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Things you need to know:

  • Stocks struggled and futures are pointing lower this morning
  • Bitcoin continues to lose value – now down > 25% since topping out at $42k
  • Oil under pressure after Joey blows up the Keystone Pipeline (expected) and halts production on Federal lands (also expected) – but it has rallied sharply – so don’t panic
  • Some in Congress pushing back on the $1.9 trillion… let the games begin!
  • Try the Fusilli…

Stocks ended the day mixed with the Dow losing 12 pts the S&P gaining 1 pt as they both struggled to stay positive, the Russell came under pressure giving back 19 pts all while the Nasdaq notched another new high… gaining 73 pts to end the day at 13,530. Bitcoin – continued to get beaten up falling another 9% ending the day at ~$31,000. This asset has now lost over $11,000 or 26% over 2 weeks… with guys like Scotty Minerd – CIO at Guggenheim Partners – telling us that:

“for the time being, we have probably put in a top for Bitcoin for the next year or so.”  This after he told Bloomberg last month – when it was surging towards $40,000 that fair value for Bitcoin is $400,000 but that there was a ‘speculative frenzy gripping the market’.  

The next YEAR? Speculative Frenzy? Come on!!!! Please say it ain’t so! What will Mikey Novogratz say about that? (He’s all in!!!) And think of the bar owner in NYC that wanted to sell his two bars in Hell’s Kitchen a month ago… (when the frenzy was taking place – the NYPost featured his ‘story’ on the front page) – but the buyer had to pay in Bitcoins… If someone had paid him the $850,000 dollars he wanted in Bitcoin then – today he would have $629,000 – and that was only two weeks ago… and if Bitcoin tests $20,000 as Minerd thinks it will – that bar owner would be licking his wounds having only $408,000… just sayin’… be careful what you wish for… Cash is always King because if he sold it for $850,000 in greenbacks – he would still have $850,000 in his bank account… (at least until the ‘coiners’ have their way…)  But hey – it’s a new world… and how happy is that guy right now?

Eco data was strong yesterday… Housing Starts and building permits exploded higher… blowing away the muted expectations… initial jobless claims and continuing claims also slightly better – not a ton, but better – moving in the right direction… (lower)… Nasdaq advances putting in another new high, while the rest of the market struggled to find direction… Joey, as promised, signed lots of executive orders reversing much of what Donny put in place and is expected to sign more today all while Dr. Fauci announced that the US would be rejoining the WHO (World Health Org) saying that:

“as a WHO member state, the US will work constructively with partners to strengthen and, importantly, reform the WHO to help lead the collective effort to strengthen the international Covid-19 resposne and address its secondary impacts on people, communities, and health systems around the world.”

In addition – the WHO is expected to go to China to do some in depth investigation into figuring out what happened… Where it came from? Was China remiss in declaring an emergency to the world? Was the WHO late to the game in declaring it a pandemic? (those are rhetorical questions… just food for thought…)

The rotation from growth to value we’ve seen over the past couple of months appears to have some analysts saying that we are ‘reversing’ course this week… with value underperforming and growth outperforming… Energy XLE and Financials XLF (both value plays) which have performed well lately up 65% and 32% since October are taking a break – both giving back about 2.5% this week… (hardly anything to get all worked up about) …Energy under pressure for a couple of reasons… 1. The cancellation of the Keystone Pipeline Project and 2. The Biden decision to stop leasing, drilling and production on federal lands… and Financials under pressure just because… they were.

Tech XLK which had been ‘lagging’ a bit (and I use that term loosely) once again takes the lead… thanks to FB, AMZN, AAPL and MSFT… etc. Hopes for robust earnings across anything ‘tech’ causing the latest push higher… Look – Do not let one day make a trend or cause you to change your plan… the growth to value play is not reversing course at all… Don’t let them tell you it is… it’s ridiculous…

And housing… do you think we’re in a bit of a ‘frenzy’ there? I mean – all you hear about is how houses are selling up and through asking as the scramble continues – Dianna Oleck of CNBC fame constantly reminding us – with buyers demanding existing homes be completely renovated and outfitted for today’s audience… willing to pay for someone else to re-design it… and here is the opportunity for that… go find the one that isn’t renovated, one that will allow you to pick and choose how you want to live… yeah, you have to put up with the work, but you’ll also find a great deal and you’ll get to do it ‘your way’… I mean – what is it with these millennials – don’t they have any vision at all? Or is it that they just don’t want to get their hands dirty? (It’s that everyone gets a trophy mentality) Someone that has an ‘older home’ and wants out will be more willing to make that deal happen… just a thought… do what you want… it’s your money… just remember – when inflation hits and rates rise and mortgage rates surge off of historic lows – the value of your home will decline (inverse relationship – rates up, prices down – it’s just simple math, not geometry or trigonometry). And if you don’t believe me – talk to someone in the ‘baby boom’ generation… they’ll tell you… (I mean I just did, and I was born in ’61).

Gains in the market of late has been credited to the $1.9 trillion relief package proposed by Joey last week – but the proposal was one thing, negotiating, compromising and passing it is another thing… and we are about to see how this new administration and congress will get along as Joey is already facing questions and demands to ‘scale it back a bit’… Some chatter had a compromise at less than $1 trillion while others continue to push for the whole shebang and then some more… so let the games begin… let’s see who in congress rises to the top and leads now… what will this package look like on the other end?

And that is causing morning angst… US futures are in the RED… (OMG! RED?) Dow futures are off 237 pts, S&P’s are down 25 pts the Nasdaq giving back 67 pts and the Russell off by 16 pts… it is now day 2 of the Biden presidency and the work has begun… so let’s get to it… and what the market is realizing now is that all of that euphoria that has been supporting the markets of late may be ‘less euphoric’ in the weeks ahead… and it is the last week of January… a time that can be a turning point… so sit tight…

Earnings will continue for the next 2 weeks and we will learn much more… and with the market teetering at all-time highs… the path of least resistance is lower… and we all know how that goes… lower can come quick and when it does – the media will be the first one to call it a ‘market in turmoil’… all very dramatic… As I have been saying – a 7% – 10% pullback would not be an issue at all (I mean for some it might be… but get over it..) and it would be healthy for the market and for investors… a 10% move lower in the S&P would take us to the mid 3400’s… just above of the long term 200 dma… and back to levels seen in October.

Algo’s will kick in as we break technical data points… think trendlines and moving averages… the 50 dma is at 3,688, the 100 dma is at 3,544 and the 200 dma is at 3,318… the S&P is 15% above that long term trendline… a reversion to the mean (or close to it) should not be a reason to toss the baby out with the bathwater… Stick to the plan…

European markets are – guess what? RED as well… At 6:30 am – the FTSE -0.89%, CAC 40 -1.23%, DAX -0.96%, EUROSTOXX -1.14%, SPAIN -1.72% and ITALY -2.06%. Eco data across the zone coming in a bit weak… Business Activity falling to a 2 month low – Markit Flash PMI for the ‘zone’ dropping to 47.5 suggesting contraction while UK composite PMI collapsed in January – falling 10 pts to 40.6 – deep into contraction zone…but what would you expect after they shut the country down (again)?  …and yesterday the ECB (European Central Bank) kept rates unchanged and reiterated that they stand ‘ready to do whatever it takes’… (think jawboning…) It’s the old Mario Draghi play… speaking of Uncle Mario – where is he? Gone completely off the grid… I miss him, don’t you?

Earnings today include KSU, SLB, ALLY, PPG…

Eco data today includes US manufacturing PMI – exp of 56.5 (expansionary) and US services PMI – exp of 53.4 (expansionary)… and Existing Home sales – exp to be -1.9% (and if it is weak it is because none of these home buyers want to deal with ‘old’… whatever!).

OIL and as expected you would expect it to be weak and it is! Falling $1.40 or 2.6% after the Biden executive orders… (see above). But look at the chart… no matter what – the move has gotten a bit ahead of itself… and while I still like oil – I agree that a pullback is necessary… but not a reason to bail… Look – oil is up 45% in 3 months… so let’s not panic. And as I told you yesterday… Goldman steps up and calls for $65 oil by summer 2021… We remain in the broader channel that I have identified as $45/$55 and I am not changing that call (yet)! LOL.

The S&P closed at 3853 – after having traded as low as 3845 and as high as 3861… this morning it looks lower and if futures hold here – then we could open closer to 3830… and if we follow in Europe’s footsteps, we can expect a pullback somewhere in the 1% – 1 ½% range… and that would be ~ 38 to 50 pts or so… As I have been saying – I think it is a bit tired and most of this good news has been priced in – so sit tight… don’t chase and keep your eye on the ball… We remain in a broad channel – 3780/4100… my sense is that we test 3780 first… but let’s see…

So stick to the plan, create a well-balanced and defined portfolio… trim where necessary, call your advisor and focus forward…

Take good care

Kenneth Polcari
Consultant, Market Strategist


Fusilli w/ Spinach and Fresh Ricotta

This is a simple yet delicious dish

For this you need:  whole milk ricotta, olive oil, s&p, 1 lb of Fusilli pasta, I lb of chopped spinach, 4 large garlic cloves, 1/3 c of heavy cream, 1 tsp of lemon zest, 2 tspn of fresh lemon juice. Fresh grated Parmegiana cheese.

Bring a pot of salted water to a rolling boil.

Whisk 1 c of Ricotta, olive oil, s&p, until smooth. Set aside.

Add the fusilli to the water and cook until aldente -about 8 – 9 mins. Taste to confirm. Now, add spinach and cook for 30 seconds more… Strain and return to pot. (Remember to always save one mugful of the pasta water)

While the pasta is cooking – in a separate pan – add some olive oil and the sliced garlic – sauté for 2 – 3 mins… remove from heat – whisk in about 1/3 cup of fresh ricotta (not the ricotta from above), the heavy cream, the lemon zest and the lemon juice to the pan.

Add THIS mixture to the pasta and mix well. Toss in 2 handfuls of parmigiana cheese and toss to combine. Sauce will thicken after a couple of mins… now add in a bit of the pasta water to adjust consistency as needed. Serve in warmed bowls – adding dollops of the ricotta mixture from step to the plate. Always have extra grated cheese for your guests.

Buon Giorno