"Just one more thing."

-- Lt. Columbo

Nice day for short term Treasury bills!

Another day, more volatility.
This is an ideal market for unemotional and opportunistic traders -- but not for the buy-and-hold crowd.
Thanks for reading my Diary.

Enjoy the evening.
Be safe.

I have covered my shorts - indexes and short calls - from earlier this morning on the whoosh lower.

I have a 1 pm research call that might go on for a while.

Then the doctor appointment.

I will try my best to get back at the close.

With S&P cash +64 handles I am selling some more (SPY) and (QQQ) calls (naked).

Selling some more (GOOGL) $106.01 and (AMZN) $100.95.

Down to tagends.

Risk/reward had changed into the rally.

At 10:45 am:

NYSE volume 144M shares, 17.5% below its one-month average

NASDAQ volume 1.10B shares, 19% below its one-month average

VIX index -7.5% at 20.60

Breadth

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Big Movers

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Heat Map

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Back to market neutral in the market with no memory from day to day.
Also, a housekeeping item:

I just sold my (SQ) trading long rental at $63.10 for an almost five dollar profit in less than two hours.

Initial claims totaled 191k, little changed with last week's 192k but below the estimate of 197k and still very low. The four week average was 196k, also basically unchanged w/o/w.

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Continuing claims rose 14k w/o/w after falling by 33k in the week before and up 64k in the week before that. At 1.694mm, it's not far from the highest since February 2022.

The bottom line remains the same in this tug of war between a modest pace of firing's at the same economic growth is no longer and is about to decelerate while hiring's have moderated. Also, those tech workers getting laid off are getting nice severance checks and likely finding new jobs quickly for those most skilled.

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Bank of England

The Bank of England saw two dissenters in their expected 25 bps rate hike to 4.25% with both wanting to do nothing. We know that the BoE has a big inflation problem on their hands but are also straddling the line of recession, a messy stagflationary cocktail. They do though expect inflation to fall notably in the back half of 2023.

The BoE too made it a point to say "the UK banking system maintains robust capital and strong liquidity positions...The FPC's assessment is that the UK banking system remains resilient."

As for what comes next, it's not exactly clear but just as the Fed did yesterday, they left themselves room to hike again "If there were to be evidence of more persistent pressures."

The pound in response has been a yo yo this morning but is now settling out around the flat line vs the US dollar. The 2 yr gilt yield, on the belief the BoE is possibly done hiking, as they really emphasized their expectations of a sharp drop in inflation, is down a notable 12 bps to 3.37%.

For those that are counting -- I am small net long.

Sold more (SPY) $396 - trying to get back to market neutral.

The SPY intraday picture yesterday:

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I also sold some more (QQQ) calls (naked).

From Peter: So this is what it comes down to? 

I will be traveling abroad tonight thru next week so my writings until April 3rd will be much more sporadic.

So this is what it comes down to for the US economy and markets? Either the US government takes on another $7-8 trillion of obligations in uninsured deposits or the ship goes down? A country that has almost 250 yrs of history and has dealt with many banking crisis but always found a way of saving it without having to backstop all the deposit liabilities of the banks? There must be some other imaginative things we can do here instead like tweaking bank accounting that would allow more M&A as after all we do have more than 4,000 banks.

Encourage more interest rate hedging so banks are better insulated against nasty marks on risk free holdings if held to maturity. Encourage every insurance company to start writing insurance policies for those that want to have uninsured deposits. Why should those with insured deposits pay the insurance for someone who doesn't? We will have SUCH an undisciplined banking system, that will ALWAYS still have failures, if we a 100% back stop of every single deposit. And please to the hedge fund people that keep tweeting that the end of the world is here if there is not a blanket deposit, stop tweeting fear.

Now that the debate on how more rate hikes the Fed has left is pretty much over, we need to shift to two other things. Firstly, lets get more details from them on QT. Powell was asked just one question on it yesterday and he basically answered vaguely that it will continue on. Well, what is their goal with what level of reserves they would be comfortable with? Will they include the size of the RRP when making this calculation? This is not like watching paint dry and the deeper QT gets, the more accidents will occur but that balance sheet does need to get smaller.

Secondly, what's the economic implications of what is unfolding here? Earnings season ahead will give us a pretty good feel but the only debate here is the breadth, deepness and extent of the recession, now exaggerated by the credit crunch headed our way. And, to what extent will the Fed be able to cut rates in response, hamstrung by still the cloud of inflation, even if moderating.

The US dollar proved again yesterday that it is in concert with expectations of Fed policy as its only driver. The euro/yen heavy DXY closed Wednesday just 1 pt from the weakest level since last April. And gold is trading just off its highest level since last April. Did I mention before that I'm bullish on gold and silver?

Gold in orange and DXY in white

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Following the ECB and Fed rate hikes, the BoE is likely to raise 25 bps at 8am est and we saw this morning rate hikes from the Swiss National Bank by 50 bps to just 1.5%, Norway by 25 bps to 3%, Taiwan unexpectedly by 1/8 to 1.875% as is their typical cadence and the Philippines by 25 bps to 6.25%.

Considering everything going on in markets, there wasn't much of a change in stock sentiment w/o/w. Yesterday II said Bulls fell to 39.7 from 40.3 while Bears rose 1 pt to 28.8. Bulls rose 1.7 pts to 20.9 in the AAII read while Bears were little changed at 48.9. The CNN Fear/Greed index closed at 36, smack in the middle of the 'Fear' category. I'd call all of this in aggregate, no man's land, though it's clear that the mood is still tepid.

Wednesday's trading looked an awful lot like one of Sholes very early models. As things began early on, everything seemed to be going reasonably well, but when we got to the critical period (spelled Fed Statement and FOMC Press Conference) everything started to jam up and markets began to twist and turn. As I say, the early part of the day went reasonably well. Bond and stock markets were in reasonably good order, and we reflected some of that in this late morning update:

03.22.23 LATE MORNING UPDATE: Stocks pretty much march in place, awaiting the Fed. Yields also not showing much variation and that's keeping things pretty much in place. The wild card or danger, I believe, could be the so-called dot plots, in which the individual members make projections of where they think rates may or may not be further out. If Powell doesn't have all of them contained in a narrow space, one or two wild projections could take up all the air in the room.

Despite what he wants to say so again, I think they would be better served by postponing any update on the Dot plots. Volume is somewhat underwhelming as you would expect in a kind of sideways move and we're still facing that technical resistance at S&P 4000 to 4025. But the market has certainly hit its own version of the pause button, and it's pausing in wait for 2:00 pm and then 2:30. Remain nimble and alert and please stay safe.

Little did we know it, but our concern about the dot plot was in many ways prophetic and, I think, it was part of the key point late in the press conference when traders began to realize that the dot plot was telling them that a good deal of the committee was still looking at higher longer and the dot plots contradicted what the bond market futures, at least, had been suggesting about cuts later in the year. At any rate, things were okay until Powell got into the meat of things. Early on in the press conference, bond yields stayed okay.

Equity prices were mildly better, assuming this was a 25 bp and no surprises as everybody had suggested, but after they saw that there was some variance between those dot plots and what a lot of the analysts had been talking about, some realizations kicked in. Also, not helping was Powell's attempt to reassure the banking system, saying all depositors should feel that they are protected, but when questioned on any detail about that protection, he outdid Fred Astaire in tap dancing behind the microphone and refused to give details, alluding only to the exceptional processes that they had available to them.

A few moments later and several blocks away, Janet Yellen was telling Congress that they did not have an effective plan to cover all deposits. The way she said it, some traders interpreted it to sound like we are not considering a blanket insurance deposit. They have to remember that this is a digital age. Within seconds, selling began to appear in the regional bank stocks. We instantly snapped into a flight to safety. The remnants of the sigh of relief rally got blown away. The same financial leaders have got to remember that this is not 1907. You do not have the luxury of waiting for a crowd to develop outside a bank.

People can hit buttons and billions, and billions of dollars fly out the window. Now, that does present a problem. They have already pretty much guaranteed all the deposits at SVB and similarly at Signature Bank. I am sure there would be tons of lawsuits if you would try to deny that privilege to others and I am sure there would be political charges as to favoring a San Francisco bank, one with Barney Frank on the board, but it is not our job to get on the political side of things.

Our leaders have to realize that we live in a virtually instantaneous age and for now, they have got to basically say - Yeah, pretty much all deposits are guaranteed and then find out a legal way to do that with whatever limitations they want to get done until the fear is over. The closing minutes of the press conference and the minutes immediately after saw a quick flight to safety and people rushing out of stocks and into bonds with the yields coming down smartly, closing basically on the lows of the day. The Dow, S&P and Nasdaq all closed down within a hair of 1.63%.

As I had said again and again, when you get that kind of similarity in indices with vastly different components that some are weighted by capitalization and some are not and yet you wind up that close in the percentage performance, you know computers must have been involved in the selling and very heavily so because even at one of our Mensa meetings, most of the guys are not quick enough to make that kind of a complicated move. So, we will dig a little further to see if the algorithms were triggered by something other than what I assume, which is dot plots and some of that tap dancing that went on behind the curtain.

As is customary, we will begin the morning exercises by reviewing what happened with our foreign cousins and their interpretation of everything from the Putin/Xi meeting to the Powell press conference to the inflationary data that came out of London. Overnight, global equity markets are perplexing if not perplexed themselves.

In Asia, Japan and India are down slightly. Mainland China is up slightly, but Hong Kong is up the equivalent of about 850 points in the Dow. Over in Europe, however, most markets are modestly lower as they await the Bank of England's move midday over there and possibly just before we open.

The U.S. economic calendar for today is relatively modest. It being Thursday, we get Initial Claims and Chicago Fed activity and the Current Account. All of that before the opening. At midmorning, we see New Home Sales. We will see the natural gas inventories and the Kansas City data in late morning. So, to summarize again, what happened at the Fed meeting - - the dot plot was a problem because it shows no cuts despite what the Treasury bill futures are getting at.

So, it does look like higher for longer, but the big problem obviously was the Yellen not considered aspect to find a way to change the wording of that because, as I say, a button pushed, and billions can disappear. Anyway, you know the drill.

Stay close to the newsticker. Keep your seatbelt fastened. Stay nimble and alert and, obviously, follow the yields and see if the flight to safety ends and what do we pick up from there. It does look like things are moderating as dawn hits Staten Island and also add to your watch list, the action in the regional bank stocks. It is also key. Stay safe.

Cathie (The Wizard of) Wood bought Square (SQ) yesterday (-$14).

And some question why I berate the investment capabilities of Cathie (The Wizard of) Wood:

I bought some (SQ) at $58.10 (short term rental) off of the Hindenburg Research report delivered this morning.

I have a doctor appointment at 3 pm today - so I will be leaving early. 

It's another routine appointment.

Upside

- (ADN) +30% (Hyundai Motor Company and Advent Technologies sign joint development agreement following successful fuel cell technology assessment)
- (SQZ) +29% (earnings; announces confirmed complete response in HPV16+ solid tumor patient in the lowest-dose cohort of the SQZ-AAC-HPV-101 clinical trial)
- (GBIO) +17% (Moderna and Generation Bio announce strategic collaboration to develop non-viral genetic medicines)
- (AZYO) +16% (earnings)
- (SCS) +11% (earnings, guidance)
- (REGN) +8.7% (strength from lung disease therapy drug Dupixent trial success)
- (FRC) +8.6% (relative US bank strength following Yellen remarks, FOMC decision)
- (LFMD) +7.9% (earnings, guidance)
- (SNY) +6.4% (strength from lung disease therapy drug Dupixent trial success)
- (EVAX) 6.3% (develops new proprietary AI platform technology ObsERV to identify a new source of targets for personalized cancer therapy)
- (WAL) +5.5% (relative US bank strength following Yellen remarks, FOMC decision)
- (CVNA) +5.3% (debt exchange plan, Q1 guidance)
- (ETNB) +5.3% (multiple price target brokerage raises)
- (ACN) +4.5% (earnings, guidance, cutting 19K jobs over next 18 months; to acquire industrial AI company Flutura)
- (EVLV) +4.2% (partners with Acrisure Stadium for seamless stadium security)
- (KBH) +3.8% (earnings, guidance)
- (BEEM) +3.5% (secures $100M credit facility)
- (AGRX) +3.0% (earnings, guidance)
- (BB) +3.0% (BlackBerry and Adobe partner to deliver a secure forms solution for mobile)
- (AFMD) +2.7% (earnings)
- (TME) +2.5% (JPMorgan Chase and Co Initiates TME with Overweight, price target: $11)
- (NVDA) +2.0% (Needham raises price target)
- (GIS) +1.7% (earnings, guidance)
- (RDW) +1.7% (awarded $5.9M NASA contract to advance new in-space manufacturing capability)

Downside

- (JAN) -15% (announces registered direct offering of 361K shares of common stock priced at $1.17/sh)
- (CDTX) -12% (earnings)
- (COIN) -12% (received 'Wells Notice' from SEC, believes enforcement actions will relate to spot market, staking service, and Coinbase Prime)
- (MOV) -9.2% (earnings, guidance; declares $1.00/shr special dividend)
- (AUMN) -7.4% (earnings)
- (MLKN) -7.0% (earnings, guidance)
- (CHWY) -4.8% (earnings, guidance)
- (MANU) -2.0% (reportedly co-owners extend bidding deadline)

At 8:36 am:

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Great observations, an email to Sir Arthur Cashin, and a wonderful baseball analog from Danielle DiMartino Booth this morning:

"There's no crying in baseball, but there are a lot of laughs, when the Savannah Bananas bring their circus antics to the ballpark. The Georgia-based Coastal Plain League team has attracted millions of fans with their TikTok videos, which show batters on stilts or players in kilts."- CBS News
Anyone who thinks baseball is a boring game hasn't seen the Savannah Bananas at bat. They play by Banana Ball rules, a slight departure from those of Major League Baseball. Here's a sampling: 1) Every inning is worth one point, and the team with the most runs in an inning gets the point - unless it's the last inning when every run counts; 2) There's a two-hour time limit, and no new inning can be started after one hour and 50 minutes; 3) If the hitter steps out of the batter's box, it's a strike: 4) If a hitter bunts, he's ejected from the game; 5) On any pitch of an at-bat, the hitter can steal first base; 5) If a fan catches a foul ball, it's an out. (But do they get to scream "You're OUT!"??)
Channeling his best umpire, Federal Reserve Chair Jerome Powell ditched his nice-guy niceties and replaced them with that of an angry ump by the time the presser ended. He may as well have been in black & white stripes. Curious as to my interpretation, my sweet mentor Arthur Cashin reached out and asked me why I thought markets had violently turned into the close. Rather than paraphrase, I'm sharing below for your edification my full reply."Good evening Arthur,There were two things market participants initially failed to appreciate. It takes Fed officials HOURS to decide on a new word to be inserted into the FOMC statement. The Committee anticipating "some additional policy firming may be appropriate" was not nearly as friendly as it first read at 2 pm ET. Even if the level of interest rates is high enough, "additional firming" translates into the Fed continuing to shrink its balance sheet "in the background," which the statement also reiterated would be the case.The dot plot enters the plot when you add Powell's terse answer as to whether he was contemplating lowering rates this year. (It was one word: "NO.") THAT helps explain why the Committee RAISED its target for the fed funds rate at yearend 2024 from 4.1% to 4.3%, because Powell intends to keep rates higher for longer than the market's worst nightmare, all the while conducting QT "in the background."In addition to Powell and Yellen simultaneously playing "Who's on First" at hot mikes at separate D.C. venues (Eccles Building and Congress), cementing the perception that they don't know how to handle the banking crisis, investors' realization of the sum of the FOMC parts - "firming" plus "NO." plus higher terminal rate in 2024 - was what jarred markets.Best,Danielle"
As for Savannah, Georgia, there's more to it than kitschy baseball. QI also mines an outstanding macroeconomic read via the city's port activity. The post-pandemic global supply chain morass generated frictions that caused massive bottlenecks at West Coast ports. Diverting to other gateways was part of the fix. When Los Angeles, Long Beach and Oakland were reporting declines in inbound containers through the summer of 2022, Savannah was benefiting, posting a U.S.-best 20% year-over-year (YoY) gain last August.
That changed in 2023. Of the six ports where container statistics are available through February, five of them have posted YoY declines. From worst to best: Los Angeles -41.2% (brown line), Long Beach -34.7% (pink line), Oakland -31.9% (light blue line), Charleston -21.6% (purple line), Savannah -16.4% (banana yellow line) and Houston +12.7% (green line, LNG exports).
In overlapping data from 1998, YoY declines of -30% (dashed gray line) or more across the three California mega-ports have occurred two other times: February 2009 and March 2016. The former was during the Great Recession and was surrounded by YoY contractions, while the latter was a Lunar New Year quirk that followed outsized strength in January and February of 2016. The current episode of import contraction is more like 2009 than like 2016. Repeating the analysis for Charleston and Savannah yields similar results to Los Angeles, Long Beach, and Oakland. In the corresponding period since 2004, YoY contractions of -15% (dashed gray line) only occurred in tandem during the Great Recession and the COVID-19 Flash Crash.
Because imports gauge domestic demand, we not only know that consumption was impaired long before the banking crisis, but an inventory correction was in the making. Aside from the hit to the topline, inventories are in part financed by commercial and industrial (C&I) loans. We already knew from the Fed's latest Senior Loan Officer Opinion Survey that lending conditions across C&I, CRE, residential mortgages, auto loans and credit cards were tightening. The vise-grip clampdown to come will only serve to further crimp volumes at the nation's ports, which it appears many members of the FOMC fear.
The bottom line for investors: Fast erupting deflationary pressures negate the need for inflation insurance. Depicted monthly, the March-to-date Bloomberg Commodity Index has fallen to a 15-month low (purple line). This trajectory concurs that the central tendency of long-run consumer inflation expectations (a.k.a. the "interquartile range" from the 25th to 75th percentiles, olive line), which rose from 3.5% in February to 3.8% in March, will "catch down" in coming months. Moreover, 5-year/5-year inflation expectations of 2.2% (orange line) are quiescent and help explain September's bottoming in the largest TIPS exchange-traded fund (ticker TIP, red line).
That said, signposts for business investment are conflicted. January's upside surprise in core capex orders (i.e., nondefense capital goods excluding aircraft) matched August's 2022 cycle high (bright red line). This contrasted with last week's Industrial Production Fed data. In it, Gross Value Added of Business Equipment topped out in October 2022 and has since landed 2.4% below that peak (gray line). The two series' co-movement is telling. Since core capex orders' 1992 series inception, the correlation between the two was a robust .90. Even if this Friday's February nominal core capex orders beat expectations, the risk to financing conditions promises this will also prove to be the last best news on this front.
Respondents to Bank of America's Global Fund Manager Survey would agree. In March, investors ditched "inflation" as the top tail risk and rushed headlong into 'systemic credit risk' as the top tail risk. Deflationary signals don't get any more obvious. If the Fed maintains tight policy, it's nevertheless a challenge to get bullish just yet on inflation protection despite a floor being put in.
In the meantime, April ushers in six Savannah Banana home games. If you're lucky enough to score tickets, take in the circus atmosphere at historic Grayson Stadium. It will be a nice diversion from a deteriorating economic and banking outlook.

Near the close of trading I initiated a buy in (SCHW) .

I have added in premarket trading.

* When it's time to sell you won't want to - and when it's time to buy you won't want to, either!

* I was a trading fool on Wednesday - shorting the morning strength and covering on the afternoon whoosh!!

* Moved to small net short late Tuesday and moved back to market neutral at the close on Wednesday (Phew!) Now small net long (as of 5:55 a.m.)]

Crazy, I'm crazy for feeling so lonely
I'm crazy, crazy for feeling so blue
I knew you'd love me as long as you wanted
And then someday you'd leave me for somebody new

Worry, why do I let myself worry?
Wondering what in the world did I do?
Crazy for thinking that my love could hold you
I'm crazy for trying and crazy for crying

And I am crazy for loving you.

- Patsy Cline, Crazyhttps://www.youtube.com/watch?v=i4Bs8kSz4pY

* From trouble ahead, trouble behind to a market that just won't like be much fun (since I quit drinkin') to You Can't Roller Skate With a Buffalo Herd (meaning it's a tough market to navigate these days). And soon thereafter the market was down 4%-6% from the early February highs - and The Law Won! Wednesday I moved to Long Island's Billy Joel so I can finally find what I am looking for. Thursday was no futures column - lyrics silent! Today, the swoon (and SIVB) took the markets by surprise - in this not so magic moment... To Tuesday's optimism, I saw the market's party lights. Wednesday, with Credit Suisse concerns (and a hat tip to Yogi Berra), it felt like deja vu all over again. On Monday we got Ludacris... time to make money, money maker? Today, dealing with the extreme volatility I am reminded of that great song, "I Would Rather Have A Bottle In Front of Me Than A Frontal Lobotomy."

And, today, what a crazy freakin' market - great for opportunistic and unemotional traders - but not so great for the buy and hold crowd!

* Despite all the volatility, we remain in The Chop Bucket (300-4100). Adjusting for the rise in stock futures (at 5:45 a.m.), the S&P sits at 3950. According to my calculus, there is +150 handles of upside and - 250 handles to the downside.

* In this market I am trading more actively these days. I have been emphasizing pairs trades, straddles and strangles. I will continue to do so.

* The intermediate term outlook for stocks remains difficult in light of the competition and a "sea change" and new regime of (still) higher interest rates. Just look at the six month Treasury bill yield of 4.95%! As noted the widening gap between the S&P dividend yield and Treasury bills is getting quite extended - this remains an important chart:

Mar 21, 2023 ' 02:45 PM EDT DOUG KASS

Another Way of Looking at the Market's Over Valuation

Today the S&P dividend yield is 1.68% compared to the yield on a six month Treasury bill at 4.93% and a one year Treasury bill of 4.63%:

S&P Dividend Yield

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The differential between the S&P dividend yield and short duration Treasuries is as wide as its been in several decades.

From an historical standpoint the lowest dividend yield was 1.11% (August, 2000) and the highest dividend yield was 13.84% (June, 1932).

The mean S&P dividend yield, over the last century was 4.27%.

* The S&P Oscillator grew more oversold on Wednesday - increasing from -4.36% to -5.48%.

"You are never as smart as u think you are when you are making money or as dumb as u think when losing."

-- Unknown

"The stock market will do whatever it has to do to embarrass the greatest people to the greatest extent possible."

-- Wally Deemer

"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"

This daily Futures feature is like inside baseball. I try to show you and write about what I believe thoughtful hedge fund managers are looking at when they awake -- let's call it our normal routine -- setting the stage for their strategy for the day. The market is a complicated mosaic and the more info you have, the better trader and investor you will be!

The market (and money) never sleeps -- and neither do I, it appears! I have previously 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 are often exaggerated outside the regular trading session. I frequently try to capture those efficiencies by trading actively both in the pre- and after-market sessions.

Here are some brief observations I wanted to highlight and a summary of overnight price movements in various asset classes:

*Yesterday's close (S&P 3935) is back towards middle valued levels of The Chop Bucket of 3700-4100 for the S&P 500. S&P cash adjusted for the rise in futures is 3950, providing a 1.67-1 negative risk vs. reward.

* Stock futures were in a narrow range last night - with an upwards bias. S&P futures had peaked at +31 and bottomed at -1 . Nasdaq futures peaked at +148 and bottomed at -11. At 5:55 a.m. ET, S&P futures were +19 and Nasdaq futures were +125:

* The S&P Short-Range Oscillator has been a great trading gauge/resource. When it gets oversold, as it did late last week, I buy. When it moved to less oversold (over 0) and overbought, there is typically a market headwind. The Short-Range Oscillator closed Wednesday at a greater oversold of -5.48% compared to Tuesday's -4.36%.

* I have also kept a bead on volatility. In recent days, reflecting the bank crisis, the VIX has climbed from the high teens to the mid twenties. This morning, the VIX moved a bit lower to 21.52 (-0.74). As volatility declined recently, I took off a lot of my straddles and strangles for a profit. I plan to get back into some straddles with the boost in volatility - but I have done nothing yet.

* The U.S. dollar is weaker against the yen, euro and sterling.

* I have been continually writing that bonds should be at center stage to equity weightings - it's all about the rates. Ten days ago I sold a lot of my Treasuries in light of the downward move in rates. I have bought back about half of my Treasuries on the runup in rates in the last few days.

* The Two-Year Treasury yield is -3 bps at 3.96% and the 10-Year is -1 bp to 3.483%. Over there, the yield on the 10-Year U.K. Gilt bond is flat after yesterday's hot EU inflation print.

* The 10s/2s Treasuries curve has been making dramatic daily moves. The curve is now down to -46 bps, a recent low.

* The recent stability of financial stocks has resulted in a move up in interest rates over the last week. I repurchased Treasuries.

* Commodities - where there are no zero days to expiration options! - are mixed to lower. Brent oil is -$0.68 to $76.01... I am still avoiding energy stocks, but getting interested for the first time in a while on price. The notion, expressed in business media, that energy stocks are well positioned even with lower oil prices was fanciful as I have been writing in my Diary:

* Gold has continued its big run. Up +$31 today.

Here is a synopsis of some of my columns I believe were important, or in the event you were out for the day and did not read my Diary. The principal intent is to review the logic of my market moves and other factors: 

From No Worries to Clueless

Nike Is Leveraged to the Consumer: Prepare For the Down Cycle

Markets are the Weakest When Leadership Is Narrow

Coinbase Looks So Un-Wells - I am Shorting It

A Successful Trade of the Week - Shorted and Covered QQQ

Back to Market Neutral

By The Numbers

Carvana Is Dead Meat

Some Changes to my Best Ideas List

And here are Wednesday's trades (As you can see I aggressively sold morning strength and covered what I had shorted into the whoosh lower - ending the day Market Neutral)

* Mar 22, 2023 ' 09:45 AM EDT DOUG KASS

QQQ

I shorted more (QQQ) at $310.31 just now. 

* Mar 22, 2023 ' 02:09 PM EDT DOUG KASS

QQQ Sale

I sold more (QQQ) at $313.10. 

* SPY Sale

Sold more (SPY) at $399.93.

* Mar 22, 2023 ' 02:55 PM EDT DOUG KASS

SPY, QQQ

I sold more (SPY) at $401.95, and (QQQ) at $314.97.

* Mar 22, 2023 ' 04:03 PM EDT DOUG KASS

A Successful Trade of the Week

I just took in my (QQQ) short $306.65 (Trade of the Week) for a large gain. 

* Mar 22, 2023 ' 04:37 PM EDT DOUG KASS

Back in QQQ, SPY

I have bought back my (SPY) that I sold much higher (earlier in the day) after the close at $392.50 - same applies for (QQQ) at $306.01 (against my short QQQ calls): 

Mar 22, 2023 ' 02:55 PM EDT DOUG KASS

SPY, QQQ

I sold more (SPY) at $401.95, and (QQQ) at $314.97..

* Mar 22, 2023 ' 10:45 AM EDT DOUG KASS

Taking Some Profits in Tech

Based on my negative market outlook, the continued rate rise - and possible impact on valuations of long dated securities - and the strong relative performance of FAANG, I have significantly reduced my (GOOGL) and (AMZN) longs.

I would buy back on weakness back to my cost basis.

* Mar 22, 2023 ' 01:52 PM EDT DOUG KASS

More on Nike

Low of the day on Nike (NKE) .

I have been pressing my short bet here.

* Mar 22, 2023 ' 05:13 PM EDT DOUG KASS

Chuck's Back (in My Portfolio)

I bought (SCHW) on the close at $56.46.

This table is a great resource for short-term traders:

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Impatience?

From JPMorgan:

EQUITY AND MACRO NARRATIVE: Yesterday, the SPX saw an almost 3% intraday reversal as it appeared there were mixed messages from Powell and Yellen regarding bank deposits and investors sold that uncertainty. The overnight message from bank CEOs helped push markets higher, and this view on stability is buttressed by the SNB's 50bps hike following its actions to solidify its banking system. Over the near-term the market will weigh (i) have governments done enough to shore up the banking system - the answer may depend on if/when risky bank M&A concludes; (ii) is a de facto hike via higher credit standards better, worse, or equal to a "natural" rate hike; (iii) to what extent does the banking crisis impact earnings that kick off next month; and (iv) to what extent does the banking crisis impact inflation. These are topics to explore in future notes, but it does feel like investor activity is likely to remain muted. The fall in vol across asset classes, lower yields, and tighter credit spreads may attract systematic flows triggering a tactical rally.

FEROLI'S FED DAY POST MORTEM

-- The outcome of today's FOMC meeting came in very close to our expectations. The funds rate was hiked 25bp to a 4.75-5.0% range. The statement's forward guidance dropped reference to "ongoing increases" to a softer "some additional policy firming may be appropriate." The statement also added mention of the banking system, which is "sound and resilient," but that "recent developments are likely to result in tighter credit conditions." QT was left unchanged. The median dot was left unchanged for '23 and 5-1/8%, and the other medians were little changed. The overall message is one of continued focus on inflation but also a willingness to be flexible in response to ongoing developments. Powell is up at 2:30.

-- Two interesting remarks from Powell so far. First "These actions demonstrate that all depositors' savings in the banking system are safe." This would seem to suggest the authorities are willing to invoke the systemic risk exception whenever a bank fails. Ask what this means Powell didn't budge and added "Depositors should assume that their deposits are safe." That said, this did sound a little different from Yellen speaking around the same time who said they are not considering a broad increase in deposit insurance. Second, he said "Deposit flows in the banking system have stabilized over the last week." The Fed has a very timely look-in on financial flows and so this is a positive bit of news.

NIKOS - he looks at deposit shifts and credit creation risk; his full note is here

-- Since the Fed started its tightening cycle a year ago, the most vulnerable US banks likely lost around $1tr of deposits, half of which happened after the SVB crisis and the other half before. Of this $1tr, half went to Government Money Market Funds and the other half to larger/safer US banks.

-- In our opinion, this ongoing US bank deposit shift has three likely drivers: the Fed's rate hikes and the failure of bank deposit rates to respond to this rise, the Fed's QT and the fact that almost $7tr of US bank deposits are uninsured. An FDIC guarantee of all US bank deposits would certainly help, but it might not be enough to completely stop this deposit shift.

-- A similar deposit shift looks less likely to happen in Europe, given the structure of the Money Market Fund Industry and given European banks have been faster in transmitting the ECB rate hikes to their depositors.

-- The uncertainty generated by deposit movements could cause banks to become more cautious on lending. This risk is heightened by the fact that mid- and small-size banks play a disproportionally large role in US bank lending.

-- The greatest vulnerabilities with respect to credit creation going forward lie with non-mortgage bank lending to households and mortgage bank lending for non-financial non-corporate businesses. Non-financial corporate businesses look less vulnerable as they could in principle instead make use of debt capital markets to offset potential reduced bank lending, though this is clearly dependent on market conditions.

Another one from Charlie:

From my friends at Miller Tabak:

Don't Bank on a 'Credit Recession'

Wednesday, March 22, 2023

The Fed's 25 bps rate hike is an unforced error. Sound risk management should have pushed the Fed to pause until May to make sure that the ongoing bank turmoil does not have major macroeconomic effects. As we describe later, there is a 75% chance that it will not. If so, the Fed will get away with its error. If not, however, then the Fed will have to reverse this rate hike within a few months.

The surprise is that the Fed did not raise its forecast for the December 2023 Federal Funds Rate from 500-525 bps. FOMC member comments prior to the blackout period had clearly signaled a higher terminal rate. The 2024 year-end forecast did jump from 4.1% to 4.3%. This is, however, not important. Only a few FOMC members made small upgrades to their 2024 forecasts. The policy statement also switched to much weaker language on upcoming rate hikes, now stating that "some additional policy firming may be appropriate." Despite the rate hike, this is a dovish policy action.

The Fed didn't pause because of fears that a pause would look soft on inflation or risk raising alarms over the banking sector. The lack of a higher terminal rate is clearly a response to banking distress; Chairman Powell confirmed this by stating that it will cause "tighter credit conditions." We have written that the Fed is misreading labor market data (especially regarding wages) causing it to be somewhat too hawkish. A silver lining from the banking sector's recent problems is that it now seems to be a counterweight to the tight labor market. We are returning to our forecast of a 500-525 bps terminal Federal Funds rate. This was our predicted terminal Federal Funds rate from November 2022 until early last month. This will most likely be achieved by a rate hike in May, followed by a very long pause well into 2024. Our forecast assumes that banking distress has only small macroeconomic impacts. If it has unexpectedly large impacts, then the FOMC will obviously have to pivot.

In premarket (5:20 a.m.), I sold some (SPY)  at $394.64 and (QQQ)  at $309.33.