Weekly Raid #48 - The Sell off Machine
What a day yesterday was, JPow struck again
He didn’t raise as I had anticipated, but his statement indicated that we aren’t done yet.
Let’s see what today has in store.
News of the day
Today we have a few pieces of news hitting the wire.
We have initial jobless claims and the Philly Fed manufacturing index out before the bell today.
Jobless Claims are important for obvious reasons, but the Philly Fed might have some additional means today.
Given the press conference yesterday, we almost need a continued contraction in the manufacturing sector to keep the hike probabilities to just one additional time this year.
If the economy proves to be resilient even in this continued pressure we could continue to see additional hikes heading into 2024.
Additionally this morning there are existing home sales out at 10 a.m. We have discussed a lot about why home sales are important, but to briefly recap, with housing in such a depleted state, prices aren’t coming down in conjunction with rate increases.
Many things I have read are just speculating that it hasn’t gotten bad enough yet, and I think there is some merit to that. I also think there is a fundamental issue with supply, and until that is solved through either demand reduction or supply addition, we won’t see a resolution. Either way, to see something positive come out of the market today, I would look for a miss on this report. If we hit or exceed I think we could see some additional market downside.
The Blue line is Existing home sales, the Orange is Total Inventory. Only a 10% rising over the past decade
Today will be short and sweet here.
I just want to remind everyone that the Market is not the economy.
Everyone merges the two together, and that is not the case. It’s possible for the economy to do well and the market to drop and vice versa.
Modern politics has had you merge the two in your mind like it’s a political goalpost, but in reality, where the market sits is irrelevant to you if you don’t have money invested there.
What is important is the price of gas, the affordability of food, and the availability of housing. Having a high stock market is great, and it has benefitted me well, but I would trade off much lower prices if it meant gas was less than a dollar and you could get quality food from a local butcher cheaply.
So the next time someone says “Well the economy is doing well, the market is up” just remember the two aren’t synonymous with each other.
The Watchlist today is short. I hit most of the goals I had yesterday for the week and split before FOMC, but if I were to place a trade today I would focus a lot on protection.
NVDA is back under its 50 and back under the VAH for the year. I would look for a 400 test before we look to bounce, but in reality, the volume is crappy all the way down to 270ish. That’s a hell of a fall, but I doubt we will see anything that low too soon.
The Second stock I am looking at today is SHOP. We are securely back into the yearly value area and have another 10+ handles to fall back to POC. I think this could be a really solid credit spread short keeping a stop around VAH on the year. As with every short trade, know your exit well in advance, it’s the harder side to trade.
Finally, I would like to reiterate that cash is always a position. Many brokers will allow you to purchase short-term bonds, CDs or even pay a higher interest rate on your cash. Earning 5+% on just holding cash is a damn good return for 0 risk. The offset is that inflation is rising faster than 5% but if that’s the case look at TIPS. I have a whole article on it here
As always trade well and Good Luck
As always this is all for educational purposes only. You are solely responsible for your trades as I am for mine. Nothing in here should be construed as financial advice, but only educational content about the markets and my particular trading style.