Today's volatility was almost unprecedented.

By our calculation the S&P Index moved almost 180 handles (up, down, up, down).

The amount of trading I executed today was too large to memorialize in the last two hours.

For that I apologize.

I ended the day about 3% higher in my net long exposure after my buys and sells.

S&P cash closed at 3790 which is 10 handles below the low end of my expected trading range.

Thanks for reading my Diary.

Enjoy the evening.

Be safe.

Peter Boockvar on the Fed:

The FOMC statement itself was rather dull in terms of being almost identical to the July statement. The only tweak was on the economy where they started by saying "Recent indicators point to modest growth in spending and production" vs "Recent indicators of spending and production have softened" said in July.

What got the markets moving was the median dot plot of the fed funds rate which went from 3.4% in their June estimate to 4.4% by year end. With the fed funds range now 3-3.25%, that implies another 125 bps of hikes over the next two meetings, implying 75 bps in November and 50 bps in December. The median tacks on another 20 bps in 2023.

They also raised their 2023 unemployment estimate to 4.4% from 3.9% on the more realistic assumption to such an aggressive rate hike path. The core PCE projection went to 3.1% from 2.7% for 2023 and that would be down from their forecast of 4.5% for 2022. They also cut their 2022 GDP forecast to almost zero at .2% vs 1.7% previously and trimmed it by 500 bps to 1.2% for 2023.

I'm not going to bother going over 2024 and 2025 Fed projections because it's worthless crystal ball information.

Bottom line, another 125 bps of rate hikes by yr end was not what the markets were expecting, only 100 bps, although the mid 2023 fed funds futures range of 4.5% prior to the statement, is not far off from the median dot plot. So all we're talking about here is an extra 25 bps of possible hikes. That said, this shows the very high level commitment on the part of the Fed to cut the inflation rate sharply from here and that is what markets are responding to.

The 2 yr yield jumped more than 10 bps in response to 4.10% as it sat at a hair under 4% just prior. The 10 yr yield is up 3 bps post statement.

It will be really important to see if Powell blesses the dots and another 75 bps in November. Either way, the Fed has now entered the 'Danger Zone' in terms of the rate shock they are throwing onto the US economy.

I am aggressively buying this decline as the S&P gets to the bottom of my projected trading range.

Adding to (SPY) at $381.54 and (QQQ) at $285.17.

I have added to (SPY) $382.60 and (QQQ) $287 on the whoosh lower.

As I wrote on Monday, I started this week with zero technology holdings - but planned to buy on any more weakness: 

Sep 19, 2022 ' 11:40 AM EDT DOUG KASS

Tech Watch

With sentiment so poor for growth stocks and with open market interest rates likely to be peaking - I feel naked without any growth exposure.

Look for me to be buying tech weakness... if it occurs.

With my buys over the last two days, I now own (AMZN) , (META) , (MSFT) and (QQQ) .

Wolf Street on the home price decline.

Added back (small) to FedEx (FDX) on today's dip.

* Bought a starter position in META

Following the aggressive cost cutting announcement, I purchased a starter position in Meta Platforms (META) at about $145.75. 

I have sold some out of the money October calls against my long - but certainly not all hedged.

* In The Chop Bucket... 

As we approach the Fed's decision to raise interest rates by 75 basis points I continue to view market in The Chop Bucket - with a likely trading range of between 3800-3850 to 4200-4250 over the remainder of the year. 

I have been a consistent buyer at the lower end of the forecast trading range over the last week - in the belief that we will not breach the mid-June lows. 

On the other hand, I respect the headwinds, especially the rising risk free rate of return - Goodbye TINA (there is no alternative) and Hello TATA (treasuries are the alternative).

So I certainly am not in the "rip your face rally" camp. 

With S&P cash at 3880, there is - precision not intended! - upside of over 300 handles and downside of approximately 55 handles - for a very attractive reward vs. risk. 

That is my program and I am sticking with it. 

Today is the first day up for Shopify (SHOP) since my Bar Mitzvah.

This might be viewed as a positive for (new buy) Amazon (AMZN) which has had a similar awful chart look over the last few months.

Today's breadth - thus far! - is markedly better than yesterday's weak advancers/decliners:

View Chart »View in New Window »

As suggested earlier this week, I have started to pick at Disney (DIS) on weakness. 

Working with a $106 limit this morning - would buy more aggressively closer to par. 

Still small-sized.

Armed with nearly 400 PhDs I still find this amazing:

Adding more aggressively to AdvisorShares Pure US Cannabis ETF  (MSOS) and some of its constituents - (GTBIF) , (VRNOF) , (AYRWF) , (TRSSF) and (TCNNF) .

Despite its poor action, I am adding to Amazon (AMZN) under $122.

I am also buying the weakness in the banks.

My Trade of the Week, Microsoft, is getting jiggy this morning. 

I added in premarket, as posted.

Upside

- (RMED) +22% (approves a 1-for-50 reverse stock split, effective Oct 3rd)
- (FREY) +7.1% (hearing Morgan Stanley increases price target to $26 from $18)
- (CLNN) +5.3% (presents updated long-term survival data from RESCUE-ALS participants at 2022 AANEM Scientific Conference)
- (COTY) +4.6% (updates guidance ahead of Investor Day)
- (DAWN) +4.2% (enters global collaboration with FMI to advance pediatric cancer care)
- (GIS) +2.3% (earnings, guidance)
- (VOD) +2.0% (Atlas Investissement acquired a 2.5% interest in Vodafone Group)
- (CDTX) +1.2% (FDA accepts Priority Review of NDA for rezafungin for treatment of candidemia and invasive candidiasis)

Downside

- (MGAM) -21% (announces $5.0M private placement priced at-the-market at $2.90/shr)
- (GLT) -11% (suspends dividend as part of capital allocation reprioritization)
- (CC) -4.9% (cuts FY22 guidance)
- (SFIX) -4.7% (earnings, guidance)
- (SHC) -3.5% (JPMorgan Chase and Co Cuts SHC to Underweight from Overweight, price target: $9 from $26)
- (ADMP) -2.6% (Phase 2/3 trial of Tempol in COVID-19 positive high-risk subjects did not demonstrate statistical significance of primary endpoint of clinical resolution of COVID-19 symptoms at day 14 versus placebo)

More "Peak Inflation" and more from Liz Ann:

From Bramo:

This probably means that the BOJ will make no change in policy this week: 

Tom

Just turned on Bloomberg TV to hear "The Japanese are trying some type of bond buying based on a theory which has never been tried before." Is this a good thing or no?

dougie kass Tom

The BOJ has a meeting coming up and they are buying (unscheduled) ten year bonds (the largest amount since June 2022) in order to keep a ceiling on bond yields. As a consequence their currency is lower for the fifth day in row and at a 25 year low.
Dougie

* Added to (SPY) , (QQQ) , (MSFT) and (AMZN) .

Wil Mr. T show up? 

We'll soon see if Jay Powell again expresses his inner Mr. T when it comes to fighting inflation.

ABM Industries, a stock we own, is always a great proxy for the state of the labor market as they are a labor intensive business with about 125,000 as of their last 10K and labor costs at about 2/3 of its expense side. They provide everything from janitorial services to healthcare facilities and schools, to cleaning services to airports and airplanes to the technical installation of EV charging stations to facility management of corporate HVAC systems, among other things.

In their latest earnings conference call about a week and a half ago that I finally got around to listen to the CEO said this:

"On the cost side, we are continuing to manage several challenges in the current economic environment. The labor pressures we are currently experiencing are largely unprecedented. With unemployment at historically low levels, immigration greatly reduced from prior years and with high demand from the rapidly recovering travel, restaurant, retail and service industries, labor shortages are driving labor inflation. We are seeing wage pressure in both blue collar and white collar positions and a real battle for talent. We expect these challenges will persist into 2023. In this environment, we'll remain vigilant on pushing through price escalations, managing costs and developing systems, programs and processes to operate more efficiently and to effectively attract, retain and manage talent."

Inflation will moderate but sticky and persistent above pre Covid trends will last for a few more years and higher labor costs will prove very challenging for corporate profit margins.

Ahead of 2pm, the April 2023 fed funds futures is currently priced at exactly 4.50%. While I think today is the last 75 bps rate hike we'll see, odds are high that they'll go another 75 bps in November before slowing down the pace.

Although the average 30 yr mortgage rate rose another 24 bps w/o/w to 6.25%, there was a 10.4% w/o/w increase in refi's after 5 straight weeks of declines, though they are still down 83% y/o/y. Purchase apps grew by 1% w/o/w but are lower by 30% from the same week last year. We'll see August existing home sales at 10am but that is somewhat dated as contracts were likely signed in the spring.

Tough talk by Putin and a further call up of troops has TTF natural gas up by 4% after yesterday's 13% jump. The one yr forward German power price is higher by 3% and Brent crude is up by 2.6%. The euro is also lower for a 2nd day. On the ag side that a further escalation will inflame again, wheat rallied 7.6% yesterday and is up 1.3% today.

Wheat

To the data, South Korea said its daily shipments rose 1.8% y/o/y in the 1st 20 days of September led by a rise in semi's. Overall exports were down by 8.7% y/o/y though as deliveries to China fell by 14%. Exports to the US fell by 1.1% y/o/y. Along with Taiwan, we now know that South Korea is a great industrial proxy.

In the UK, the September CBI industrial orders index rose to -2 from -7 and that was better than the feared decline to -13. CBI said "It is clear that the downturn, which originated in consumer-facing services, has spread to manufacturing, with output falling for the second month running. When adding an uncertain demand environment to ongoing input and labor shortages, and a cost of doing business crisis, the outlook looks increasingly challenging for the sector."

We know the energy pain that both households and businesses are facing and the high cost it will take the UK government to mitigate it. Ahead of tomorrow's BoE meeting, yields are higher and the pound is weaker but that weaker pound and higher energy prices today are helping the FTSE 100.

UK CBI

Ahead of the BoJ meeting, the BoJ was back buying 10 yr bonds trying to cap the 10 yr yield but it still closed at .259%. They bought 1.26T yen (about $9b), the biggest daily amount since June. The yen is down for a 4th day to near a fresh 24 yr low. It will be really interesting to see how Kuroda explains himself, again.

Yen

This is a good tool for short term position traders:
View Chart »View in New Window »

* The market (and money) never sleeps -- and neither do I, it appears!

* S&P futures were quiet last night, with a slight positive bias - though in a narrow band.

* Gold, which collapsed last week and early this week, has finally had an up session, +$12.10. Pretty weak in light of Putin's nuclear threats. I still can't work it up to buy.

* Brent advanced by a not inconsequential +$2.13, to $92.75..

* Soft commodities are higher.

* Bond yields, likely responsible for a portion of the market's drubbing recently, are finally lower - but modestly so . The yield on the 10-Year is -3.33 basis points to 3.542%. I added to Treasuries on yield strength during the last few months.

* The S&P oscillator remains oversold but still fairly low, at -2.72% -- a level it has generally been since Sept. 12. The oscillator has been a good short-term trading tool over the last few months!

"Workin' on our night moves
Trying to lose the awkward teenage blues
Workin' on our night moves
In the summertime
And oh the wonder
Felt the lightning
And we waited on the thunder
Waited on the thunder."

- Bob Seger, "Night Moves"

I described the importance that overnight futures trading holds for me here. It is a guidepost to my strategy in the regular trading session.

Moreover, the overnight/early morning futures hold opportunities as they are (1) inefficient, though liquid, and (2) it seems fear and greed is often exaggerated outside the regular trading session. 

S&P futures peaked a +13 and bottomed at -17. At 6:30 a.m. ET futures were +7 handles.

Nasdaq futures peaked at +31 and bottomed at -62. At 6:31 a.m. ET futures were -1 handles.

Here is a synopsis to some of my columns I believe were important, or in the event you were out yesterday! The principal intent is to review the logic of my market moves and other factors:

New Levels. 

Trade of the Week - Buy MSFT $242.22 (The company raised its dividend by +9% after I published the Trade) 

Captain Obvious

Recommended Viewing (Lee Cooperman) 

More Lessons Learned (Made Up Narratives)

With a Calculator In Hand

Managing By the Numbers: Its an Art and Science

Here were Tuesday's trades (a busy day):

* Sep 20, 2022 ' 08:20 AM EDT DOUG KASS

Premarket Trades

Added to (MSFT) at $242.55

Added to (QQQ) at $289.03.

Covered more DWAC (-10%)

* More buys:

Sep 20, 2022 ' 03:02 PM EDT DOUG KASS

Latest Cost Basis

Here is my cost basis for my latest tranche of buying referenced two columns ago link:

(MSFT) $240.44

(QQQ) $287.01

(SPY) $382.050

(AMZN) $121.84