Goat Rodeo of a Stock Market

Equities start the day higher as we make the front page of the Journal! I spend a fair amount of time thinking of ways to make journalists laugh so I guess I succeeded with Corrie Driebusch. You wanna know what my top looks like? That. Anyway, enough patting myself on the back, what the heck are we gonna do with this goat rodeo of a stock market? Remember how I used to say we are always on the lookout for “max good news”? Well…..did we get it? Was tax reform and a market up 6% in January the best it gets? I mean it’s possible, let’s not discount the fact that bull markets end in a euphoric surge, but shouldn’t economic data be crumbling too? If this is the end where is my recession data? How come new home sales and auto sales haven’t topped out? Why hasn’t the yield curve inverted?  Why hasn’t the unemployment rate started to rise? What is the record for most rhetorical questions in a recap? So you are sitting there saying “well, if you were on the lookout for max good news why didn’t you give us a warning or something in Jan?” Look, I chose to live in a place where it snows for 3 months, is cold for 5, and I can’t fly nonstop to London so I have to drive to O’hare all the time, I may not have the best judgement in the world. None of us will know when the top is in.  I won’t, you won’t, even my main man Josh Brown won’t. I do know this:  it’s hard not to think it’s the 8th or 9th inning especially with interest rates rising, valuations at lofty levels, employment as good as it gets, tax reform behind us, rates starting to rise, and Tiffany’s selling a ball of yarn for $9k. Everyone seems smart in a bull market, everything seems easy in an index fund that only goes up. But you know what…how do you think people feel now? I have a sneaky suspicion you are going to want to be long financial advice in the next few years…

After the open it felt like we were going to head south and we did. 2,655 all the way down to 2,622 where we finally, for the love of God, stopped the slide. I know price determines sentiment but it sure feels like people want to sell the rallies now. We’re stuck between the 50 and the 200 day so “no man’s land” seems appropriate too. Risky stuff bounced (Energy, Fins, Tech) and safety plays fell so at least the composition of the rally was ok. Winners were CSRA, ALXN, MRO, UA, COF, CSX, and RCL. Losers were ULTA, NVDA, GPS, TRIP, and WYNN. Apparently ULTA is being sued for re-packaging used cosmetics so that’s not good. Anyone tried to buy their wife something in one of these stores? My God….I may as well have fallen into Daedalus’ maze for that Minotaur because holy cow is it confusing. Honey, apparently Philosophy Amazing Grace is all the rage because I gotta get outta here.  By lunch the market was grinding on its highs, 2,657 up 1.45% while we watched another Nordic country dominate cross country skiing. Like what age do kids x-country ski in Norway?  2?  3?

The rest of the day felt ok until the last 20 minutes. Sitting here, trading, feeling good, when all of sudden my bids are being hit. SOLD SOLD SOLD. Late day selling in SIZE, which is exactly the kind of price action we don’t wanna see. It appears Bears will not go gently into that good night my friends. We did close positive though, in fact bigly positive. 2,656 up 1.39% so let’s not get too crazy. This is an impt week, we need to see some kind of stability to think humpty dumpty is being put back together. Are we late stage? God yes, for sure. Will the bull market end soon? Maybe, maybe not, but I’ll be here to make you laugh either way!   

Final Score:  Dow +170bps, S&P500 +139bps, Nasdaq +156bps, Rus2k +89bps.  

News Highlights:

Since it’s Winter and the Olympics are on we have to end with a ski video.  A unique ski video…





Have a good night

The Biggest Skirmish Since The Battle Of Bull Run

Equities start the day flat after the biggest skirmish since the Battle of Bull Run. And while that battle started a larger war I don’t think we are facing the same escalation. So what on God’s green earth happened yesterday? What one event caused the biggest selloff we’ve seen in YEARS. Well my friends you just witnessed the death of a very popular trade made popular by Target managers. For years people shorting volatility have made stupidly easy money. The market goes up and to right, no one cares about anything in the World so the trade has minted countless millionaires. That trade started to crack late last week (due to fears about rising yields) and it truly imploded on Monday/Tuesday. You see everyone short volatility needed to cover that position and in order to cover they effectively needed to buy VIX. As the VIX soared it caused every PhD programmed computer to sell stocks indiscriminately. Why were they selling stocks?  Because the VIX was going up. Why was the VIX going up? Because the Target manager guy was trapped short. That endless circle played out and knocked the DJIA down 1500 pts. Look, it’s been so long since anything happened that yesterday’s price action feels very ominous. But you know what? On average the market falls 5% three times a year, on average it falls 10% once a year, and on average it falls 20% once every 3 to 5 years. The question we have to ask is are we witnessing the end of the Bull Market? IMHO we are NOT. Bull Markets end primarily because of recessions, not from popular trades imploding. Does anyone think the economy is currently in or near a recession? All I know is that the “short volatility” trade just got buried in our history books alongside the Confederacy and you were there to witness its fall. God I love markets when things finally happen…let’s go baby!

After the open it was chaos mixed with anarchy and a dash of madness. Most of the VIX ETFs were halted (probably for redemption) and futures diverged from cash because they sold off after the close on Monday. At one point S&P futures were up 2% while the index was negative. If you wanna learn about spot futures parity go here but honestly I’d rather bang my head against an icicle than re learn that. Anyway, $SPX rallied slightly off the bell but spent the bulk of the morning going sideways because no one wanted to make a move while the VIX churned. Here’s a random sample of VIX prices in the first 3 hrs of trading: 23, 32, 40, 46, 35, 32, 30. Efficient market theory? What a bunch of garbage. When something this complex unwinds it’s going to disjoint markets and that’s exactly what happened. Random people losing $4 million overnight tends to make the market indecisive. Winners TRIP, SWKS, MU, NWL, TPR, GM. Losers CBOE (I assume from all the lost vol biz), ARNC, IT, CMI, PEG, and FIS. Things were nutty at the individual stock level but indices really didn’t go anywhere in the morning. By lunch the S&P was down 37bps, the DJIA was down 12 bps, and the Nasdaq was up 17bps. If you skipped all that looking for a video to sum up what it’s like selling vol you can just click here. Eventually you miss the ledge…

The afternoon saw a wallop of a rally as the market, for now at least, brushed off fears about a larger meltdown. We closed at 2,695  up 1.75%. Hey…we all wanted things to move again right? Violent price action creates opportunity, it always has. Don’t bemoan markets finally waking up from their slumber, embrace it and try to find ways to profit. Active management needs these kind of events to show their investors that their process works and that they don’t take 4% losses in a day the S&P 500 ETF did. I’m off tomorrow but we’ll be back on Thursday to see how the week ends! Oh and while we sat here fretting over a made up volatility index Space X did this. Perspective people…  

Final Score:  Dow +234bps, S&P500 +175bps, Nasdaq +213bps, Rus2k +108bps 

News Highlights:

Ok so I have to end on this video because it perfectly encapsulates what the market felt like yesterday.  


Have a good night

Tic Tac Toe, Three Recaps In A Row!

Equities start the day higher as we grapple with earnings, a SOTU speech, Crypto melting down, and a two day selloff. Tic Tac Toe, three recaps in a row, let’s go! Last night Trump did his thing and the market seems ok with it. Josh gave his thoughts here and they perfectly sum up what I wanted to say but I did I want to point out how much I laughed when our President clapped at his own comments. Amused me to no end….next time I speak in front of clients I’m going to try and pull that off. So on Twitter I’ve made fun of Boeing lately because the darn thing trades like a FAANG stock. I mean they make a cyclical product where demand plummets in a recession. Anyway they reported earnings last night and beat EPS by…you ready for this….$1.90 per share (estimates were for 2.90, they came in 4.80 *core EPS*). Now I don’t know if that’s a record for an Industrial company of their size but it HAS to be some kind of Hall of Fame print. Earnings my friends….earnings are driving this market (along with global growth). It’s not the Fed’s Balance Sheet or some mythical Plunge Protection team it’s just good old fashioned earnings growth. Now we do need to be on the lookout for “peak good news” because when things feel this good it’s possible they can’t get any better. Today was also Janet Yellen’s last Fed meeting so let’s see what she had to say (History will treat her very well, she was an amazing Fed Chair).

After the open we saw weakness in stocks all the way through lunch. Given it was a Fed decision day I wasn’t entirely surprised to see us hovering around unchanged. Markets don’t like to take a stand in front of one of the most powerful people in the world talking bout dem rates. Decent macro data today with ADP jobs beating and Chicago PMI coming in 65.7. REITs had a pretty sizable dead cat bounce but again, they go down pretty much every day. In fact most of the sectors that have been fire bombed this week did better in the morning (Industrials/ Tech). Alright so we know BA did well what else? XRX must’ve made a bunch of copies as it hit a new 52wk high, AMD reported their way to a 6% gain (so many graphics cards being used for crypto) and EA ripped 7% even though their new Star Wars game sucks (honestly, you have to try pretty freaking hard to screw up shooting things in the Star Wars universe but they sure managed to). Losers were JNPR, LLY, BBY, FOXA, and anyone who had the word “American” in a SOTU drinking game. By lunch we were waiting for Janet’s last appearance with the market up 30 bps to 2,830.

We got the Fed statement at 2pm ET and they said the same thing they’ve been saying forever: “we are holding rates steady but see inflation rising this year. Oh and we’re likely to continue to raise rates at a slow and steady pace”. That slightly hawkish tone didn’t sit well with stocks and we sunk into red territory in short order. Are we pricing in 4 hikes this year? Maybe. You know what else? Rising interest rates and excessive bullishness isn’t a great way to get rich in stocks…ugh. I might be over my skis with my current “no big deal” market view…we’ll see. We got a last second rip off the lows to close at 2,824 (slightly positive on the day) and my guy Ryan Detrick has this amazing stat for us to finish the recap: “When the S&P 500 is up >5% in January the full year has never been lower (12 for 12)”. Let’s hope this “January Effect” holds up in the face of rising yields and a hawkish Fed… 

Final Score: Dow +28bps, S&P500 +5bps, Nasdaq +12bps, Rus2k -49bps

News Highlights:

Ok, tonight I have an amazing piece of marketing.  This ad will undoubtedly win “Best Superbowl commercial”.   It’s so good!


Have a good night


Is There Actually A Sell Button On People's Keyboards?

Equities start the day lower as maybe risk is returning to the market? It’s been so long since I’ve seen red futures that I can’t even describe it anymore, is there actually a sell button on people’s keyboards? I mean is it possible that higher interest rates finally matter? I guess we’ll see but first we need to talk about this crazy news story I woke up to. Apparently JPM, AMZN, and BRK are going to band together to try and figure out a way to save their employees from the misery that is the U.S. Healthcare System. A system that charges me $525 for a Physicians Assistant to tell me that my son stubbed his toe and that I just wasted my entire morning in the clinic. Look, I’m on the record saying that whoever brings price clarity to this goat rodeo will be richer than Bill Gates so I’m all for it. I’ve sat here and talked to our Financials Trader about starting some kind of local app where people input the cost of their procedures and we crowd source the cheapest price. If the giants of banking, cardboard box shipping, and cherry coke drinking decide they are going to lead the way then let’s go baby, let’s break up this insurance monopoly.  An MRI cannot possibly cost 20 different prices.  Let’s simplify the easy stuff then move on to pricing heart surgery. Anyway, futures were lower because Asia gave up 1.5%, Europe 0.5-1%, and Treasury yields were marching higher. Will this route take back all of Friday’s gains? Stay tuned to find out.

After the open we stumbled all the way down to a gain of 5.7% in January. You could cut the tension with a knife and people ratcheted down their annual return expectations from +28% to +25%. Let’s keep it real for a second: yes, the market sold off 1.2% in the first hour and yes, the market is about 2% from its highs but you what? I’ll take a selloff seriously why credit spreads quiver and the VIX soars and correlations start trending higher. Has momentum been broken?  Probably, but weren’t we all saying that we needed a “healthy pullback”? Let’s knock 5% off the market before getting our feathers ruffled. Ok, let’s talk stocks and jocks. UNH, ANTM, CI, and AET all cratered on that insurance news but I doubt shareholders are crying in their Bugattis, most of those stocks are up 50-60% over a 1 year period. Energy got shellacked with Crude dropping 2% and racy sectors like Financials and Industrials fell because they’ve gone up every day for months. Look, this is likely a run of the mill pullback from the highs but if I see anything that makes me nervous you’ll be the first to know. Winners were utilities and telecom but there’s only about 32 of those in the S&P so nobody really cared. Who is going to win the Superbowl you say? Probably the Patriots and if you aren’t sick of Boston by now we can’t be friends. They are the freaking Evil Empire, I’d rather see Duke Basketball, the Yankees, the Cowboys, and Kim Kardashian all score huge wins before Brady hoists another trophy. Sigh. By lunch we were down 1% with things looking grim. 

The rest of the day featured more of this with a close at 2,822 down 1.09%. It’s been so long since we’ve had a meaningful pullback that a 2 day, 1.7% move feels like the Crash of ’87. Finance Twitter has been aching to call top for so long that any down move seems mega serious. I do wonder though….with macro data strong and global growth accelerating is this really the time to get nervous? Maybe…my friend @helenemeisler pointed out that tops are made on good news so perhaps I should be more vigilant. I just don’t know…does anyone think the market is going to correct significantly with this happening? I mean do you wanna be on the other side of that when the man…comes around (god I love this song so much.  Gimme credit for working Johnny Cash into a market recap). 

Final Score:  Dow -137bps, S&P500 -109bps, Nasdaq -86bps, Rus2k -96bps

News Highlights:

Tonight I have a link for all my dad bros out there.   If you have a kid (or multiple kids) under the age of 10 then this link is for you!   (look, it plays off the “F” word so if that kind of thing bothers you maybe don’t click.   In fact if that’s the case my recap style probably isn’t for you…


Have a good night

If This is What a “Melt Up” Looks Like I Hope it Continues

Equities start the day lower as the best January since Bud Fox put up all those tacky decorations comes to an end (that song is amazing though…I think it was the Talking Heads?).  I told myself I wouldn’t write another recap until the market traded down so you’re all welcome.  You all owe me for the uninterrupted gains you’ve experienced in Jan.  No joke I actually come in every day and expect the market to be higher.   If there’s a dip I expect it to be erased, if there’s bad news I expect it to be met with buying, if a company misses earnings it’s probably going to trade up.  If this is what a “melt up” looks like I hope it continues for a few more months because honestly, how great is this?   The NYT has a nice infographic on why markets around the world continue to rise and it all boils down to one thing:  growth.  Growth here, growth there, growth everywhere.  In fact things are going so peachy abroad that the dollar continues to get slammed because we aren’t the best house in a bad neighborhood anymore.    Most of the homes in our community have fixed up their bathrooms, thrown a fresh coat of paint on the outside, and spruced up their landscaping so the United States has some competition now.   7.3% in Jan for the S&P?   Please.   The Hang Seng is up 10%, Italy is up 9%, and Brazil is up 11%.  So while we are having a decent party it’s not like we have a monopoly on Fireball shots.   Big week for earnings my friends, big week.   How have they been?  Not bad actually.  About 24% of the S&P has reported and all 11 sectors are experiencing both sales and earnings growth.   In fact, 81% of the companies reporting so far have beat sales estimates and if that holds it would be the highest on record (factset data).   Can you believe you are living thru this bull market?  We will talk about it one day with fond remembrance.  This run has been absolutely bonkers wealth creation.

After the open I desperately wanted a Mr Pibb as JAB group said they would acquire Dr Pepper Snapple in an $18B deal.   Now I don’t know about you but Diet Dr Pepper is literally the only diet drink I can stomach so the team from Germany got themselves a nice product.   The market traded lower to start as we wiped out about 48 mins of gains from Friday.  Down 50 bps with people blaming 10yr yields and a stronger dollar and NAFTA and weak tech moves and blah blah.  Just excuses, look we can’t go up 1% every day even though it feels like we do.   I mean for crying out loud you want a sentiment check?  Look at this Drudge report headline link….is this really where we are?   The low was made around 11am ET and by lunch we had scratched and clawed back to down 25bps.     Winners   DPS, GILD, NFLX, JEC, AMD, and MGM.  Losers WYNN, F, IRM, AYI, and LRCX.   If you were a yield play you got llama slammed today and I gotta think REIT investors are wringing much hands right now.   By the way, on the “I’m super angry 1-20 scale” where does rolling your window down accidentally after getting a car wash rank?  50?  100?   I’m such an idiot.

The rest of the day actually brought more selling…can you believe it!   Who knew that the S&P could actually close in the red?   Though, to be fair, we were up 1.2% on Friday so today’s 68 bps drop didn’t even bring us back to there.   So with MIFID currently destroying my will to live I think I should write more and entertain the FAs in my firm with stories of how amazing they are (they are all such nice people).  Who knew that a regulator in Europe could have such a profound impact on a guy from Milwaukee.  Anyway, let’s see what tomorrow brings because if we have two days in a row of red numbers we might literally witness the apocalypse.   Final Score:  Dow -68bps, S&P500 -68bps, Nasdaq -52bps, Rus2k -62bps.       

Volume was high.   News Highlights:

Tonight we are going to end with Dude Perfect!   To be completely honest how do I not have Dude Perfect as an advertiser on the recap?  Feels like we should be business partners.


Have a good night