Thank you for joining us for another edition of the Magnelibra Markets Podcast, I’m your host Mike Agne and today’s episode #9 is entitled “Fed Minutes, Tech Charts & Tesla.”
Yesterday saw risk assets were once again under attack and the FOMC minutes didn’t offer that much of a reprieve. The Nasdaq did bounce initially but was quickly right back down toward the days lows. So let’s take a look at some of the highlights of the minutes:
Some of the uncertainties included, downside risks to the economy associated to overly restrictive stance
Almost all saw their base line Fed Funds rate lower by the end of 2024
Balance sheet runoff discussions are ongoing and technical factors are being discussed in regards to slowing the pace of the runoff (slowing they can’t even hit their baseline target?)
Upside risks to inflation have diminished
Evidence of a softening growth in labor demand via job openings
All in all the FOMC wasn’t without the usual doublespeak as they did note that circumstances might warrant keeping policy restrictive…hmm sure.
With the minutes behind us we now move to Friday’s payroll report and we suspect the number will fall short of expectations of that 170k number and Magnelibra expects by March to see our first negative payroll print ushering in the emergence of the new rate cut era!
Look let’s be honest, we know the last 4 decades have started with higher rates then where they finish, its a function of an over spending bureaucracy creating massive deficits and a central bank bestowed with the honor of ever expanding its asset base. We can’t have all this debt and have higher interest rates now can we. We know the US Govt is spending $1Tn on interest now with Fed Funds at 5.25%, so the obvious course of action will be the ZIRP regime once again.
We keep seeing the $34T US Debt charts on social media, so we fixed it and posted it to X, saying here is the debt chart for the future, can we not do this every $1T in new milestones please, so we extrapolated the line and trajectory up to $40T by May of 2025 with a nice picture of a broken down Uncle Sam:
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Ok so what are we currently seeing in the markets to start 2024. We are seeing early weakness in Tesla and Apple and when we look at Tesla there is a major technical triangle building and we don’t know which way the breakout is going to go yet, however we are leaning to the downside here with the break of the 21p VwMa at $240, above $260 would negate this and cause the breakout to the upside:
When we look at the options markets, we see decent open interest in the $200 puts in the Feb 16 2024 expiry. The 220/200 put spread settled at 4.50 and would return 20.00 at full value so a decent 4.4:1 payoff:
When we look at the Apple chart its interesting to note the double top formation here, even the gap down is eerily similar to that July/August 2023 move:
For now keep the $181.50 area in focus, we would like to see this hold initially and buyers should step in there. However we find it curious that Berkshire has held up very well the last two days is +2.8% thus far!
In ETF land when we look at the QQQs yes it looks like a top but honestly we don’t get much of a confirmation till the 387 area is broken. So technically the sellers remain in control but we will probably see some attempts to buy this here in the coming days against that 387 area. Below that, well that is another story:
When we look at the Russell2k futures, the weakest link of all the equity indexes yesterday and look back at our chart we put out in December, where we pointed out two things, one, does it rocket up to new highs by March 2024 or does it fail at the 2022 area for the 5th straight time? Well its failed and is back below there and at first support of 1983. A weekly close below 1983 would prove disastrous for the bull case early on here:
Moving over to the SP500 vs Nasdaq spread, something we highlighted in December as hitting a prior double bottom area, we can now see a nice bounce as the Nasdaq has lost some 10% or so vs the SP500 contract:
We do think this trend of favoring the SP500 vs the Nasdaq will continue here considering the beating it took all of 2023!
Our last technical chart is of Bitcoin, after rumors of imminent approval were unfounded and now even delayed approval are swirling, saw Bitcoin fall from the $45k level and now back to the top of the prior trend channel:
We do not look at the ETF approval as a good thing, in fact we believe it will be more of a sell the news honestly. Too many believe it is bullish, yet if that is the case where Bitcoin has run up because of front running and it doesn’t come to fruition, then we may see a snapback to the $30k area once again.
Ok onto the settlement tracker for yesterday where silver was the biggest loser and RBOB the day’s contract winner, with the energy complex performing quite well:
As far as our Futures Model Tracker one change of note was the close out of the long Euro currency position. The move from the Fib target/reversal area has been confirmed and the model exited the Euro completely:
When we look at the MEGA8s Tesla was the weak link down almost $10 on the day with Berkshire +1.2%. We didn’t get the hedge off yesterday, so we moved the expiry and strike to next week and the 404 Calls, so will see if we can get a move up to 2.25 in those calls in order to hedge this static long only tracker:
We leave you with a link to the newest YouTube channel that we found and we think you should check it out too, My Lunch Break - Old World History
Many long time readers of our newsletter know that we love science, we love history and we love uncovering those destined to seek out the truth of our past. When we look at the way some of the old world was constructed and the narrative that we are given, quite often things don’t add up. We believe in a world assisted now be generative AI, that the past and all of our history will eventually be rewritten. So we love channels like this that point out things in our past that should be explored, in particular the construction of old world buildings. So take a look at this channel and see what you think, we think this stuff is fascinating!
That is all we have for you today, we hope you continue to support and share our work as it is vital that we grow our audience so that we can educate as many people as possible as to how and why financial markets move the way that they do. We hope the insight, the data, and above all else that the conviction that we have shows up in our work each and every day. We spend a lot of time compiling this and we hope that if you can support what we do, you will and if not always share it with someone, or simply give it a like. Thank you to each and everyone of you and remember 2024 is about positivity, we view our realm as a binary construct of positive and negative and that each and everyone of us plays a bigger role then we think. We have the power to choose the output and its connotation will have a negative or positive reverberation, its up to you to choose the positive outcome…Let’s always try to focus on the positive and let’s see if we can shape our reality together! Till next time…Cheers
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