Alongside a narrative of impending recession, there is a narrative of ‘sticky’ inflation
The more negative the reaction of financial pundits and commentators, the more embracing the notion of a massive drop of nearly 1,000 points.i am not Here we say that this is not possible. It doesn’t mean it will happen this month or next month. A big sale may happen in September or October. This gives plenty of time for this rally to continue to rise. Move as erratically as possible. Why am I pushing this gatheringhouse concept? This means that while experts predict doom, investors, money managers, and institutional investors expect nothing of the kind. Otherwise they are all hedged.
Friday’s March jobs report saw many positive results
The Department of Labor reported on Friday that employment rose by 236,000 compared to an estimated 238,000 in February, below the upwardly revised 326,000 in February.
The unemployment rate fell to 3.5% and fell as the labor force participation rate rose to its highest level since before the Covid pandemic. The unemployment rate has fallen as the number of workers has increased. There were other data items pointing to a cooling job market, such as lower hourly wages. Instead, the commentator emphasized that he would lower the unemployment rate to 3.5% and pushed the concept of a very tight job market. There is also an expectation that the CPI will also overheat.
What if the recent plunge in interest rates did not herald a recession?
There have been many comments by commentators that 2-year and 10-year rates have fallen precipitously. This is he one of the proofs that a recession is on the horizon. What if the bond market looks ahead to his 2024 and inflation falls towards 20%, then current interest rate levels look much better. Perhaps they’re factoring in that the economy could slow down months from now. The stock market is always looking to the future, and in 9-11 months he will enter 2024, when inflation will calm down significantly and the Fed will be freed from supporting the economy.
Finally, why are we talking about blow-off tops?
It is generally accepted that this is one of the most hated gatherings in recent memory. We also talked about money being moved from savings to money market funds. Most financial markets are available through brokers. Playing an armchair psychologist, when money jumps from the bank into a brokerage account, it reduces a lot of inertia and creates another move in the stock portfolio. Another catalyst for him is a very sharp drop in interest rates. Interest rates are no longer above 4%, so if the S&P 500 starts to move, it makes sense to me that some of that loose cash will flow into brokerage accounts and be invested in stocks.
I think we have a very good setup where the negatives turn into positives as the rally gets higher. Instead of talking about a recession, instead of further interest rate hikes by the Fed, we can talk about a soft landing. That could change going into the first quarter of the year. On top of that, better-than-expected earnings can set off an irrational frenzy that can flood stocks. Let’s take a look at the upward trend of the S&P 500 (SPY) ETF. I always watch the market based on the S&P 500, but I expect the Nasdaq-100 to hold most of the water in the surge. Let’s adopt what Chartists call a cautious move. Take the number of recently dropped points and add it to where the current recovery line is. Let’s stick to the SPY 6 month chart
The top is 410.4 and the bottom is 383.8, and when you put that back into 410.4 it’s 26.6 points, which is 437.0. So does excessive rally start at this level? Measured movements usually indicate “normal” rally. Perhaps when the S&P 500 rises well above 4200, the rally could accelerate to buyer panic and lead to an unsustainable hyperbolic chart. Note that the numbers are not 1:1, as this is the SPY, not the actual S&P 500.
I don’t know if anyone has noticed, but rallies tend to turn people’s moody opinions of the stock market into more optimistic ones. Yes, and in the current negative situation there are so many dry tinders.This rally can get pretty hot. In the meantime, enjoy your ride. If the stock pushes the S&P 500 up to he 4200, we’ll start hedging more, probably, but if it does, the rally will be pretty vulnerable. The rally must appear to be almost straight up for the blow off top to occur. It then collapses on any negative news and gains momentum as the index falls. when will this happen? In the meantime, looking at the price action, I don’t think it will let us know. The Dual Mind Research community knows they can handle when the market runs out of gas.
My first deal is Calls on Alphabet (GOOGL) with 105 strikeouts by June. I’m making money now, but GOOGL could easily go back to 105 this week for the CPI announcement. Then you will have the opportunity to buy more calls. I think GOOGL is a catchup deal with Microsoft (MSFT). I’ve been comparing MSFT’s Chat GPT and GOOGL’s Bard, and I happen to like the Bard format. No wonder, because I’m sure Sundar Pichai doesn’t need my endorsement. GOOGL has amazing capabilities in AI, built on years of research. In fact, GCS is (or was it?) the go-to cloud provider for AI/ML applications. I think Mark Zuckerberg is leading the way in their embracing the mantra of “efficiency.” I think GOOGL will be one of the few Tech Titans to improve profitability, but he probably doesn’t have much revenue growth right now. Certainly, GOOGL will benefit further financially when the economy returns to growth. Also, perhaps more effective is building other revenue streams down the road. In the meantime, I don’t know why GOOGL didn’t do as well as Apple (AAPL) and MSFT.
My second deal is Exelixis (EXEL). Farallon goes public with three nominees on its board. EXEL has a vast research program that extends from the West Coast to new research facilities on the East Coast. Their top drug produces $33 free cash per share, but I think before the activist announcement he was trading at $17, now he’s trading at $20. completely. Perhaps instead of announcing a $550 million buyback, they will actually buy back a lot of stock. Or clean up your balance sheet and run an auction for EXEL. Or you could encourage them to start paying dividends to reward troubled long-term shareholders. I have it in my long term investment account so I am one of those victims. It won’t necessarily make his EXEL skyrocket, but it will put pressure on companies to use shareholder funds responsibly. I have Equity and Long Call in my trading account, my Strike is 20 and my Exp is 1/24. This should give you enough time to resolve the situation.
My third trade is Charles Schwab. This is an investment, not a transaction, not a new name. I am increasing my positions in both call and equity. I also wrote a call at 54 to protect the downside. I can’t believe my luck when the SCHW drops below 50. 50 strikes and he could add a few more calls heading into June.
Boeing (BA) calls are all sold out as they approach 118. It was not a top tick. I think the 115 quarters are sold out. Closed all UVXY calls.
Frankly, I have never done more than the above activities. I’m adjusting my positions in case the CPI data that comes out on Wednesday isn’t as acceptable as it seems. Add cash to his GOOGL call if there is a big sale. Hopefully when Boeing drops to 105 I will start adding calls.