Jimmy was a Flash in the Pan; Listen to Jay – Try the Grilled Shrimp

Kenny Polcari Uncategorized

Things you need to know.

  • Jimmy Who?  Powell and Harkins disregard his commentary, Algo’s loved it.
  • This was a ‘technical bounce’ not a fundamental shift in psychology
  • Stocks up, Yields up, Oil up, Dollar up, Vix down, Gold down
  • Bitcoin gets closer to the danger zone – expect the media to bring out all the big boys telling us to settle down
  • Oil rallies 2.6%
  • Try the Grilled Shrimp

Ok – so stocks exploded higher after Friday’s tantrum…. the Dow up 586 pts or 1.7%, the S&P up 59 pts or 1.4%, the Nasdaq up 111 pts or 0.8% and Russell up 48 pts or 1.9%.  Treasury yields rose as investors sold treasuries to buy stocks in a complete reversal…by end of day – Yields were 1.48% up from 1.42%.  The VIX which surged by 16% on Friday – fell by 17% yesterday…. the Dollar index continued to advance putting pressure on some commodities…. while WTI (West Texas Intermediate – oil) surged higher…. adding 2.7% in yesterday’s trade…. – this is very much a demand story…. nothing else….

Dallas’s Fed President Bobby Kaplan reiterating his support for a ‘pullback’ – saying that the ‘central bank should take its foot off the accelerator sooner rather than later’ – BUT unlike his counterpart – Jimmy B – he did not pick a date in 2022, he did not even pick a date in 2023 – he just supported Jay Powell’s position – a position that he announced last week after the FOMC meeting….

And speaking of Jay Powell – he appears today up on Capitol Hill and he released his comments yesterday for public scrutiny…..and in it – he once again plans on telling us that Yes, the economy is improving – ‘showing sustained progress’ and Yes, while we have inflation – he remains in the camp that it is transitory and Yes, they are beginning to talk about talking about tapering and saying that he expects interest rates to be ½ point higher by the END of 2023….nothing in what he said – suggested 2022 (a la Jimmy B) and this helped to send stocks higher.

Next – let us be honest – it was an overreaction on Friday which caused the indexes to back off and test support – because rates must rise and while Jimmy B is a respected member of the FED, he is NOT a voting member – which is why they sent him out to float that balloon….….

But look – it’s not always about fundamentals…..it can be a technical reaction as well…..and what we saw on Friday – The Dow, S&P and Russell – all came down to kiss their trendline supports….where they found buyers just sitting there and waiting….and every time this happens and the buyers defend the position – the next move is always a blast higher….and then everyone explains it away with all kinds of fundamental analysis and macro-economic data….rather than what it is – or was – a technical bounce – because the truth is nothing really changed (in terms of economic data)  between Friday and Monday other than all of the talking heads getting a chance to challenge Jimmy B over the weekend….Although, again, I do think it was very orchestrated – I do believe that Jimmy B was sent out to ‘poke the bear’ to see what the reaction would be – and then allowing others to challenge him….BUT they did succeed in putting 2022 on the table and it is in play now…. it is part of the conversation in the public square.  Do not be fooled – we now have a conversation that suggests rates could move as early as mid- 2022 so sit tight….because so much can change….Recall I said months ago – that the FED’s promise of zero rates through 2023 was not only aggressive, but almost an impossible promise to keep – considering how hot the economy was expected to get and how hot inflation was expected to get…..both of which we are now seeing causing us to discuss 2022 as a possible lift off date….that’s a good 18 months ahead of the original 2024 promise.  Just sayin’….

Now unlike Friday when there was no place to hide….as everything came under pressure – every sector lower – yesterday saw a complete reversal of fortune- with every sector higher –…..….….Energy (XLE) was UP 3%, Utilities (XLU) up 0.5%, Financials (XLF) up 2%, Consumer Staples (XLP) up 0.5%, Basic Materials (XLB) up 1.6%, Real Estate (XLRE) up 1.3%, and the list goes on….the value trade (SPYV) gained 1.4% while the growth trade (SPYG) gained 0.7%.

So, all the talk of that slowing economy due to higher rates was suddenly not part of the conversation yesterday…. which is curious…. because why not?  It was ‘the headline’ on Friday – but yesterday – the idea that rising rates will slow the recovery was NOT part of the conversation….as investors went on this buying spree…. which suggests more of a technical bounce rather than anything fundamental…. remember – we are basically at all-time highs across the board…. Again – any change in inputs must change the outputs – so this remains a very fluid equation.

US futures are a bit lower this morning and that should surprise no one…after the strong bounce yesterday……Jay Powell is due up on Capitol Hill at 10 am…and as discussed – he is expected to keep to his script – that the FED remains committed to see a full recovery, inflation, while notable, is transitory and that nothing is expected to happen to rates before mid- 2023……Did you see what just happened?  No mention at all of 2022 by the chairman…. Dow futures are down 33 pts, S&P’s down 6 pts, the Nasdaq off 28 pts and the Russell off 9 pts.

Eco data today includes – Existing Home Sales – expected to be down 2.2% and the Richmond Fed Survey of 18.

European markets are also a bit muted – after the Monday surge…that recovered a bit of last week’s losses…. ECB’s (European Central Bank) President – Christine Lagarde telling investors that the Eurozone economy is clearly in a different situation – offering up an optimistic outlook across the region.  The UK is expected to join the TPTA (Transpacific Trade Accord) joining Japan, Canada, Australia, Vietnam, New Zealand, Singapore, Mexico, Peru, Brunei, Chile, and Malaysia – this agreement is set to erase 95% of all the tariffs on goods and services between members.

Oil which ended the week at $71.95 – blasted higher yesterday – ending the day at $73.66/barrel.  (After testing $70 last week).  Nothing has changed – and in fact, there are calls for $100/barrel by year end…. (Goldman).

Bitcoin is trading at $31,300……down another $1100 as the sun rises over the Atlantic…..as it tries to hold onto the KEY $30,000 level…..and that is KEY…because a breach of $30 means it will have a $20 handle it fairly quickly…but let’s see if the trader types and all of the big money boys can hold the line right here….and if it breaches – then expect Mikey Novogratz, Mark Yusko, and Tony Pompliano to come out and tell everyone that it is a new asset still very much in its infancy so anyone investing in it has to be prepared for dramatic moves….and that any collapse in prices is nothing but a buying opportunity as they ‘talk their book’…..

Ethereum is trading at $1,800 and doggey coin is trading at .19 cts…now down more than 75% with not bottom in sight.

The S&P closed at 4,224 – blasting right up and thru 4200 a level that I thought may offer some resistance, but the excitement was so wild yesterday – that the sellers how could not sell fast enough on Friday, turned to buyers who could not buy fast enough yesterday…. all while the long-term investors remained composed and at ease…. just riding the wave…. because for now – rates remain at zero and there is nowhere else to go….

Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss the markets or a plan.  You can now get a video version of this note on my YouTube Channel.

https://www.youtube.com/channel/UCI-MTlH2FdbMNvpZ2b_ELrg

You can follow me on Twitter – @kennypolcari
Take Good Care

Chief Market Strategist, Consultant
kpolcari@slatestone.com


Grilled Shrimp on a Bed of Lemon Infused Orzo

For this you will need:  about 2 doz large, clean & deveined shrimp, 10/12 skewers, olive oil, oregano, fresh lemon juice, minced garlic, s&p, handful of fresh spinach, feta cheese and some Orzo (Orzo is a rice shaped pasta – used in many types of pasta salads or soups or in this case as a bed for the shrimps).

**if you are using wooden skewers – you must soak them in water for at least 20 mins. **
Now – pierce the shrimps onto the skewers – maybe 4 at most per.  Set aside in a deep Pyrex dish.

Next mix the olive oil, garlic, oregano, some lemon juice, s&p – shake well and then pour 1/2 over the shrimps.  Place in fridge and let marinate.
Heat the grill – using a grill brush –clean the grill rack.
Bring a pot of salted water to a rolling boil and add the orzo…cook for about 8 mins or so…do not let it get mushy…. keep it a bit aldente.  Strain and mix with the feta and the spinach.  Now pour the remaining mix into the pasta and stir well to coat.  Place the orzo in a large family style platter and make a bed.
Next – remove the shrimps from fridge and place on hot grill….be sure to not burn…. should take no more than 5 to 7 mins max.  Now place the skewers on top of the orzo and feta.  Take a picture to remind yourself of this great and simple dish.

Buon Appetito.