Hello Traders and Investors and thank you for joining me for another edition of the Magnelibra Markets Podcast, I’m your host Mike Agne and today’s episode #21 is entitled “China Steps In, Stop Gap Bill Passed, Party On!”
Audio a bit staticky at times so apologize, needed to get this out…
But first a quick regulatory disclaimer:
DISCLAIMER: The following podcast is for educational purposes only. This is not a solicitation to buy or sell commodity futures or options. The risk of trading securities, futures and options can be substantial and may not be appropriate for all listeners.
What a strange day, which ultimately saw a continuation of alpha chasing here by fast money and once again the tech heavy Nasdaq was the standout on the day! But what really started the buying frenzy, was sanctioned state buying out of China and the PBOC plunge protection team of course as Bloomberg strategist Chen noted,
"The national team is likely stepping to stabilize the market as they have done in previous market crashes,"
The Hang Seng China Enterprises Index finished the day 0.8% higher, reversing an earlier decline of 0.6%. Down 10% this year, the HSCEI gauge is the world’s worst-performing major index.
Then the stop gap bill passage in the afternoon really got the rally caps on as the money spigot was once again sprung open and the party was on. Equities took this as further confirmation that the money flow will never stop and why not, its always been the case, nothing in DC ever changes.
So speaking of the Nasdaq when we look at the futures chart on a daily time frame, you guys know we are targeting a break out above this 17k area and today we had a decisive break above it. Tomorrows weekly close if above will flip our NQ to a long from a short on the futures model tracker, so we will monitor that closely, for now take a look at this breakout which for us targets 19k:
Now we know the daily has already broken out and will bring in momentum players now, but the weekly close for us will prove the resiliency that we have moved to a new shift in pricing which targets the higher highs and lows pattern.
Another change we will make is in the currency as the Euro has been curiously strong lately vs the Suisse, something has changed and we aren’t sure this is a major bottom in the spread, but the Euro does look like it will continue to outperform here prompting us to add a long in the model tracker there and a short in the Suisse, reversing roles here for the first time in quite some time:
We also want to keep an eye on Bitcoin here as it approaches the $40k level, it is important on multiple fronts, one, it truly means the ETF was the buy the rumor sell the fact and two, more importantly, technically Bitcoin would once again be back into the trend channel that began back in mid 2022:
We were listening in to Kopernik Advisors today and saw a couple of great charts we wanted to highlight, the first chart shows the massive unsustainable debt trajectory that the US finds itself on and basically points to a perpetual $2T budget deficit for the foreseeable future:
The other chart we liked was the fact that the MEGA7 or the Magnificent 7 that most everyone calls them in terms of the wealth they represent, have a larger market cap than any other countries entire stock market and they also showed how Apple and Microsoft are 13.9% of the total weight of the entire S&P 500 index. So concentration of capital and wealth is very obvious:
We hate to bring it up, but historically this is what you see at major inflection points, 1929,1999 and now 2024! But whose really looking, its party till you can’t party any longer!
Speaking of partying we saw this great cartoon, with all the private jets in the snow at Davos running to listen to Greta Thunberg’s climate speech! Classic:
Ok let’s look at the settlement sheet for today we can see that the front end of the bond curve held up well as the long end was the clear loser there today down 41 ticks in the ultra and 28 ticks in the bond contract. Equities were up big led by the Nasdaq +240.25 points closing at 17110. The dollar was mixed with the Suisse the big loser down 55 pips on the day, energy was higher sans Nat Gas which saw profit taking and metals stronger across the board led by Gold + $15.10:
We will see if we get a continuation in equities tomorrow, if the bond market can continue to resteepen or will we get a sell off in risk and reverse today’s flows?
A couple of position changes in the Futures Model Tracker, as we noted earlier the move in the Euro/Suisse spread has caused the tracker to flip long the Euro vs Suisse, something that hasn’t happened in quite some time! The tracker is also flat the Nasdaq now and will flip to a long on a close above 17k tomorrow:
As far as the MEGA8s brand new market cap high today at $13.074T led by Nvidia once again and Tesla the usual weak link. The option hedge gave back all of yesterday’s gains and then some, so will see how the dust settles tomorrow and will most likely be flat with no hedge by tomorrows close:
Here is a look at the Mega8 Market Cap chart:
When we look at the package on the charts its continuing on this path of higher highs and lows:
When we look at Tesla, we have had a decent collapse since that breakdown from $260. We would suspect buyers here initially to hold this pre triangle breakout, but if the Nasdaq does continue higher, this will drag Tesla higher most likely off these lows. So be careful here if you are shorting this, we would like to see a back test of the $222 area first. At first glance accounts are most likely stepping in here to support with stops below $195:
Ok guys its been a long day, we hope you stay with us as we navigate these markets. Be mindful of the geopolitical events brewing in Ukraine and the Middle East and keep a watchful eye on the border situation a bit closer to home. The Texas National Guard is about to stand off with the DHS and Border Patrol so will see if calmer heads can prevail and reinstall legal authority to enter our country!
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