"Just one more thing."

- Lt. Columbo

I bought back my Netflix (NFLX) after Pershing Square announced that they have purchased over three million shares.

And I reestablished Meta FB long.

I added back to the levels I was before my sales yesterday and today.

I have a lot of tickets to process and a bunch of earnings releases so sayonara until tomorrow (early).

There is a lot to discuss!

Thanks for reading my Diary.

Enjoy the evening.

Be safe.

I covered my (BAC) short for a small profit.

Buying (XBI) , (JPM) , (SPY) , and (QQQ) .

I am buying this dip.

From Peter Boockvar: 

As boldness and monetary policy symmetry (hiking as quickly as they cut) are just not in the DNA of the members of the Federal Reserve, they have decided not to surprise the markets, repeating that QE will end in March (thus they are still buying assets by another $30b in February which "will continue to foster smooth market functioning and accommodative financial conditions", according to today's statement which now reads so out of place with the current economic environment) and "the Committee expects it will soon be appropriate to raise the target range for the federal funds rate."

But, they did also lay out a VAGUE game plan for reducing the size of their nearly $9 trillion balance sheet. They said that it "will commence after the process of increasing the target range for the federal funds rate has begun." What needs to be clarified by Powell though is HOW SOON AFTER the rate hiking cycle has begun? One hike after? Two hikes? Three? And at what pace this will take place? And will they reduce the balance sheet side ALONG WITH rate hikes, similar to what took place in 2018 or will the rate hikes stop when QT commences?

In response to a Fed that is beginning the process of taking away the punchbowl, but still at a pace that remains uncertain, the 10 yr yield is rising to 1.80% from 1.78% just prior. Is it rising because QT is coming soon and the curve steepens? Or because this overall tightening pace will still go slow and the long end will tighten for them? I'm not sure yet. The 2 yr yield is unchanged. The dollar index is pretty much where it was before the statement was released.

Bottom line, after QE, and the March rate hike, the pace at which what happens thereafter is right now play it by ear in terms of how the subsequent rate hikes will be spaced out and when QT will begin and at what pace as I mentioned. Yes, much will depend on inflation and growth but so will the behavior of stocks and bonds. The policy mistake has already been made by keeping policy so easy for way too long and now we'll have to deal with their catch up.

Speaking candidly, I approach today's Fed talk without any conviction - in either direction. 

I don't believe it is Powell's nature to surprise the markets. 

Regardless of what he says, I have no idea how the market will respond - especially in light of the sizeable recovery from yesterday's lows. 

To me, its just a guess - and I don't like to trade based on guesses.

Thomas C

Rivian Automotive rallies with production increasing, Ford not planning to sell its stake

Rivian Automotive (RIVN +9.9%) shoots higher off a report that the electric vehicle startup plans to increase its production rate to 200 units per week after working through some assembly line issues. Rivian was averaging about 50 units a week through the end of December.

On Bloomberg TV earlier today, Ford CEO Jim Farley said the company has no plans to sell its Rivian (RIVN) stake when the lockup period ends in May and does not see direct competition with Rivian in the early days of the EV player's growth phase. Farley did say that everything is still on the table as the Rivian story plays out.

Rivian Automotive reported a total of 1,015 vehicles produced in 2021 and 920 vehicles delivered.

EV stocks in general are having a very strong day just ahead of Tesla's earnings report today after the closing bell.

pops4 Thomas C

Looks, as if they like the news..

dougie kass pops4

when a stock drops as precipitously as RIVN a rally of this nature is random and not necessarily news related, more market related.
Dougie

I have a 1-2 pm research call.

The market continues to swing in multi-hundred point ranges. Whipsaw not quite as wild so far today, but we still have the Fed ahead of us. We think we continue to be in that post-bottoming pattern, but let's continue to watch very carefully.

Stay safe.

Arthur

(TROW) on a TEAR.

I am back shorting (BAC) at $46.23 - I remain long (JPM) . 

My thesis is here.

We have tough acting central bankers in many emerging markets because of their historical experience with inflation and then we have the crop of developed world central bankers that are so quick to ease and so slow to tighten. Who knows if this is a precursor ahead of what the Fed will do where some think they will at some point hike 50 bps at one meeting (I don't think they have more than 25 bps since 1994) or signal today QT or more than 3-4 rate hikes, but the Bank of Canada decided NOT to raise interest rates today.

Now the consensus was mixed on whether they would but that they didn't with the December CPI print last week of 4.8% headline and 3.7% trimmed core, what is the point of waiting I ask.

That said, the Bank of Canada is laying the groundwork for a hike at the next meeting by saying, "Looking ahead, the Governing Council expects interest rates will need to increase..." as it should as they also gave this background, "The economy entered 2022 with considerable momentum, and a broad set of measures are now indicating that economic slack is absorbed. With strong employment growth, the labor market has tightened significantly. Job vacancies are elevated, hiring intentions are strong, and wage gains are picking up. Elevated housing market activity continues to put upward pressure on house prices."

And they felt that keeping rates at zero was still good policy in light of us?

They expect inflation to slow to a 3% rate by years end "and then gradually ease towards the target over the protection period."

And we'll see if the Powell hints at something similar with the Bank of Canada's comment on their balance sheet, "the Governing Council will consider exiting the reinvestment phase and reducing the size of its balance sheet by allowing roll-off of maturing Government of Canada bonds."

Bottom Line

Interest rate hikes are coming and they will consider QT but this was couched in a pretty dovish way and the 2 year yield is falling 6 bps in response following the run up over the past few weeks. After plunging in immediate response, the Canadian dollar is back up on the day as the hikes are still coming.

Is this how Powell will go about things in terms of pace?

I am closing out my long (DISCK) /short (DISCA) as the differential has narrowed to only $0.45 - for a gain.

Let me make it clear, I still want to buy dips/dislocations.

Sold (DIS) .

As we begin to approach some obvious technical resistance, I am selling some out of the money March (QQQ) and (SPY) calls against a portion of my (SPY) and (QQQ) longs.

From Sir Arthur... some subscribers have asked for this!: 

Editor's Note: Unfortunately, there are indications that we are experiencing equipment malfunction again this morning, so today's Comments will be a bit shorter.)

The blind squirrel lucked out again, not quite as precisely as we were lucky enough to do on Monday but, I think, given how the market traded, we were in the general vicinity.

Let's take the opportunity to quote ourselves. In Tuesday's pre-opening comments, we said:

"While we will take some time to work with the slide rule to get specificity in the initial aftermath of yesterday's seeming washout reversal, we will make certain assumptions. We have had ten very similar washout reversals since the late 80's of such huge significance. That is usually followed by choppy whipsaw trading that goes virtually lateral for the next four to six weeks, which then is ultimately followed by a retest of the low. As I say, we will try to work on that slide rule a little bit better, but even with the Fed meeting, we will assume a lot of whipsaw testing over the next week or two, which will give the market a possible chance to consolidate near the bottom they made yesterday morning. Well, whipsaw volatility?"

That kind of describes exactly what we got yesterday. We were down about 800 points at the lows. The Dow actually went up a couple of hundred points late in the day and then closed with a minor loss.

I think that is the kind of whipsaw volatility we were expecting from a quick glance of the slide rules and, we expect more will be in store. It is what happened after those ten or so washout bottoms that we have seen since the late 80's.

So, keep your seatbelt fastened.

We may see the volatility decrease slightly, but we think we may be in for amazing days of whipsaws of up hundreds and down hundreds and that is in the plural.

The other point we suggested you keep your eye on was the auction at 1:00 p.m. Once again, while it was not as good as the two year, it was enough to encourage some of the equity buyers and, they moved along quite well, helping the afternoon rebound.

There were lots of comments about earnings and their impact, but as we have repeated time and time again, the market at this point is interested in its own condition. It is taking its own temperature. It is taking its own pulse. It is taking its own blood pressure. You know after a patient has had a bit of a shock, they head back to reality in a tempered away. You know the thing. Well, I made it down to the end of the block without any trouble, let me see if I can do that again and, maybe take an extra 20 or 30 paces, measuring itself out and, I think, that whipsaw measurement will continue.

We are seeing that in how the VIX also plays out. Today, at 2:00, the FOMC will make its statement and then we will get the Powell press conference. There are all manner of guesstimates. He is going to back away from being hawkish and, this and that and the other thing.

I don't think he can afford that unless the market happens to be in freefall when he is talking. So, look for some manner of a calm matter of fact presentation. He does not want to look as though the market has forced him to change his mind or doubt his role. At the same time, he doesn't want to dare say anything that will disrupt an obviously nervous market and, so it will have to be a bit of an Academy Award performance, I believe.

We expect the whipsaw action to continue certainly for the next several days and possibly for a couple of weeks to come. Hopefully, the amplitude of each days whipsaw will begin to narrow as we proceed and finally get back to something that used to resemble normal. The media pundits are still talking about the Ukraine. I think it is a concern, but I am not so sure it is imminent. As we said, Putin had to transfer key troops to Kazakhstan. So, on a physical incursion basis, I don't think he is too ready and it seems to me that on the U.S. side logistically, we are not in very good shape for any kind of conventional warfare - Iraq, Afghanistan type. If something happens, I think it may be started by accident.

My great concern is rather than going nuclear, this will be the first real cyberwar and, the Russian's, who are skilled at it, will try and attack U.S. systems and hobble the economy, limit energy supplies, things of that type. That is bad on two fronts. If I am right, it could lead to a difficult economy and second, it could be showing a lesson to our Chinese friends that any other tensions there, cyber may be the way to go. I certainly hope I am wrong about all of that.

Powell again, will note the market is nervous so he will avoid trying to say anything radical and probably go step by step. So, as the slide rule suggests, the volatility and whipsaw action, perhaps in the hundreds of points, will continue on a daily basis.

Keep your seat belt fastened.

Stay close to the newsticker and let's hope there are no accidents near the Ukraine.

Bullish commentary on cannabis company Trulieve (TCNNF) in its online edition.

The new regime of heightened volatility:

View Chart »View in New Window »

I added to (DKNG) in premarket trading.

Peter makes a lot of sense today: 

Chair Powell really has three doors to choose from today...

Door #1: Confirm the markets expectations of 4 rate hikes this year with the process beginning in March when QE ends. Right now the fed funds futures are pricing in just under a 100% chance of 4 this year. The December contract is priced as of this writing at 1.025% and the January 2023 is at 1.08% vs the effective rate right now at .08%. Throw in some commentary about QT at some point but make no commitments.

Door #2: Sound really tough and maybe even end QE today and say they will do everything they can to get inflation down even if it means a rate hike at each of the remaining meetings and with balance sheet runoff.

Door #3: Try to reestablish credibility on price stability by using his words but don't commit to anything more than the end of QE in March, maybe a rate hike or two thereafter and then they'll see how it goes. "We'll be data dependent" he could say and also implicitly say 'We'll see where the S&P 500 and credit spreads are."

I did not include the option of Powell being dovish and talking down the 4 rate hikes priced in to something less because what's the point of that when inflation is at 7% and he's still at zero. It would further damage his already damaged reputation.

A few things though on these options:

1) After the experience of 2018, Powell will not again be hiking rates and shrinking their balance sheet at the same time and I believe the state of the yield curve will determine what comes next after they get a few hikes under their belt.

2) Manipulating the yield curve with QE/QT is easier said than done. Their experience is that long rates have FALLEN during QT and RISEN while doing QE. And, influencing the long end via QT, if they choose, will be tough also because the average maturity of their balance sheet is only about 6 years.

3) We have 3 doves coming on to the committee as Governors to join Vice Chair dove Brainard. Why would Powell 'speak' for them with any firm commitments before the new ones even join.

4) Will the November elections influence the choices of some on the committee come summer as it did for Janet Yellen when she hiked in 2016 just once and AFTER the election.

Bottom line, I think that Powell will try to thread the needle of trying to sound tough on reestablishing cred on price stability while at the same time not trying to firmly commit to anything more than we're currently expecting.

For perspective on this bounce in the S&P futures, the 200 day moving average is 4413.

The MBA said mortgage apps fell 7.1% w/o/w with another jump in mortgage rates to an average of 3.72% for a 30 yr. That's the highest since March 2020. Most of the decline was driven by a 13% fall in refi's w/o/w and 53.3% y/o/y. Purchases moderated by 1.8% w/o/w after rising by 7.9% in the week prior. They are still down 11% y/o/y. We know all about the pricing and inventory issues facing the sales and purchases of homes.

There wasn't much overseas of note. French consumer confidence for January fell 1 pt as expected to 99. It stood at 105 in February and bottomed at 90 in May 2020. Singapore said its December industrial production exceeded expectations led by a 162% y/o/y increase in pharma output.

This morning the business media is talking about Powell walking back his prior hawkish comments.

Why, in the face of (likely) multiple rate increases, would they become more dovish now?

Out of (COIN) , (NVDA) , FB and (MSFT) in premarket trading.

Sold small (SPY) and (QQQ) at $440.50 and $352, respectively.

I forgot to mention that I purchased (GOOGL) this week. Small.

I have sold my (BA) at $206 on the escalating costs comment in the release.

I have sold out my trading long rental in (NFLX) above $380 in premarket trading - for a modest profit - started higher and scaled lower as posted.

Morgan Stanley upgrades DraftKings (DKNG)  with a $32 price target.

* More lessons learned

Warren Buffett famously said "you can't tell who is swimming naked until the tide goes out."

If nothing else the recent dive in stock prices has again taught us some important lessons: 

* Trust yourself and maintain your risk discipline and stay within your risk profile.

* Never use leverage.

* Do your own homework.

* Listen, whether its technical or fundamental, and develop strong resources.

* Don't rely on commentators who either have no skin in the game or are trying to sell you a service.

* If commentators do not provide a record of the results of their investment advice - turn off the volume.

* In mature Bull Markets, stick with quality and avoid gewgaws.

* Avoid the herd and "group stink."

The last month has revealed a number of swimmers who are swimming naked. 

Remember some of the more confident and forceful recommendations - General Motors (GM) , Coinbase (COIN) , PayPal (PYPL) , Robinhood (HOOD) , Nvidia (NVDA) , etc. 

Now look at the charts. 

And recall who forcefully recommended the stocks throughout the entire decline. 

And now recognize that you get nothing but crickets from these fools, and a handful of large investment losses. 

Mind you, there is nothing wrong with being wrong. 

There is something wrong with having excessive hubris, being too confident and not taking ownership of their mistakes. 

Me? I am often wrong and always in doubt - that will never change. Everyday, as Grandma Koufax used to remind me... I worry about the (market) Cossacks coming. I am always questioning my decisions - which you can clearly see in my Diary's entrees. 

Let's move on...

* Holy volatility, Batman!

I described the importance that overnight futures trading holds for me in this column last week - it is a guidepost to my strategy in the regular trading session:

Last night's volatility was ridiculous.

S&P futures bottomed with a decline of -42 handles at the low and are now at the high of +61 handles!

Nasdaq futures made a low of -375 handles and are now (5 am) +280 handles.

Words can't...

Suboptimal from a supply chain (and inflation) standpoint: