Thank you for joining us for another edition of the Magnelibra Markets Podcast, today’s episode is entitled “Nasdaq and RRP Plunge - Bond Yields and Bitcoin Higher.”
We would first like to congratulate the Michigan Wolverines in particular JJ McCarthy their outstanding quarterback. We have watched him grow into one of the best college quarterbacks ever and it will be exciting to see him play for the BCS Championship and we are sure we will be watching him on Sunday’s. He comes from a great family and we are very proud of everything he has accomplished. Its really amazing to see the euphoria that surrounds such a talented team, the buzz that it all creates and when we spoke of 2024 and it being a year of positive vibrations in our podcast earlier today, this is the kind of thing we are talking about.
Jim Harbaugh the Michigan coach had this to say about JJ McCarthy,
“I've said it before, but right here, this is the greatest quarterback in University of Michigan football, college football, history," said Harbaugh.”
So congratulations to the Wolverines, Go Blue!
Ok onto the markets, and 2024 opened on a sour note for risk assets and the Nasdaq futures took the brunt of the selling losing 303.50 points or 1.8% on the day. Bitcoin was the big winner on the day on news that an ETF announcement was imminent, Bitcoin was +$2,937.20 to close on our marks at 3pm at $45,052.18. Here is how the day settled out across the markets that we cover:
The bond market saw a parallel shift across the maturity spectrum with yields rising over 8.5bp in the 10Y and 5Y sectors:
As far as the Magnelibra Futures Model Tracker, there are no position changes and we will continue to provide updates as to any additions or subtractions to the markets in which we follow. Please take note that AUM and P+L are now reset for the 2024 educational tracking purposes as our goal is for you to take our sentiment and incorporate it into your own methodology as a base if you don’t already have one and are still learning. Our tracker is a global macro long/short by which we take long or short positions across various market segments and provide a statistical value to that sentiment. We choose the hypothetical $250k AUM as it fits our models overall risk profile, but you can adjust positions and scale according to your own parameters:
As far as today overall, we aren’t going to take too much stock into the market moves on the very first day, rather we want to see how the entire month goes. However as we pointed out earlier today, the equity markets are starting from lofty positions and the tech heavy Nasdaq in particular, which was the safe haven all last year, may continue to see rotations out of and into the broader market.
When we look at the Magnelibra MEGA8s Tracker, please note we have reset our positioning to reflect a new start to 2024 and will start the P+L tracker at zero. Once again this is an educational tool designed to see the flow of funds in or out of these MEGA8s to see if we can determine an overall change in market sentiment. We also adjusted the market caps to properly reflect the 2024 starting points as well. Apple and Nvidia were the day’s biggest losers dropping -3.58% and 2.73% respectively. With Berkshire the big winner +1.63% which with Apple down 3.58% was pretty impressive!
The MEGA8 market cap chart is breaking down and its something we need to keep an eye out for. The adjusted all time high is $12.877Tn and today’s market cap settle was $12.588T. We do not like this chart structure as technically this looks ripe for a pull back and a break of $12T in the overall market cap will open further downside probes. So we may see continued technically selling here in the first half of January as those that have to sell and take a few chips off the table will do so. Basically don’t be surprised if we see a continuation of risk off here for the next few weeks:
We also noted that the Reverse Repo window dressing on Friday was most likely be removed with today’s data and boy were we right as the RRP dropped a massive $314Bn today falling 30.8% in a single day as it seems 24 participants decided to dress things up for the final day of the year!
With the RRP dropping to $704Bn, we suspect that this will not continue to fall at this pace as the markets if they do correct, should see capital flow out of risk and back into this program. However ultimately we would like to see this drained and as we get closer to the FOMC rate cuts, we should start to see this get closer to zero.
In other US Treasury news the US debt pile hit the $34T mark today and as Zerohedge noted on X today up a stunning $1 Tn dollars in just 3 months! The debt is accelerating at an almost exponential pace now, soon to be 2x GDP and rising!
Alright here is the data out for the rest of the week, tomorrow we have the FOMC Minutes, but the big data comes Friday with the Non Farm Payroll print with and expected 170k forecast. Here is the data calendar from MarketWatch:
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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