Nasdaq Rare Down Day???

Nvidia Earnings Tomorrow lets see what 29x sales looks like

With the debt ceiling “X” date approaching, the rhetoric was too much and the Nasdaq June Futures took their first daily 100 point plus loss since May 2nd, losing 173.75 points to close at 13728.75. The MegaCap tracker with the SPY hedge is shown here:

We had some clown on twitter comment on this and looking for real positions, apparently he doesn’t understand this is an educational tool and that we are looking to track the veracity of the MegaCaps as we know they are and have been the safe haven here for 2023! As far as the options hedge, the educational trading tool covered the 422C at 0.19 and Sold instead the 418C now with the same expiration and noted in the yellow highlighted area. We continue to favor this short SPY call long MegaCap in the educational portfolio tracker.

As far as the overall market tone today, it was defensive, even in bond land, however there was a 2Y auction which went very well as the higher yield concession built over the last few weeks, seemed to have drawn in the bidders. Also we wanted to note the yield on the US 21-Day T-Bill with an investment rate of a whopping 6.326% remember when ZIRP and zero rates were the global economies savior, well how do you explain the global economies functioning at 6.326% rates???

We will continue to watch the US bond market especially this very short end which is obviously the risk for the debt ceiling. We aren’t sure why this is even an issue. We cannot figure out how the Federal Reserve Board (FRB) can bail out banks with the BTFP a $300BN program initially, yet the US government cannot tap that same spigot. Seems odd now, seems deliberate, yea we understand that underlying conflict of interest but honestly does anyone truly differentiate from the Executive Branch, the Federal Reserve and the US Treasury? NO we all know its one machine so to keep up these pretenses seems a bit strange. There is nothing stopping the Federal Reserve from creating a government borrowing program to get through this mess till congress figures something out.

Ok well will see if todays equity sell off has legs or if this was nothing more than one of those buying opportunities to get long all the AI driven market Megacaps!

We saw this chart from Wolfstreet and we can’t help but wonder, if 2008 was the biggest housing crisis of our lifetime, what does that say about the 2x rise since then? Says to me the Federal Reserve is going to have to buy a lot more MBS in the coming years! So we get a 2x rise in RE for a 10x rise in FRB assets…makes sense:

Just to put that into perspective it took the market 7 years to retake that all time high and that was a drop of 22.6% a similar drop now from $500k is a drop to $387k which is still above the Covid breakdown, what if housing crashes 50% or more? If the economy turns and people are forced to sell homes, it doesn’t matter they have a 3% mortgage rate now does it?

Alright get ready for Nvidia Earnings tomorrow, expected earnings 0.92 and 6.52B Revenue. It will be interesting to see if today’s sellers were setting up for an even bigger decline tomorrow??? The options markets show the $300 put at $14 and the $310 call at $9, so $23 bucks for the straddle. Buying it on the breakout of the 0.382 Fib at $199 is vastly more different than buying it right here above the 0.786 Reversal/Target Fib area. Given the straddle cost, options markets predicting a 7.5% move:

Till next time…

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