CPI Higher, Core Lower and JPM Earnings
Risk rallies on technicals
First up, JPM beat estimates of $4.11 posting a Q4 $4.81 EPS. Their net yield on interest earning assets was 2.61% beating the 2.53% expected. The provisions for credit loss was below estimates and this should be expected as JPM is the top bank and should be last to the default party. JPM is +2% today trading $252.75 nearing its highs reached in November:
We would suspect sellers up here as there were back in November, could be a good spot to short some calls and reap some vol or buy put structures outright for the next month.
The CPI rose 0.4% MoM and +2.9% YoY, with food costs adding to the upward pressure, but the more important core posted a 3.2% vs 3.3% last month, so the FOMC will most likely cheer that. As far as the markets we are seeing a reversal in both equity and bond selling as of late as bond yields are plunging, even the 30Y is -10bp, the Nasdaq futures are +2% and the SP500 futures are +1.5%:
Ok so as we suspected we would get some short term reversals of the one way trades we have been seeing lately and this is a healthy market dynamic. We still believe the markets have no idea what the FOMC will do in the future. We still believe that the markets have no idea on what the incoming administration affects will be from their policy changes. So as much as today’s markets are moving in a relief style buy pattern, we are still far below sentiment levels for changing the bearish overall theme. You can see how the weekly 21VWMA has held and we would suspect renewed selling pressure on any approach toward the 21600 level in the March Nasdaq futures:
Lets take a look at yesterday’s data starting with the settlements, we also have a corrected five year note futures net YTD dollar change. Bitcoin was the dollar based winner and Crude Oil the loser on the day:
There were not any changes to the MCA CTA Markets Sentiment Tracker:
As far as the MEGA8s the tracker is now hedged with both the QQQ 512C and 516C as of today. The group as a whole lost $147Bn in total market cap yesterday:
As far as the MicroStrategy tracker it is back in the black as the stock rallied the last 2 days:
Also we have the updated DCA for MicroStrategy’s BTC position which is now 450k BTC with a DCA of $62,667:
Ok guys it seems that the recent selling has abated and given away to profit taking and some fast money accounts looking for a quick pop. Maybe we get another push up in equities until we reach some technical areas that we highlighted. As we also suspected the 5% US Govt 30Y was most likely a good stopping point for the yields rise and today has seen decent buying across the fixed income sector. Even FX seems to be bouncing a bit with all the markets dragging one another up including energies and metals. Crude Oil strength is very curious and not something we believe you should be fighting at this point, the rally is now in its 4th straight week higher and first resistance is still 5% away at least! Ok, till next time…cheers.
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