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Things you need to know.
- Markets rallied into the close but US futures are negative this morning
- Bitcoin and Ethereum have settled down
- The FED didn’t really say anything new – or did they? We’ll discuss
- Oil under pressure as traders accentuated the negatives – that will change
- Try the Pollo Agridolce
Mamma mia! What a day it was…..as I pointed out in my note yesterday morning…..markets had sold off on Tuesday, US futures were weak in the early morning on Wednesday, 10 yr. yields were up, Vix was up, Dollar index was under pressure, Asian and European markets were all lower, Bitcoin and Ethereum were under fire – having pierced key trendline supports overnight leaving them vulnerable to another beating when the masses awoke and the sun rose over the Atlantic….. As the clocked ticked towards 9 am US futures were in the red and sinking fast, Twitter was exploding with all kinds of analysis and commentary from all parts of the world about why Bitcoin had pierced $40,000 and was now tumbling into the abyss as the day began, Coinbase going into ‘freeze mode’ as it got overwhelmed with order flow – reminiscent of the Robin Hood drama only months ago…….and SPAC’s? They too are in sell off mode – with some down in excess of 40% – (take a look at the Defiance Next Gen Spac ETF – SPAK – it is an ETF that tracks the performance of newly listed SPAC’s and that alone is down 34% since February) punishing everyone that piled into what was going to be ‘the next greatest thing’….all of this set the tone and there wasn’t one piece of positive data that was going to slow this train down. Not one….it was all about the negatives, Period.
It was also FOMC (Federal Open Market Committee) day – it was the day where the FED would expose the minutes of the late April meeting to shine a light on who thinks what and when they thought it and the speculation was rampant about what the minutes would reveal and what they would NOT reveal….…….….
And then we got a replay of the Larry Summers commentary that took place on Tuesday…..in it he accuses the FED of ‘dangerous complacency’ by underestimating the risks that a prolonged period of low interest rates posed to inflation and the economy…..Recall that Larry Summers always wanted Jay Powell’s job…he wanted to be Fed Chair (or Treasury Secretary) – and that ain’t happening….so he went back to Harvard to brood….and now he is taking a very public stand in hopes that Joey might consider replacing Jay at the end of his term in two years….this chapter of the story is just beginning to unfold – watch to see who else starts to jockey for position in the coming months…..
And then – we had another ‘Ivy’ league professor – Wharton’s Jeremy Siegal telling us that he is bracing for 20% inflation over the next 3 yrs….and he also does not’ think the FED will be able to keep rates at zero thru December 2023 – in fact, he thinks that the FED will be forced to hike rates in the fall of 2021! Oh boy….now that’s different than what we we’ve been told….and so the day began….stocks got whacked, Bitcoin and Ethereum blew up as speculation ran rampant about who was margined and who took out HELOC’s (Home Equity Lines of Credit) to go all in on Bitcoin, Ethereum and Doggey Coin…..oh it was a beautiful thing to watch….and then like clockwork – after it was clear that it couldn’t hold onto the trendline at $39,800 – it did what I had suggested it would – it crashed and traded down thru my target at $30,800 and found support at $30,000 before Lonnie Musk starting tweeting about TSLA’s ‘diamond hands’….. the cable business stations scrambling to find anyone that might be able to calm the markets had many of the talking crypto heads telling us that ‘this is healthy’, these assets are volatile, they are in their infancy, it is the greatest thing on Earth, blah, blah, blah and that this is also ‘transitory’. By the end of the day – Bitcoin had rallied back but remained just shy of the trendline at $39,800.
The selling pressure then hit stocks hard and continued all morning with the Dow piercing its 50 dma – falling nearly 600 pts or 1.6% and the S&P piercing its 50 dma as well. Remember that the Nasdaq and Russell have already broken those lines and in fact the Nasdaq appeared to be about to spin out of control and tease its long term trendline at 12,518…. which in the end it did NOT but still may….and then that will tell another story?
And then at 2 pm – we got the news that we had been waiting for…. The minutes from the last FED meeting on April 28th….and what did they reveal? They revealed that while members were cautiously optimistic about the recovery – there were some (and we know who they are – Rosengren, Kaplan, ) that would be open to discussing the start of the taper conversation…..’at some point’ …….while there are others that favor holding the line…..and it also noted that the majority of the group favor Powell’s view that the FED should give ‘plenty of warning’ before this starts happening…..and BAM….that’s it ….CONSIDER THAT THE 1ST WARNING. (There will be more, but yesterday’s reveal is the 1st….)
Now to be fair – was there really anything new here? It is exactly what he had told us…that the bulk of the group is cautiously optimistic but we are not there yet…and while some may want to start to think about that conversation – it’s still too early to move but it is NOT too early to tell you that there is a split building from within…(thus the warning)…..so expect more analysis today and tomorrow and over the weekend on the Sunday morning talk shows……with many questioning if the FED still needs to be supporting the RED-HOT housing market by buying some $40 billion of MBS (Mortgage Backed Securities) in the months ahead…..
By the end of the day – all the indices regrouped and came off their lows and while they all ended the day again in the red – they did attempt to rally into the bell. The Dow losing 164 pts or 0.5%, the S&P’s off 12 pts or 0.3%, the Nasdaq down only 4 pts or 0.03% and the Russell giving back 17 pts or 0.8%. In the end – it was one of those ‘edge of the seat’ days…
This morning the tone is a bit different…. Global markets are up – small – but they are up, Bitcoin is trading at $39,000, Ethereum is at $2,600 and Doggey Coin is at 35 cts…. The 10 yr. treasury is at 1.65%, the VIX which had surged by 25% yesterday in the morning managed to close only 4% higher is up 3% this morning at 22.93…Gold is down $11, and the Dollar index is back above 90. All while US futures are once again going South…. with the Dow down 161 pts, the S&Ps off 18, the Nasdaq down 43 pts and the Russell is off 14 pts as investors continue to consider more talk on the next move….
Look – SPAC’s, Crypto and many of the tech disruptors represent the latest frenzy in the markets – and they are being ‘re-priced’, so it makes sense that the broader market take notice…. and if there is real building concern about inflation and that the FED is about to keep hinting about ‘hinting’ about talking about tapering then it puts us where we are….in a state of nervousness and uncertainty – exactly what investors and markets don’t like….so you need to figure out where you stand in all of this….and then plan accordingly. Remember investing is dynamic not static…which just means that you build a well-diversified, balanced portfolio that will ride the waves….
Eco data today includes the Philly FED Report – exp of 41 (down from 50.2), Initial Jobless Claims of 450k and Continuing Claims of 3.6 mil. After yesterday’s action – I do not expect these data points to create any interest….
Now the Europeans are pushing it all aside and seemingly ignoring the latest crypto drama and even the taper talk……markets across the region are all bucking the trend as investors there look for bargains…there is no eco data to report so investors just trying to remain focused on the bigger picture choosing not to get drawn into the fray…at 6 am – the FTSE -0.15%, CAC 40 +0.23%, DAX +0.20%, EUROSTOXX +0.31%, SPAIN -0.56% and ITALY -0.03%.
Oil got hit hard yesterday during all the pandemonium…as traders were taking money off anywhere they could…There wasn’t anything that was specific, it was just the tone…..and while worldwide demand continues to improve, markets chose to focus on the negatives…..Demand is strong…US crude inventories increased by 1.3 million barrels last week – but that was less than the 1.6 million expectation – suggesting that demand is strong….yesterday took us below the 50 dma trendline at $62.57 and this morning oil is fighting to take it back.
Bitcoin is trading at $39,000, Ethereum is at $2,600 and Doggey Coin is at 39 cts.
The S&P closed at 4125 after testing 4061 – piercing its 50 dma at 4081…. the action this morning suggests that we may test that trendline level again….to see if it holds and if it does – we should see markets begin to calm down, if it does not then expect more volatility…. Intermediate support is at 3954. Just sayin’.
Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss the markets or a plan. You can now get a video version of this note on my YouTube Channel. KennyPolcari.
Take Good Care
Chief Market Strategist, Consultant
This is not a difficult dish to make and once you simmer it – treat yourself to a bubble bath then come down and set the table, break open the wine, turn on some dinner music and enjoy the night.
You need: Chicken pieces – legs, thighs and breasts, olive oil, s&p, diced onion, chopped carrots, chopped celery, plenty of sliced garlic cloves – 6+, ¼ c sugar, 1 c Chianti, ½ c red wine vinegar, ½ c orange juice with pulp, *sliced almonds – optional.
Season the chicken pieces with s&p – set aside. In a heavy frying pan – heat up some olive oil, – now brown the chicken on all sides. Remove and place on a platter.
Now add the garlic, carrots, celery, and onion – sauté for 10 mins on med heat…. Now add the sugar, wine, vinegar, orange juice, and almonds…. bring to a boil – add back the chicken – skin side up. Place a lid off center and turn heat to simmer. Cook for about 30 mins.
Now remove chicken and place on a platter, – turn heat up to high and stir until it is nice and thick…not long…maybe like 4 mins max…. taste – adjust seasoning with s&p. Spoon the sauce over the chicken pieces and serve.