In the continued post-close momentum, I have sold more Indexes and initiated a (QQQ) short.

I plan to move back toward market neutral in the net hour or so.

Thanks so much for allowing me this platform to express my views today and all of the week.

I am leaving on an airplane for the West Coast but will be back writing on Thursday morning.

Enjoy the weekend.

Be safe.

I am putting on a large (SPY) (July) $395 straddle now.

Increasing my net long exposure further now.

Professor Scott Galloway, No Mercy/No Malice Quitters.

See: View Chart »View in New Window »

(SPY) is back to the 2:25 pm levels from yesterday:

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I was a large buyer of (JPM) today.

Shorting (AMZN) puts and adding to common.

Added to (PARA) at $20.

I have covered my (QQQ) puts.

No position in QQQ now.

Adding to (SCHW) common and selling (SCHW) April monthly $57 puts (short).

* And one of the reasons I have moved to a modest net long exposure

* Reject "group stink" and emotion when trading and investing...

In a perverse or ironic way the regional banking industry crisis has served to do the work of the Fed - lowering open market rates and suggesting that stocks could stabilize or move a bit higher. 

The rapidity and magnitude of the Fed's rate rise - especially when the two year yield hit 5% - resulted in an acceleration in deposit betas, reducing the propensity for banks to lend. More importantly, these events have eliminated or reduced the need for the Federal Reserve to move much further with their planned interest rate hikes. 

As a result, and as previously mentioned, the 2 year Treasury yield has fallen from 5.05% - only three weeks ago - to 3.72% today. 

A lower risk free rate of return marks up the intrinsic value of equities - as the hurdle rate is a significant component of every discounted dividend model. 

With the S&P Index falling to about 3900, equities are now fairly valued but certain sectors of the market are very attractive. 

I am ignoring the emotion of the moment and gradually but steadily raising my net long exposure to equities - especially in the financial space.

At 10:30 am:Bad Breadth

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Biggest Movers

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Heat Map

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With VIX elevated the straddle opportunities are growing - on it now.

Covering some more (GS) , (MS) , (WGO) and (RILY) (down by another -10% to $26.15 - its been a thing of beauty). 

All these stocks are getting hurt today.

On weakness I have moved to medium sized (SCHW) .

Sold out (SPY) and (QQQ) that I bought for a profit on the early rally.

I had been buying (SCHW) in premarket at around $51.80: 

From JPMorgan on Schwab: 

Summary 

Investment Thesis

We believe Schwab is a well-managed and highly valued company that trades at a premium to peers based on an industry-leading brand for retail financial services. While we acknowledge some of the near-term headwinds that Schwab faces, we view Schwab as a growth company with numerous initiatives to drive both incremental organic growth. We see Schwab benefiting from an engaged retail base that should drive a future generation of Schwab's investor clients. We rate the shares Overweight.

Valuation

Our Dec 2023 price target falls from $97 to $92 following our model and valuation update. We lower our valuation multiple for Schwab as we see its valuation converging somewhat with banks given bank regulatory risk that we expect will be an overhang for the stock. Historically, Schwab has traded at an ~8x multiple over large banks but we see that premium somewhat lower today and we arrive at our price target by applying a 16.5x multiple on our 2024 EPS estimate of $5.56. We note that we see Schwab under earning due to a depressed NIM driven by cash sorting and ST borrowing.

badgolfer22 commercial office space is the new mall sector. gonna be lots and lots of jingle mail

dougie kass badgolfer22

I certainly don't have the answers, Mikey.
But my fears of CRE was the proximate cause for selling out banks about two months ago - with the stocks near their highs.
But now:
First level thinking - the commercial office space glut is the next shoe to drop.
Second level thinking - everyone is now aware of the commercial office space glut and it has been discounted.
Weighing intrinsic value vs current stock prices and trading and investing unemotionally are the cornerstone of my approach.
I am a buyer, steadily slowly and incrementally in banks.

Dougie

badgolfer22 dougie kass

there's a time and price for everything usually.

dougie kass badgolfer22

The charts of SL Green and Vornado have, for months, suggested commercial RE is in trouble. But the rear view mirror is not the way to invest. Moreover, as I mention this AM, the markets are now doing the work of the Fed - and reducing fixed income yields.... a + for the CRE/banking crisis.

badgolfer22

3rd level thinking might be that banks aren't goin down because of CRE, but might be going down due to other things that haven't come to light yet.

In premarket trading I have added to (SPY) $390.67 and small new position in (QQQ) $308.28  - against yesterday's short calls.

I more aggressively added to my small position in (SCHW) in premarket trading (under $52).

Upside

- (CURV) +13% (earnings, guidance)
- (NXGL) +10% (enters supply agreement with GlaxoSmithKline Consumer Healthcare Holdings to supply material for a consumer product 'to be developed in the future')
- (ADMA) +7.7% (earnings, guidance)
- (HRTX) +7.5% (earnings, guidance)
- (ATVI) +5.3% (UK's CMA narrows scope of concerns in Microsoft; still expects final report by Apr 26th)
- (AMS) +5.0% (trading higher ahead of earnings)
- (IMPL) +3.1% (trading higher ahead of earnings)
- (KULR) +2.2% (earnings)
- (OPFI) +2.1% (earnings, guidance)

Downside

- (SCHL) -12% (earnings, guidance)
- (DB) -10% (weakness as global bank concerns increase)
- (EXPR) -8.7% (earnings, guidance)
- (OUST) -7.9% (earnings, guidance)
- (OSS) -6.6% (earnings, guidance)
- (FRC) -5.8% (weakness as global bank concerns increase)
- (TRUP) -5.7% (downside momentum)
- (UBS) -5.1% (weakness as global bank concerns increase)
- (PACW) -3.9% (weakness as global bank concerns increase)
- (INCY) -3.2% (US FDA issues complete response letter for ruxolitinib extended-release (XR) tablets; cannot approve application in present form)
- (KRE) -2.1% (weakness as global bank concerns increase)
- (SCHW) -2.0% (JP Morgan cuts price target)

At 8:16 am:

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We are probably creating an outstanding - or even a near generational buys in banks now. 

It is important to note that the dive in yields -- the 2 year yield has moved from above 5% to under 3.60% in a matter of a few trading sessions! 

This is a positive for domestic banks - as investors are fearful of deposit outflows. 

I do love Treasuries! 

And, now, banks. 

I have about a 3%-4% weighting in banks and that will be going much higher if the weakness continues. 

Stay unemotional. I am.

From Danielle DiMartino Booth (JTG - pay special attention to truckers' comments!):

On Tuesday, March 18, 2008, Grep Ip reported for TheWall Street Journal that the Federal Reserve had opened the discount window to securities dealers. The action required a unanimous vote by the Fed's five governors who invoked a Depression-era clause in the Federal Reserve Act to waive a prohibition on extending loans to nonbanks.

"On Wall Street, there is likely to be some relief that the Fed has finally opened the discount window to securities dealers, something they have long clamored for. The Fed has been reluctant because the move was outside its explicit mandate. 'This is a five-vodka event,' said a senior executive at one big brokerage firm that previously didn't have access to this funding source. 'Liquidity is no longer an issue.' That lifeline did not come in time to salvage the wreckage that was Bear Stearns, which the prior Thursday evening, informed the SEC and Fed that a run on its cash reserves left it with no option other than filing for bankruptcy protection the next morning.

Though it's always informative to look back at history and the charts we studied back then (upper left), I promise I'm not stuck in a time warp, fighting the last war. Rather, I share this slice of history to illustrate the signal emanating from increased usage of the Fed's discount window, a phenomenon that's been with us since the beginning of 2022. Of course, the credit part of the Great Financial Crisis (GFC) was just gaining a head of steam when Bear fell. That part does worry me.

When I say, "trust me," I don't make a habit of sharing correspondence in Feathers, well, trust me. That said, amidst the hyperbolic crypto Pied pipers screaming discount window uptake is QE, a client, who is anonymous on Twitter posed the following rhetorical question in response to my tweet detailing the entrails of yesterday's Fed H.4: "I could be wrong, but I think she is suggesting loans are deflationary??" Here is my reply:

"These are loans to banks hanging on by a thread. The bankers in these institutions can only DREAM about making loans. Right now, they know they just need to shore up their balance sheets as they've bled deposits to the extent they're at risk of failure. There will be great opportunities to make money in coming months if you know which side of the trades to be on as credit dries up even more than it already has. Commercial Real Estate and autos are having heart attacks, which we published yesterday for clients. The crypto acolytes are blindly following those who seek to profit from them and they're persuasive the same way a heroin dealer is if you're an addict and need a fix. Hope this finds you well."

As for those opportunities, they're not yet at fire sales prices. Markets like commercial real estate (CRE) assets rarely change hands. Tellingly, the S&P 500 rallied nearly 15% through May 19, 2008, to 1,440 before resuming the bumpy selloff that landed the benchmark at 666 on March 6, 2009. To take but one example in the space, per CRE analytics firm CoStar, the million-plus apartment units in the Multifamily pipeline, "will be hitting the market at exactly the wrong time...deliveries will overwhelm already slowing demand." And here's the kicker: "Private equity funds are only thinking values will drop 10% to 15%, but we see a far deeper decline in values. This could affect construction lenders, especially those with a large portion of their loan book in apartment construction."

In the meantime, CEOs across America have clearly been "Musked," a term I'm coining here and now to describe the worm the Tesla/Twitter leader has placed into the brains of countless C-Suite occupants. It goes something like this: "If Musk can ax 75% of his staff and Twitter still has the lights on, how many can I cut?"

For someone expecting the layoff cycle to accelerate, even I was taken aback by Accenture's announcement yesterday that it was laying off 19,000. Meanwhile, in addition to slashing headcount at its distribution centers, Walmart is methodically closing stores, one at a time, pushing the number well above the norm. I've often frequented the one in South Bend on my way from that airport to visit my high schoolers at Culver. It's always been busy...but seemingly not busy enough, which bites for me.

As for the rest of the economy, the freight market is having a heart attack, with truckers' latitude to reject loads "bouncing along the all-time bottom as carriers take almost any load offered," in the words of FreightWaves' Craig Fuller (upper right chart). And that's those who can stay in business. As the logistics hub reported yesterday, Florida-based Flagship Transport suddenly closed at the end of last week, going radio silent on the 455 truckers now out of a job who haven't been paid in weeks.

Meanwhile, demand for temporary staffers, a textbook cyclical marker, is collapsing (turquoise line) as is their wage negotiating power (lilac line). As for the very first regional Fed survey we have post-Silvergate/Silicon Valley/Signature, the Philly Fed's services survey suggests employers have suffered coronary arrest as temp employment slid into recessionary territory this month (red line); wage inflation is clearly following its path (blue line). We know history doesn't repeat itself. It's naïve to deduce this is the first time ever it won't rhyme.

This table is a good resource for short term traders:

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From JP Morgan: 

EQUITY AND MACRO NARRATIVE: Yesterday, we saw a 2% downward reversal in the afternoon as pressure on regional banks mounting. MegaCap tech continues to outperform the broader market while SMid Cap struggles; FANG rallied 3.14% vs. SPX's 30bp gain. Sr. TMT trader Ron Adler noted yesterday afternoon that: "At best, the demand seemed reluctant everywhere except the MegaCap, where we saw substantial LO demand today (though it petered out into the afternoon)."

Further, Delta One's PURE Quality Index gain 9.4% MTD, which the team thinks indicates a late cycle move; detail analysis from the Delta One team is further down below. In addition, Fed releases its H.4.1 statement yesterday; Jay Barry and Kabir Caprihan notes that while borrowing was little changed, deposit outflows at the very least have slowed, consistent with the remarks made by Chair Powell in yesterday's press conference (here).

Good tweet from my pal Larry:

There will be no "Futures" column this morning as I am busy trading and on research calls.

TD Cowen downgrades (COIN) to underweight with a $36 price target.

Yesterday I remarked that the futures market is experiencing more moves than a shortstop batting .110! 

Just watch the early going - a roller coaster, with a negative bias. 

* I added to my QQQ short (via short calls) over the last two days

Bull markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.

-- Bob Farrell

From Charlie: