Decision Time
We are going to keep this simple here today, with the US markets on Presidents Day Holiday and futures markets muted action. Last week ended on a down note for risk assets as PPI proved to be too much as PPI jumped 0.3% expecting 0.1% and housing starts were lower than expected at 1.33m expecting 1.45m. Feds Daly didn’t help things later on in the day noting that “there is more work to do on inflation.” Also assisting markets lower was the monthly options expiration and now we get to see exactly how the markets begin to price in the next few weeks. It is decision time this week, do the markets use the Nvidia earnings to propel the AI magic pill into new highs for the year, or do we disappoint and put in a top that never seems to happen?
Anyway we know a few things, we know that the US yield curve continues to take away rate cuts, which means many have thrown in the towel here for now on that theme (we have not). Here is how the curve looked on Friday:
We can also see that the Nikkei Index has come within a hundred points or so of its all time nominal price high, its only taken 34 years!
Another chart we want to look at is the Magnelibra Mega8s it saw its first weekly down bar (although not by much) in 6 weeks:
So all in all we know how elevated and FOMO driven everything has become. The bulls have had it very easy for the last 6 weeks and we know if you never sell then you never take profits and this week, it seemed that a few accounts were in there sneaking out some selling. So its decision time for the markets and we believe Wednesday’s release from Nvidia after the close will mark the next move. We will bring you options analysis on Tuesday and see if that opens any doors of knowledge but honestly we don’t have much in the form of data this week not until Thursday, so the markets should waffle around till Wednesday.
As far as the settlement’s go from Friday:
The Futures Model Tracker had no changes:
The MEGA8s were all lower except Berkshire and our options hedge performed as we expect it too and will continue to put these on to protect this tracker and to demonstrate how you guys can hedge a static long only basket of equities. The goal for this tool by the end of the year is for the hedged MEGA8 to outperform the actual basket:
We can see via the market cap that the MEGA8s starting to lose a little ground:
We leave you with a quick look at LULU, it continues to fall:
Ok that is it, this first half of the week will be lite so don’t expect much out of this mouthpiece, but as always we wish you all the best in everything you do and we hope that you stay with us as we navigate the changing market place. Our goal is simple, to inform you of the things that we believe matter, that can educate you and help you realize your full potential. Till next time cheers!