Things you need to know
- And the crumble continues – Stocks continue to re-price
- Crypto’s not immune – as prices tumble
- SARK is the way to play Cathie Wood from the Short Side
- The FED is the KEY data point this week – they need to take back control of the conversation
- GS and MS send a weekend warning to investors
- Try the Lemon Roasted Feta Chicken Pieces
It was a melt up in 2021 and it is a meltdown in January 2022…. Stocks got slammed hard last week and have begun 2022 on a real sour note…. – the Dow – now down 5% ytd is by far the best performer with the Nasdaq and Russell nearly tied for the worst performing indexes – down 11.66% and 11.46% respectively… the S&P and Transports both off 7.7%. The 10 yr. treasury kissed 1.9% earlier in the week but ended yielding 1.75% while Oil churned in between $81.50 – $85.50 to end the week at $85.10. Gold up 3.5% while Crypto’s getting absolutely slaughtered as investors try to discern what the heck in going on in DC and the FED. Bitcoin was down 24% last week alone – having broken thru all trendlines leaving that asset struggling to breathe as it too looks for a bottom……the chart suggests $30,000 – which would be another 10% lower from where it is trading this morning. Ethereum – looks the same……but that asset was down 33% last week – as it looks for a bottom as well…. The chart there suggesting $1750 ish or another 22% from here.
Look – the angst across all of these assets won’t settle down until we get clarity from the FED rather than all of the mouthpieces that seem to be driving the conversation…..and you know who they are – Goldman, JPM, MS, C, Blackrock etc….What the market and investors need to hear is what the FED is thinking and not what these ‘FOF’ (Friends of the FED) are thinking…remember – the market wants some sense of certainty…it can deal with that – whether good or bad – what it can’t deal with is the continued speculation and uncertainty that is currently surrounding it. Talk of 5, 6 and 7 rate hikes are only the latest speculative data points that are causing angst…. the immediate ‘cease and desist’ of stimulus along with a swift reduction of the balance sheet are all in conflict with what the FED has been telling us is the path of future policy decisions. But, on the other side – we recognize that the FED hasn’t been on target either…remember – the ‘transitory’ conversation even in the face of definitive data suggesting the opposite. And that is why we are in a ‘shoot first/ask questions later’ mode…. because that is what it is….
Now for sure – there are a lot of names and sectors that needed to be corrected and the Disruptive Tech space was just one of them…. Think – the Cathie Wood ARKK Innovation Fund…. now down 27% ytd and 56% off the Feb 2021 highs….it was a very overcrowded space for sure…. But so is (was) the crypto space ….and that has followed the same pattern – getting crushed day after day. Parts of the FAANG trade also a bit ahead of themselves…Consumer Discretionary off nearly 12%, Housing down 15% while Retailers gave up 14% as higher rates will punish these groups harder. The Growth trade off 12% while the Value trade is only down 3% as the rotation continues.
If you are playing it from the short side, you would see gains in these ETF’s – DOG (Dow Short) +7%, PSQ (Nasdaq Short) +14%, SH (S&P Short) +9%, SARK (Tuttle Capital ARKK Short) + 60% since its launch in November 2021. And those are just a few of the ways to play a broader selloff…and they have been helpful offsetting the losses on your long positions. A strategy that is known as ‘hedging’. Think hedging your bets…. all as we await the FED’s press conference on Wednesday, January 26th….
Over the weekend we heard once again from our friends at Goldman and Morgan Stanley…..both sounding the alarm bells…with Goldman now suggesting that their report of the 3rd was incorrect…the 4 rate hikes that called for could now be 5 or 6 and the July balance sheet reduction could actually start in May…..while Morgan is warning investors not to ‘buy the dip’ in the sexy high growth sector comparing it to a breaking fever….which makes no sense…because it is exactly when the fever breaks that you begin to feel better….it is when the fever spikes higher that you feel like death…..But whatever….the fact is – the market will continue to push lower until we hear from the FED on Wednesday and ‘believe’ what they tell us….which might be a bit of a stretch, just because no one really knows what’s next….Look – this is new for everyone….there is zero precedent surrounding the massive amounts of stimulus that has been unleashed on the US and global economy and considering what we have witnessed recently – it is causing investors to come to their own conclusions.
The FED must do this. They need to lay out the schedule and stop the speculation…. they need to announce a first hike in March (rather than allow the January/February speculation), they need to define the target for yearend rates…. will it be 1% higher or more (or less). Is there really a reason for the FED not to know right now – what the plan is? I don’t believe that…. I think they know dam well where they want to go and how fast they want it to go there…… (here is the…: Will it be 25 bps or 50 bps moves?). They need to lay out the taper schedule and they need to clarify the balance sheet reduction plan. They need to acknowledge that they were wrong and then explain how this new schedule will attempt to fix it. They need to stop the hysterical speculation…. Period.
This week will also bring a range of earnings reports…. APPLE, TESLA, BA, 3M, MSFT, IBM, GE, ADM, JNJ, AXP, VZ, COF…and the list goes on…. On the economic front – the FED will be the highlight event of the week, but the week also includes 4th qtr. GDP 5.3%, New Home Sales +2.8%, Durable Goods, Personal Income, Personal Spending, etc. On Wednesday we will also get the crude oil inventory report.
On the geo-political front, we have Russia on the verge of invading Ukraine all while Secretary of State Tony Blinken tells us that the Vlad will pay a dear price if he moves…. Did you see Blinken’s warning…? Do you think Vlad is worried? Understand that if Russia invades the Ukraine – you can expect oil prices to spike higher and $100 oil will be on the doorstep. And then we have the Olympics in China -which will keep Xi Xi at bay over his dispute with Taiwan until the end of the Olympics…and then that will become an issue. Over the weekend the Houthi’s (from Yemen, supported by the Iranians) once again launched more missiles into the UAE capital of Abu Dhabi – which were all intercepted…. but these 3 issues will continue to simmer on the back burner causing pockets of angst and concern – so now Joey needs to decide the role the US will take. And while this will be of national and global concern, it will not in the long run price stocks.
This morning US futures are once again weaker…Down -30 pts, the S&P off 5 pts, the Nasdaq -26 pts and the Russell flat.
European markets are weaker all down between 1% – 2%….as FED speculation runs rampant….and investors attempt to price it in.
The S&P closed at 4,397…. after testing a range of 4494/4397…. closing on its lows…. which usually means we will test lower again today. And that is exactly what the futures are telling you. We closed below the long term 200 dma trendline….at 4429……which now means that the trendline will become resistance…. while the chart suggests that support could be at 4275 – a level seen last October.
Take Good Care
Chief Market Strategist, Consultant
kpolcari@slatestone.com
Lemon Roasted Feta Chicken
Start with 6 pieces of chicken – thighs and legs…or just thighs, 2 cloves crushed garlic, 1 lg sliced onion and 3 potatoes that you have either cubed or quartered or sliced…whichever way you prefer works just fine….
Place chicken, garlic, onion, and potatoes in a glass baking dish…. season with S&P.
Preheat oven to 400 degrees.
Next whisk together: 1 cup of chicken broth, 1/8 cup of olive oil, about 1/4 cup fresh lemon juice and some dried oregano. Pour over the chicken, cover tightly, and let marinate for 20 mins.
Place in oven and roast for about 30mins – then remove cover and roast for 20 more mins …. basting occasionally with the pan juices. Now turn on broiler and …Broil the chicken on each side until nice and golden brown. Careful not to burn the potatoes.
After broiling – add crumbled feta cheese over the chicken and potatoes and return to the broiler for a couple of mins- just so the cheese softens really. Once completed serve on a warmed platter with Chicken in the center surrounded by the potatoes – serve juice on side. Enjoy this dish with a steamed green vegetable- like asparagus, or broccoli. Season with S&P and a dab of butter.
Buon Appetito.
