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Things you need to know 

  • And the rally fades…. stocks end on their lows…expect further weakness ahead.
  • Financial and political headlines causing global investor angst
  • FED losing control of the conversation is NOT helping the tone ahead of their FOMC meeting next week
  • Global markets all lower – S&P now about to test its 200 dma….4427 is the level to watch
  • Crypto’s continue to crumble – $147 billion wiped off the face of the earth in the last 24 hrs1
  • Try the New England Clam Chowder…

“I feel the earth move under my feet; I feel the sky tumblin’ down…. I feel my heart start to tremblin’ – whenever you’re around……”  Carole King – Tapestry Album 1971 – I was 10!

And tremble they did…. Stocks got off to a strong start on Thursday, leaving some to suggest that the recent selloff was ‘overdone’, there is no reason for the weakness.  The algo’s tried to identify ‘buying opportunities’ in some names that have been beaten up….the sell side algo’s reacted by cancelling in line offers leaving voids in the order book that left buyers no choice but to pay up…and up the paid….all of the indexes went solidly in the green, the media calling it – saying that the worst was over….Everyone back in the pool!  

At the highs – the Dow had gained more than 400 pts, the S&P +70 pts, the Nasdaq +300 pts, the Russell +42 pts, and the Transports were up 338 pts. – But that wasn’t how the day would end….buyers started showing some fatigue before noon….yet stocks tried hard to hold steady… about 12:30 – it started as a slow grind lower….and they by 3 pm – it turned into another all out ‘sell off’….and by the end of the day all the indexes had swung from decent gains to heavy losses….The Dow swinging 800 pts from hi to low – ending the day down 313 pts ot 0.9%, the S&P swung 125 pts to end the day down 50 pts or 1.1%.  The Nasdaq swung 500 pts to end the day lower by 187 pts or 1.3%, the Russell swung 82 pts to end lower by 39 pts or 1.8% and the Transports ended 66 pts or 0.4% lower after swinging 390 pts from hi to low.

This even as the 10 Yr. Treasury yields fell (slightly) but did end the day yielding 1.79%…..Which just shows you that the damage is being caused by the perception of what is about to happen in the coming months and not about what happened yesterday in the bond market…..….Talk of a more hawkish FED, rising rates, and balance sheet reduction continue to dominate the headlines….earnings while front and center are NOT the culprit, but some of the forward guidance is not helping, because the guidance goes back to what is happening in the economy and what will happen to the economy as the FED pulls back on the taper and moves to raise rates. 

Investors are concerned about tightening policy…..buyers – and there are plenty of them – are choosing to be more coy…..after the surge higher in the morning, it became obvious that there wasn’t much follow thru, sellers recognized that and went in for the kill…..The algo’s shifting gears going from buy to sell and BANG down the drain we went….And this as 10 yr. yields declined!  What fueled the selloff was how quickly the buyers – who were anxious to buy stock in the morning – chose to back off…..Once they weren’t tripping over each other to find the bargains….the order book dried up – in line bids disappeared and once again a vacuum was created….the buyers still wanting to buy – just moved lower saying to themselves why should I pay $62 when the sellers are willing to sell it for $60 – or even $59?  And that will be the subject of the conversation in the weeks and months ahead as we learn more about the FED’s intentions…. the pace of the taper, the number of rate increases – more importantly the increment of rate increases and the speed of the reduction of the $9 trillion balance sheet.  Period the end.

And then add in the political narrative that just added noise to the conversation….

There was lots of talk about Joey’s press conference on Wednesday and some of his controversial comments surrounding Russia, Ukraine, and the building reality of an imminent invasion – saying that he expected Vlad to take over that country and then how the US would respond.  Leaving the WH press corp to quickly try and clarify what he meant by his comments while leadership in the Ukraine expressed horror at this comment.  Jen Psaki working overtime to dispel the confusion…… There was also commentary about how Joey said that if we didn’t get the ‘federalization of elections – then he wouldn’t be able to be say that future voting would be fair’…. Now isn’t that a kick in the pants…. Wasn’t the last election – the fairest election to date? Weren’t we told that the November 2020 election lost by the GOP was the most secure and definitive election to date?  It just adds to the negative tone out there….and while none of this political stuff will price stocks in the long run, it will add to the angst that we are currently under.

I will also reiterate the idea that the FED has lost control of the narrative….which is not helpful at all….it leaves the media to focus on the wide range of possibilities – with some bigger voices calling for 5, 6 and even 7 rate hikes – which makes absolutely zero sense no matter what….unless of course there is an idea that inflationary forces will send inflation to double digits…and then, all bets are off….And while I do not need to remind any baby boomer of what that was like back in the late 70’s and early 80’s, it is the 2 generations behind us that have never experienced that phenomenon……and who are about to get an education….. I know – ‘it’s different this time…’  Right- it’s always different this time…. history NEVER repeats itself…. You keep thinking that …. Because none of us lived it!

Oil – like the stock market has also been all over the place…trading as high as $87/barrel only to end the day at $84.48 /barrel. This morning it is off another 2% or $1.65 trading at $83.90/barrel…. The move being credited to an increase in US crude stockpiles…. Gasoline inventories rose by 5.9 million barrels while crude stockpiles rose by 515k barrels….  These are all short-term data points…. which is fine but focus on the longer-term demand trends and that calls for $100/barrel oil.  How do I know this?  Because Goldman told us so…. need I say more?

Goldman is also the one that ignited this mess in the mkts with their note on the 3rd telling us how the FED will have to raise rates 4 times, end the taper now and begin the balance sheet reduction asap…. Note that there was no response by any member of the FED since that report was published…so one of two things is happening…. 1. They are letting GS jawbone the markets lower so that the FED doesn’t have to raise rates 4 times or 2. They are letting GS put it out there in the public square so that when it does happen, they can point to the fact that no one should be surprised by this action – because it was out there in plain sight.

Either way – I said it before and I will say it again…Buckle Up and Strap In…..stick to the plan, add new monies to VALUE and be patient with the sexy high growth names…because they will continue to get hammered until the FED offers more clarity and takes control of the narrative once again….unless of course it’s too late…and investors believe they have lost credibility and that is a whole other issue.

Crypto’s continue to CRUMBLE under the weight of all this uncertainty…. Bitcoin now trading well below $40k – this morning it is down 6% at $38,800, Ethereum down 8% at $2,840.  As the market moves lower, some investors in crypto are throwing in the towel… they fall from the trees – clearly not having the stomach nor the will to hold on…..If Bitcoin fails to hold right here at $38k – we could see it circle the drain only to find support at $30k…..which is another 21% move lower from here….Remember – that Bitcoin is already down 44% from the highs….so another 21% will surely change the ‘investment’ theme for so many.

Overnight – Asian mkts came under more pressure all ending the day in negative territory…. this morning in Europe investors is also heading for the door…leaving those mkts off between 0.8% and 1.5%.  The story is the same…. inflation, interest rates, policy, and the uncertainty….

US futures are down again…. the Dow -50 pts, the S&P off 21 the Nasdaq down by 125 and the Russell off by 7 pts.  This should also not surprise you.  It’s Friday, it’s a big options expiry, there is so much uncertainty, stocks closed on the lows, and the FOMC meets next week……  Stick with the high-quality value names…. stocks that can perform and outperform in what is sure to continue to be a volatile environment.

The S&P closed at 4482 – well below its intermediate trendline…. We are now set to test the long term trendline at 4427…. which is only a 1.5% move lower…. a move we could easily see happen today….and again that will really be a KEY level….to watch.  If we pierce that – then the algo’s will go into overdrive – tossing everything out the window and the next level would be the loves of October 2021 – 4300.  That would represent a 10% move off the January high of 4818 – Hmmm…. I wonder if we will get that?  In any event – stay close…. Grab the coffee and don’t leave your seat….

Take Good Care

Chief Market Strategist, Consultant

New England Clam Chowda

It has become an expensive dish with clams going for $13/lb up from $1.50/lb only a few years ago…

For this you need:  Bacon, Celery, Onion, Garlic, potatoes, water, clam juice, s&p, flour, 1/2 & 1/2, chopped clams.

In a large pot, cook the bacon (cut in small pieces) until crisp.  Remove and set aside.  Now sauté the celery and onions until soft.  Add in 1 clove of chopped garlic – cook for a couple of min.  Now add in the cubed potatoes, 2 c of water, 2 bottles of clam juice and s&p.    Bring to a boil and then reduce until the potatoes are cooked.

In a separate bowl – mix 1/3 c of flour and 1 c of 1/2 & 1/2….smooth not lumpy.  Now add to the pot of chowder. Stir until thickened.    Stir in the chopped clams, some more 1/2 & 1/2 if necessary and the crumble d bacon.  Serve in warmed bowls with oyster crackers.

Buon Appetito.