Financial News vs. Noise
The first episode of The Watchlist can be seen here. https://youtube.com/live/bpODVg5pO2g. We plan to do this every Thursday at 11:30AM. If there are any names you would like us to cover just let me know.
Kind of what I thought when I saw red pre market on Friday. Last thing you wanted to see after AAPL and AMZN earnings was a down open, which then accelerated from there. Narrative now is that the Fed is behind again and should have cut last week.
Lousy Jobs Report Forces Fed to Reckon With Hard Landing-WSJ
Policymakers have been focused squarely on inflation. Now they need to worry about the labor market, too.
That’s probably right, I trust the market more than I trust the Fed, but intermediate term it’s a positive in that we may get more aggressive cutting. Jobs Report Should Put a Jumbo Fed Rate Cut on the Table-Bloomberg
First, the labor market probably isn’t quite as imperiled as the main figure suggests. Second, the speed at which it’s cooling ratchets up the risks, and Federal Reserve policymakers should at least entertain the possibility that they’ll need to cut rates by 0.5 percentage point when they meet next in September.
Shorter term, this is a concern.
VIX did close well off the highs, but a spike like this can go one of two ways. First, it could be an omen of something bigger. Here is a chart of February 2018 where we had a big move on February 2 followed by the Volmegeddon move.
Remember though, VIX needs fear to stay elevated to stay up. Stocks could continue to drop, but if the fear isn’t there then VIX could still drop.
I have a bunch of models that trade VIX long and short. For the short side I use puts on VXX, UVXY, or UVIX, whatever looks easier to trade at the moment. For the long sides I buy calls on the VIX index. The VIX ETPs use futures, so the roll makes them wasting assets, which is why I buy puts on them and not the index, and the other way around. The beauty of options is that number 1 you don’t get carried out on a stretcher, which you would have if you were short VIX outright yesterday, and number 2 you could end up in a situation like I did Friday where I had both sides, but my gains on the calls way exceeded my losses on the puts. Much quieter week in terms of data than last week, which could help vol settle down a bit.
SPY is down 5.69% from the top, and it is still up 12.83% ytd. If the past few days are a problem for you, then you are taking too much risk.
Overnight Japan cratered again and it is taking down our markets as well. Bunch of stuff going on:
-Fed behind the curve
-Warren Buffett selling a ton of his Apple
-Great chance of major Middle East war
Crypto taking it on the chin even more, with Ethereum down over 20%. That kind of move looks like a forced liquidation. VIX is currently at 41, it can’t stay that elevated for long but it is a big concern at the moment. Moves like this do two things, first they tell you if your investment strategy makes any sense. Making money on the upside is relatively easy, protecting the downside is not. Second, it will create opportunity. I don’t think we go into a bear market, I think the Fed will come in and cut more aggressively and over the intermediate term that’s going to be a positive. Be careful out there though. One other note, if the Fed does an emergency cut (not at a regularly scheduled meeting) I think it would move the market up in the very short term, but you are probably better off fading a move like that. If CNBC runs a Market’s In Turmoil special then I would be a buyer. Thank you Shiv for this…
X looks panicked, headlines I am reading looked panicked, and the Central Banks may be about to panic. It doesn’t feel like it, but that’s actually a good thing, as long as you can keep from panicking yourself.
Keep an eye on this nuclear theme. How a shuttered power plant in Michigan could pave the way for more nuclear energy-CNBC.com
But Palisades is now poised to become the first reactor in U.S. history to reopen after shutting down. Lawmakers on both sides of the political divide, tech companies and leading utilities increasingly view nuclear as a crucial source of reliable, carbon-free energy to supply rising electricity demand in the U.S. while slashing emissions to address climate change.
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Matthew Tuttle is the Chief Executive Officer and Chief Investment Officer of Tuttle Capital Management, LLC.
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