Things you need to know
- Assume the position and ask for more! (Animal House – 1978)
- Oil advances after yesterday’s 9% decline
- Cease fire talks continue in Turkey – Investors are hopeful for something
- 2’s and 10’s getting closer to inversion
- 3 FED speakers over the next 3 days…. Listen to what they say…
- Crypto’s holding tight
- Try the Farfalle w/Roasted Eggplant, Sundried Tomatoes and Goat Cheese
Here is my appearance on the Larry Kudlow show last Saturday with Joe Lavorgna…click on the link and then click on the 3rd segment
https://wabcradio.com/show/larry-kudlow/
OK – sports fans…..here we go….yesterday I identified a level on the S&P that was KEY to the next move…and the level was resistance – at 4560….a level that I thought would provide some resistance -at least initially (It did not..)……and I said that if it didn’t then get ready because stocks would move higher…In fact I said –
“If we kiss it and then pierce it – then the algo’s will kick in on the buy side, they will cancel supply on the sell side – leaving a vacuum causing prices to surge up and challenge the early January highs of 4800!”
Well, we tested it once at 2:29 pm and then backed off and then tested it again at 3:15 pm and backed off and then it kissed it for a 3rd time at 3:22 and BAM…..it’s off to the races….notice what happened….the algos’ went into high gear….the buyside tripping over each other while the sell side algos cancelled inline offers and moved higher to see how aggressive the buyers would be in the last half an hour……by 4 pm the S&P rose an addition 15 pts for a total of 33 pts on the day to end at 4575.52…..Now 4590 is the next level for stocks to pierce….and if they do it will also be the 3rd time…..(are you seeing a pattern?). We tested 4590 on Feb 2nd, then again on Feb 9th and now we are about to test it again….and like the 4560 level – a breach here will send the algo’s into a tizzy as it gets ready to challenge 4800…which is the all time January 2022 high… before the meltdown that saw the Nasdaq and Russell enter Bear Mkt territory while the Dow, S&P and Transports tested high correction territory….
In any event – stocks across the board advanced…. The Dow rose 95 pts or 0.3%, the S&P is up 33 pts or 0.7%, the Nasdaq gained 185 pts or 1.30%, the Russell flat, and the Transports up 96 pts or 0.6%. 10 Yr. Treasuries ended the day yielding 2.50%, the 2 yr. note ended the day yielding 2.41% – causing that spread to tighten…. now only 0.09% away from inverting….and there are many on the street that watch this data point intently. Once it inverts – the 2’s yield more than the 10’s then history shows that a recession is not that far behind…. (Recall that the 5’s and 30’s inverted last week….). Oil ended the day down 9% or $10.50/ barrel at $103.50….this move lower credited to the ‘lockdown’ in Shanghai – that saw 25 million people confined to their homes to once again battle a resurgent covid variant – something that I along with many others think is a big mistake – but it is what it is and now the market/traders took advantage of the recent price hike to ‘lock’ in some profits on the idea that this lockdown will produce – energy demand destruction……right -you keep thinking that….I mean as a trader I get it, but as a long term investor a 10% pullback is an opportunity (I told you that yesterday) and this morning – oil is up trading at $107.50/barrel at 5 am.
Now – on the technical front – right now (5 am) S&P futures are up 15 pts and where does that take us? – Bingo – 4590……refer to my argument (in italics) in paragraph one…this is the 3rd time that we kiss and test this level….and if the rumors of a possible ‘peace/cease fire’ is true – then hold on and strap yourself in – because the algo’s will RIP higher…..and you don’t want to get in the way…..and while we won’t get their today – if we pierce 4590 – decisively – then a challenge of 4800 becomes more of a reality….which then leaves me to ask – What then? Will investors just continue to ‘buy’ stocks in the face of rising inflation and still relatively low rates? Or will investors really begin to consider what higher rates mean for stocks….Because if we get the 4 – 50 bps rate hikes that Citibank is now yapping about – then we will be at 2.25% by September….- which means that revolving credit card rates will surge, new auto loans will see higher rates, refi’s will slow and new mortgage rates could hit 5.5% – 6%….considering right now – conforming 30 yr. money ($647k) is now 4.75% (with a 725 credit score or better) and the ten year is at 2.5%. Capisce…?
Away from that – Dow futures up 140 pts, Nasdaq futures up 60 and the Russell is up 13…..and the Eco calendar kicks in…today we will get the S&P CoreLogic 20 city housing price Index – up 18.55% y/y…..and the JOLTS report – Job Opening and Labor Turnover Survey – and that is expected to show 11 mil jobs available….that is almost two times the number of un or underemployed – so let’s go….and what has become interesting is what I call the LinkedIn effect….I have seen more and more announcements of people getting ‘new jobs’, making more money….and that just speaks to the narrative of the day…..Employers are desperate for workers and are willing to pay UP for quality….and higher wages – will translate into higher prices passed onto the consumer which will ignite the 1970’s style Wage/Price Inflation…. I was 21 yrs. old at the time….graduating from college and entering the work force….I remember it well and my fear is that there is going to be a whole new generation that is about to get ‘schooled’ in the real world…none of this ‘academic classroom’ hypothetical schooling…oh no, this will be the ‘real world’….so strap in….and assume the position – saying “Thank you, sir, may I have another!” (a clear reference to the Kevin Bacon scene in Animal House – that classic 1978 National Lampoon comedy…. If you have never seen it – put it on your calendar this weekend….).
Now talk of ongoing ‘cease fire’ talks in Turkey is what is the main driver this morning….in addition investors remain in awe of the markets resiliency…..recognizing that at the moment there is no alternative…..Bonds will get re-priced as rates rise, while big mega cap US multinationals in the consumer staple sector, financials, Industrials, Utilities and energy sectors will provide healthy dividend and hopefully real earnings growth that should help to shield you from the continued volatility. Boring yes, but if you are an anxious investor this is one way to provide exposure without taking on huge risk. In addition – investors should also consider exposure to cybersecurity, metals and mining, artificial intelligence, semiconductors and mega cap tech – that will continue to benefit as they assist in ‘changing the world’. Anyone who is below the age of 40– might want to consider being all in on a more ‘aggressive portfolio’ as they have time on their side…. (About 30 -35 yrs.….) – Older than that – you have to consider your risk profile and the strength of your stomach…remembering that risk does have the benefit of bigger rewards – but you have to sleep at night…. So – talk to your therapist/financial advisor!!
European markets are all up on the back of the ‘peace talks’ that will not bear fruit – or at least until Vlad succeeds in destroying the eastern part of Ukraine as he turns his attention and refocuses on dividing and conquering the nation….as Ukraine pushes back. In any event – Zelensky has offered an olive branch, wants to stop the madness…. At 6 am – European markets are up between 1.6% – 2.4% across the board.
Crypto’s are trading in line…. Bitcoin is trading at $47k while Ethereum is at $3,425.
The S&P closed at 4575….You know what I think happens next…..Much will depend on the geo-political headlines today…..Yesterday Joey gave another press conference where he got inundated with questions about his ad- lib gaffe over the weekend…and when asked if he was walking back on his statement about Putin – he said – “No, I am not” (which leads me to say – well then – you should speak to Tony Blinked and Jenny Psaki -because they are there doing ‘damage control’) and then when asked if he thought his comments would complicate the ‘peace talks’ he said “No, of course not, why would they”. (Which is almost comical – but then again would you expect him to say – “Yeah, I screwed up’?).
Today in addition to the eco data – we will hear from Philly Fed President Patty Harker; Tomorrow will be Richmond Fed President Tommy Barkin and Thursday we will hear from NY Fed President Johnny Williams…. Investors will be listening intently to what they have to say – will they start to echo the Citi commentary? Will they put it out there to continue to ‘test the markets reaction’ to those very aggressive predictions or not? You see, they let Citi float the idea, let it marinate in investors minds and then casually discuss it – and depending on what happens they can distance themselves from the Citi commentary or they can embrace it – What do you think happens next?
In the end – remember investing is not static, it is dynamic. Stick to your plan, have names that will provide stability. Big, boring and beautiful US mega cap names will help protect your capital in what you think may be an anxious time while others think we’ve only just begun….
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Farfalle w/Roasted Eggplant, Sundried Tomato Pesto and Goat Cheese
(Farfalle con Melanzane Arrostite, Pesto di Pomodori Secchi e Formaggio di Capra)
How beautiful does that sound?
So, this is simple to make and presents beautifully on the table. For this you need:
1 eggplant cubed, olive oil, 1 cup of oil packed sundried tomatoes, garlic, parsley, s&p, 1 lbs. of Farfalle (bow ties) pasta, goat cheese.
Preheat your oven to 400 degrees
Bring a large pot of salted water to a rolling boil.
Put the cubed eggplant in a strainer and lightly salt – let sit for 40 mins (get the water out).
Put some olive oil in a roasting pan and then toss the eggplant to mildly coat it. Season with s&p. Place in the oven and roast for 25 mins or so. Be sure to turn the cubes once or twice.
While this is happening – break out the food processor and combine the sundried tomatoes, some parsley, 2 cloves of peeled garlic and a bit of olive oil and pulse to blend. Do NOT PURIFY…. just pulse it – capisce?
Now cook the Farfalle until Al-dente…about 8 mins. Strain – always reserving a mugful of the pasta water. –
Return the pasta to the pot – add in the roasted eggplant and the tomato pesto mixture. Toss well to coat. Add ¼ cup of the pasta water and turn up the heat on the stove to mix and coat well. Serve in warmed bowls with goat cheese on top. Enjoy with a nice class of pinot noir – perfect – not heavy – just right.
Buon Appetito.
