Hello Traders and Investors I hope you are having a great start to your day and thank you for joining me for another edition of the Magnelibra Markets Podcast, I’m your host Mike Agne and today’s episode #37 is entitled “Market Shrug off Selloff - Retail Sales Plunge and Coinbase reports After The Close ”
Quick 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.
Ok well let’s just start off with this mornings data from MarketWatch as Retail Sales plunged -0.8% well below the -0.3% expected and we continue to see improvements in the Philly Fed Manufacturing Survey but import prices continue to rise:
So we figured we would get a consumer cut back here post the holiday, but we would like to see prices paid continue to soften but just like the Fed says, they aren’t focused on one single data point, but rather the trend!
Then again, when your government is the largest single percentage sector of job creation, it does go a long way to support not only pricing inflation but even worse skews actual private employment because it essentially becomes a competitor for private market payrolls. Why is this a problem? Because the government is essentially a non zero sum player operating unimpeded and at a $2Tn dollar a year deficit. So this forces companies to compete for individuals and offer higher wages, adding to the already sticky wage inflation that the economy is exhibiting. This is why we talk about these non zero sum players creating very large imbalances that seemingly continue to grow unabated and in the long run is certainly unsustainable and cannot continue without the Federal Reserve lowering interest rates and or restarting their QE programs again. Here is a great pic from Mish Shedlock on this Government job growth from 2022 to 2023:
Speaking of the government, we know given the holiday they will not be back in session till the end of the month and will have but 3 days to come to some sort of budget agreement or else risk a partial shut down on March 1st! Honestly what are we talking about, that never ending debt ceiling again? Honestly it always seems nothing ever changes, budgets are never really cut and we just play this game with American’s lives and futures!
Ok as far as the markets, let’s talk about the markets shrugging off the Tuesday sell off, well this really shouldn’t surprise any of us. This has been the case time and time again and these selloffs for us just seem like monetization days for the ultrawealthy, as we know Bezos dumped around $4Bn worth and honestly this is how it should be done. Given the massive dislocation between the real economy and the financial landscape, well we should expect these guys to monetize their wealth because if they don’t its all just paper gains. So MSM types will blow this stuff out of proportion and talk about insider selling, but reality, this is a big nothing burger, its monetization nothing more.
So the equity markets continue to rebound as did the US yield curve yesterday with the US dollar down slightly and energy and metals mostly weaker. Bitcoin is now above $48k which is our initial support with $58k our longer term target and reversal area. That area may coincide with the overall markets topping out so it is certainly going to be a big objective, but we continue to believe this recent buying is still on the heels of ETF euphoria and we do not recommend a chase here in that market:
For now we believe consolidation is in order and is a healthy development for the equities and bonds here.
As far as our Futures Model Tracker, no changes:
When we look at the MEGA8s please note the addition of the QQQ 433 Call hedge today at 2.00 as the MEGA8s continue to be led by META and Nvidia:
Ok as for today’s earnings, let’s focus on Coinbase and considering the massive move this month, let’s just say the call buyers are extremely hopeful here:
Coinbase is +46% in just a few weeks here. As far as the options and looking at the ATM BE Straddle, its indicating a $19 move or 11.3%. There is a big call wall at $165 strike some 25k Open Interest and we see call skew way up the ladder with someone spending around $10k for the $370 calls that expire tomorrow! Its probably a sale against other call longs, so not that significant, but its safe to say call sellers should be nervous here. When we look at this, yes it makes sense for Coinbase to potentially fall given its massive run, but we also like to think that the fundamentals make sense for this to continue to rise. The $180/200 call spread is around $2.85, so risk reward putting on something like that with 1 day to expiration looks good if you are bullish this thing and that specific trade is risking $2.85 to make $20 at full value which is a decent 7 to 1 payoff and would require a 20% increase in the price of Coinbase by end of day tomorrow.
So that is what we are looking at today, we hope all of this inspires you to learn more, to look at markets from various angles and to refine your own knowledge and skill sets. Thank you for listening to us today and as always please share our work, give a like and if you are financially able, subscribe and get the full benefits of total access to everything we put out. We have done a lot of free versions to start the year but we trust in our base to grow and people to see the value in what we have to say!
Till next time, cheers!
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