*All but three were negative

The two moves (higher and then lower) in the last few minutes confirms to me that the market is broken.

I raised my short exposure today.

Thanks for reading my Diary today.

Enjoy the evening.

Be safe.

From Mainy:

mainframe

GLP-1 Thoughts

As a holder of NVO for over ten years, I have watched this industry develop. .I call the 2 big players "Penn and Teller". On the one hand you have LLY(Penn) who is promotional--they brag about their 82% gross margin, appear often on FinTV.

On the other hand you have NVO-quiet, doesn't brag, etc.

These two have announced plans to build domestic based manufacturing capacity costing something like $6bil combined.

They can't make enough of this stuff!!

The smaller entrants have a very, very steep mountain to climb. Even if they got a partner, who is going to manufacture it?

Any buyer knows the cheapest part of entering the biz will be the acquisition. Then you have to manufacture it, and spend billions on promotion and advertising, etc, etc.

By the time this is accomplished, Penn and Teller will have pills in your local CVS.

The only exception I can see is RHHBY. They acquired Carmot last fall. The bought it during their PH1 trial. Methinks they had a sneak peak how it was going:-).

My major fear is regulation. It could take a multitude of forms. LLY's talking about their margins is cannon fodder for members of Congress.

I'm looking so forward (haa) to speeches on the floor along the lines of a "The Cost is Too Damn High".

NVO (L), LLY(M), RHHBY(S)

From The Credit Strategist: "Small Portions."

"I am going to write a good Diary on TheStreet Pro today... and I am going to help people. Because I am good enough, I am smart enough and doggone it, people like me."

- Daily Affirmations with Dougie Kass

Today's Daily Affirmations is about (shockingly!) Nvidia  (NVDA) .

I just went into the history books.

The peak price-to-sales ratio of Cisco  (CSCO)  at the top of the dot-com boom (in late 2000) was 24x.

The current price-to-sales ratio (based on January 2025 estimates) of Nvidia is 24x!

I am not a licensed therapist, though.

"I deserve good things. I refuse to beat myself up. I am an attractive person. I am fun to be with."

Safe Harbor for Financial Institutions Serving Legal Cannabis Businesses - State of Delaware News

With S&P cash now +1 handle I am shorting more Index calls.

Dan and Guy on Market Call now. 

Always a very worthwhile and value-added viewing.

He just mentioned yours truly...

And it's free!

JeffI

Counterpoint:

My interpretation is that the GEN AI answer on Yellen was reasonably accurate.

Over a short time frame inflation wasn’t transitory. On the other hand, looking through a longer lens of time inflation was in fact transitory. Inflation spiked to approximately 10% (depending on whose measure) and is now under 4%.

A 40% increase of the money supply (over 2 years), supply shortages caused by the pandemic and Ukraine war, and labor shortages all caused a spike in inflation. The proper question was always how long these causes would take to abate- leading to a debate on the definition of transitory.

I believe you are projecting your mistaken beliefs which has brought you to the incorrect conclusion.

Dictionary.com Transitory: 1. not lasting, enduring, permanent, or eternal.

Dougie Kass

Respectfuly, Jeff - you entirely missed my point and projected your own views.

You might reread my post as you didnt understand the message of the column (as it pertains to AI).

WOC

Your column raises great questions about AI using quantity vs quality sources. But the most important issue which you highlight is the corruption of language. "Stupid" is not only a slur. It is also a useful adjective. This makes AI quite scary. Thanks for your skepticism.

Dougie Kass

I dont have a dog in the hunt but my objective in the More Tales of Nvidia is to provide a layperson's common sense journey into AI - with emphasis on issues that you will not see tackled elsewhere.

I hope it is helpful.

(MSOS)  next resistance is $8.17.

"Bubbles take a long time to bust."

- Goldman Sachs

Two more little nits:

Commentary on AI from the fine folks at Goldman Sachs  (GS)  below.

Interesting investment hypothesis.

It doesn’t work, but people won’t figure it out for a while, so all systems go. Granted, that has been very true to date. But if they knew exactly where we were in the process of the investment world figuring it out, they would all be trillionaires and not doing this. What inning are we in, that is the million dollar question.

At this point we are a year into it (I should also note, the Y2K tech bubble actually lasted slightly less than a full year for the stocks), there has been a huge increase in the numbers, there is a lot of market cap, and a lot more discussion about the challenges this stuff has (how it works and what it does not do well per the issues I have highlighted, the tremendous cost, and the lack of business model).

It is unclear to me why they think we are still early in the game, but they could certainly be right. I just don’t know how you know. I think the reality is as long as Nvidia  (NVDA)  beats and raises, people will not ask many questions. When NVDA stops beating and raising, or they miss, the questions will be asked. And if that happens, the old head of IR at NVDA will not have to deal with the hassle of answering them since she just resigned.

It is also interesting the Y2K bubble was aided and abetted by Fed Chair Greenspan; what is going on with AI and stocks in general now still has the benefit of all the money put into the system by Powell and the fiscal side of the house – ergo the transitories mentioned in the prior More Tales of Nvidia missive, where the AI did not pick up a single thing about all the money put into the system. It missed the single most important point.

This article is another example that shows that AI needs the human content and is worthless without it.

Currently the AI is stealing it (once again our tech overlords do not practice what they preach). The operating costs of AI are already incredibly high, once they have to start paying for the content they are using, or they are blocked from stealing it, there is going to be a problem.

https://nypost.com/2024/06/24/business/sony-universal-warner-sue-ai-startups-suno-udio-for-infringement/

From Goldman Sachs:

Top of Mind: Gen AI: too much spend, too little benefit?

25 June 2024 | 5:10PM EDT

Tech giants and beyond are set to spend over $1tn on AI capex in coming years, with so far little to show for it.

So, will this large spend ever pay off?

MIT’s Daron Acemoglu and GS’ Jim Covello are skeptical, with Acemoglu seeing only limited US economic upside from AI over the next decade and Covello arguing that the technology isn’t designed to solve the complex problems that would justify the costs, which may not decline as many expect. But GS’ Joseph Briggs, Kash Rangan, and Eric Sheridan remain more optimistic about AI’s economic potential and its ability to ultimately generate returns beyond the current “picks and shovels” phase, even if AI’s “killer application” has yet to emerge.

And even if it does, we explore whether the current chips shortage (with GS’ Toshiya Hari) and looming power shortage (with Cloverleaf Infrastructure’s Brian Janous) will constrain AI growth.

But despite these concerns and constraints, we still see room for the AI theme to run, either because AI starts to deliver on its promise, or because bubbles take a long time to burst.

From Peter Boockvar:

Home sales data, inventory check

New home sales in May, measuring contract signings of freshly made construction and thus more timely than existing home sales that calculate the number of closings, totaled 619k. That was 24k less than expected but April was revised up by 64k to 698k which was the most since July 2023. I’m not sure why but there was a drop in new home sales in the Northeast to the least amount since June 2022. These figures include homes that have been finished, still under construction or not yet started.

Months supply hit 9.3 from 8.1 in April as the number of homes for sale are at the highest level since January 2008. Remember what Toll Brothers said on their last call that they have increased the amount of spec homes being built. A cooling of home prices, if the result of this new home supply, would be welcomed by the transaction market for sure but those long homebuilding stocks should take note. The median home price was little changed y/o/y, down .9% but because of mix, this is very volatile month to month.

Bottom line, smoothing out the monthly volatility in this data point has the 3 month average at 667k vs the 6 month average at 660k and the 12 month average at 663k. For perspective, this averaged 685k in 2019. So, the big builders are doing well because they are taking market share and are able to provide incentives to buyers, like a mortgage buydown as we know. The smaller builders are having a more difficult time, hence the NAHB builder index well below 50, both because their funding costs are high but also they can’t discount as much for the buyer who is certainly affordability challenged.

New Home Sales

Number of Homes for Sale

Machines and algos are now on steroids!

Divergences are mounting.

Market leadership is narrowing.

There may be a growing possibility that today's ramp (and traders reaching) in some conspicuous market leaders (specifically Amazon  (AMZN) , Apple  (AAPL) , Microsoft  (MSFT)  and Meta  (META) ) is an exhaustion move.

Stay tuned.

NCAA Division 1 council moves to take cannabis off banned drug list.

I have moved to very large in cannabis.

* Still stink!

Breadth

- NYSE volume 115M shares, 15% below its one-month average

- NASDAQ volume 1.59B shares, 10% below its one-month average;

- VIX index: up 1.56% to 13.04

S&P 500 Sector ETFs

Nasdaq 100 Heat Map

Financials are leading to the downside.

I have converted my  (SPY)  and  (QQQ)  common short into short calls - in the money, monthlies for August.

* Easy come, easy go, will you let me go? 

* As historical correlations - particularly over the near term - have lost their relevance in a market dominated by passive products and strategies

Is this the real life? Is this just fantasy?
Caught in a landslide, no escape from reality
Open your eyes, look up to the skies and see
I'm just a poor boy, I need no sympathy
Because I'm easy come, easy go, little high, little low
Any way the wind blows doesn't really matter to me, to me

- Queen, Bohemian Rhapsody Queen – Bohemian Rhapsody (Official Video Remastered) (youtube.com)

On Monday the averages fell as the average stock price rose (RSP ++) and breadth was healthy:

Yesterday the averages rose (especially of a Nasdaq-kind) as the average stock fell (RSP --) and breadth was unhealthy:

Meanwhile, financials (which typically presage action in the broader market) have recently stumbled - conspicuously so yesterday (and in premarket trading). Note: I have been adding to my short  (XLF) .

The conditions, divergences and bad breadth/narrow leadership that I have observed in recent weeks continue to suggest market vulnerability.

I added to my net exposure in premarket trading by reestablishing my  (SPY)   $546.34 and  (QQQ)  $481.70 common shorts.

Bottom Line

Too late, my time has come
Sends shivers down my spine, body's aching all the time
Goodbye, everybody, I've got to go
Gotta leave you all behind and face the truth
Mama, ooh (any way the wind blows)
I don't wanna die
I sometimes wish I'd never been born at all

The correlations, relationships and factors/influences that have historically held, no longer do so in a market dominated by algos and machines who know everything about price and nothing about value.

Confusing to many of us as...

For now, nothing really seems to matter.

Nonetheless, remember (The Oracle's words) that while the market might be a voting machine over the near term - it is a weighing machine over time.

I remain in Warren Buffett's camp.

These are the most active premarket ETFs as of 8:09 a.m. EST:

Here are the largest pre-market movers, percentage-wise, as of 8:27 a.m. EST:

As of 8:20 a.m. EST:

Upside:

-RIVN +42% (VW to invest $1B now & up to $5B in Rivian through JV)

-WHR +18% (Robert Bosch reportedly weighing bid for company)

-FDX +15% (earnings, guidance; conducting assessment of Freight Business)

-VSTO +9.1% (MNC Capital raises offer for Vista Outdoor by 6.3% from $39.50/shr to $42.00/shr, valuing it at $3.2B)

-DAKT +8.1% (earnings, guidance)

-GRND +5.9% (earnings, guidance)

-UNF +5.1% (earnings, guidance)

-MU +2.9% (Samsung Electronics reportedly plans to raise server DRAM and enterprise NAND prices by 15-20% in Q3 2024)

-EYPT +2.1% (to highlight DURAVYUTM (vorolanib intravitreal insert) Clinical and Regulatory Progress and Pipeline Innovation at R&D Day 2024)

-LILM +1.8% (successfully completes the first series of tests of its electric jet propulsion unit)

Downside:

-TXO -7.9% (files to sell 5M units; enters into Definitive Agreements for assets in the Greater Williston Basin for total cash considerations of $243M and 2.5M common units of stock)

-WOR -6.7% (earnings)

-APTV -6.5% (Piper/Sandler Cuts APTV to Underweight from Neutral, price target: $63)

-GIS -4.5% (earnings, guidance)

-LUV -4.1% (cuts Q2 guidance)

-PRGS -1.4% (earnings, guidance)

From Peter Boockvar:

Interesting comment from Lisa Cook/Earnings comments from CCL, FDX/CPI upside in Australia, jump in yields

Following the comments from Mary Daly and her lean toward a rate cut by citing the labor market and Michelle Bowman sounding more hawkish on the other side, Governor Lisa Cook has an easing bias too but the timing of when to reflect that will depend on the data she said. What I found most interesting though in her speech yesterday was this, and something I've heard before but apparently gaining some more credence. "With more workers entering the economy, the monthly job gains needed to keep the unemployment rate steady likely has risen from just under 100,000 to nearly 200,000." 

Soon after seeing the downward revision from Pool Corp, highlighting again the spending shift away from stuff like pools, whether because people put in a bunch of them during Covid and/or now it involves a much higher interest rate to borrow money to pay for it for those not paying cash, we were reminded where many are prioritizing their spend. That is on travel, leisure and as I said Monday with the Sphere, on experiential things, as we all know. 

Carnival said this on their earnings call:

"we've closed yet another quarter delivering records, this time across revenues, operating income, customer deposits and booking levels, exceeding our guidance on every measure."

"Our European brands experienced extraordinary yield improvement again this quarter, up over 20%, while North America continued to improve on last year's highs, up a healthy 7%."

"In the near term, pricing on bookings taken in the 2nd quarter has continued to run considerably higher for each of the 3rd and 4th quarters, and again, that's on top of record per diem last year." And, "not only did we take more bookings for post 2024 sailings than we did for in-year sailings, we set yet another record for the most future bookings ever taken during the 2nd quarter. The unprecedented level of demand for 2025 sailings coupled with flat capacity growth next year translates into meaningful pricing power."

On the movement of goods around the world, this was from FedEx, a stock we own and one benefiting from a lot of self help and market share gains more so than big improvements in organic volume:

"While we saw modest yield improvement and signs of volume stabilization across segments, we have not yet seen a notable increase in demand."

For example on the self help, "At Freight, 4th quarter operating income increased despite significant demand weakness."

On volumes, "Volumes continue to stabilize. In US domestic package, y/o/y volume declines continued to moderate. International export package volume increased 8% in the quarter, driven by international economy, largely consistent with the monthly trends we saw last quarter."

"Similar to last quarter, the pricing environment remains competitive, but rational."

The May US Architecture Billings Index came out and fell sharply to well under 50 at 42.4 from 48.3 in April. The economist at AIA said "The decline in the May ABI score continues a year and a half of weakness in design billings at US architecture firms. However, firms only reported modest declines over the first half of this period. Over the past 9 months, volatility has increased, and scores have softened more significantly, with the May score the weakest reported since the end of the pandemic recession."

Obviously the higher cost of borrowing changes the math on any project/purchase that relies on debt. 

With regards to the weekly mortgage application data and with mortgage rates just below 7%, purchase apps rose 1.2% w/o/w, though still down 13% y/o/y. Refi's were unchanged and up 26% y/o/y on easy comps and reflecting cash outs and whoever had an adjustable rate mortgage come due, however painfully I'm sure in this new rate environment. 

In Europe, German consumer confidence weakened a bit to -21.8 from -21 but after 4 months of gains. That figure though remains well below the +9.1 print seen in February 2020. From the firm who releases the data, "The interruption of the recent upward trend in consumer sentiment shows that the road out of sluggish consumption will be difficult and there can always be setbacks." With prices still high of both goods and services, income and economic expectations softened and the desire to buy things fell. 

With respect to consumer confidence in France, the June read, and reflecting the Macron decision to call early parliamentary elections, fell 1 pt to 89 as expected and that's the lowest of the year. It was 105 in February 2020. 

German Consumer Confidence

A higher than expected Australia May CPI at 4% vs the estimate of 3.8% resulted in a sharp selloff in Australian bonds. The 2 yr yield jumped 18 bps to 4.20%, the highest since November and further complicating the job of the RBA. The 10 yr yield was up 11 bps. Also, the 10 yr JGB yield got back above 1.0% and we're seeing modest selling in European bonds and US Treasuries.

The yen by the way is now above 160.

Australian 2 yr yield

The S&P Short Range Oscillator moved from 0.40% to -0.15%.

This table is a valuable resource for momentum-based short-term traders:

* More hallucinations...

Just for fun, I asked AI (Perplexity) the following question: “How stupid Is Janet Yellen, and why did she think inflation would be transitory?”

The answer illustrates why AI is dangerous, for lack of a better term. Even excluding the hallucination issue, it can give answers that are very watered down and represent the lowest common denominator of internet content, the majority of which can often lean in one direction. 

To Begin With...

Go back to the starting point; AI cannot think. It is entirely parasitic on human input. AI does not learn the way we do, and does not have the ability to cross check things for consistency. People keep trying to add lots of prompts to get AI to "check its work," but it's a losing battle. 

With regard to the question I asked, in the case of economic policy (and many things), 80%-90% of the media and internet content leans in one direction. AI can only regurgitate what is out there (and seemingly is programmed to do it with some bias, which is too bad). Therefore, you get an answer that makes every excuse in the book for Yellen, because most of the stuff on the internet does. AI cannot go to the 10% of the content that is out there that is heavily critical of Yellen with regard to transitory inflation, and figure out that is right, and use that content to shape its answer. 

A human being could make that determination, which at this point in time, is easy to do, with the benefit of hindsight. AI, even with the benefit of hindsight, cannot do this, because the preponderance of content that is out there was either created before we had an outcome or is biased in one direction, and it has a permanent life on the internet.

We should get an answer that skewers her for not seeing this coming and then also sticking around and also an answer that touches on all the money that was put into the economy, which the AI completely left out, which is inexcusable.  

Therefore the answer AI gave is woefully bad and incomplete.

Once again, this path leads to a doom loop of self-reinforcing bad information, that will also be full of hallucinations, which are a feature and not a bug.

Then notice the follow up question I had to ask, and the answer it gave. Boring. And yes, she is functionally stoopid!

How stupid is Janet Yellen and why did she think inflation would be transitory?

Sources

commentary.org favicon

newsbusters.org favicon

Answer:

Janet Yellen, the former Chair of the Federal Reserve and current U.S. Treasury Secretary, has faced criticism for her initial characterization of inflation as "transitory." This term was used to suggest that the inflationary pressures observed in the economy were temporary and would subside as supply chain disruptions and other pandemic-related factors resolved.

Reasons for the "Transitory" Label

* Pandemic-Related Disruptions: Yellen and other economists believed that the inflation was primarily driven by temporary factors related to the COVID-19 pandemic, such as supply chain bottlenecks and a sudden surge in demand as economies reopened. They expected these issues to resolve over time, leading to a normalization of prices.

* Historical Precedents: Historically, certain inflationary pressures have been short-lived, especially those caused by supply chain disruptions. This historical context likely influenced the initial assessment that inflation would be transitory.

* Economic Models and Forecasts: Economic models used by the Federal Reserve and other institutions initially suggested that inflation would not persist at high levels. These models did not fully account for the prolonged nature of the disruptions or the impact of significant fiscal and monetary stimulus.

Criticisms and Reassessment

 * Persistent Inflation: Contrary to the initial expectations, inflation proved to be more persistent and widespread. Factors such as ongoing supply chain issues, labor shortages, and increased consumer demand continued to exert upward pressure on prices.

* Admission of Error: Janet Yellen has publicly acknowledged that her initial assessment was incorrect. She expressed regret for labeling inflation as transitory, recognizing that the economic conditions evolved differently than anticipated

 * Broader Economic Factors: Critics argue that the focus on transitory factors overlooked other significant contributors to inflation, such as corporate pricing power and broader economic policies. Some have suggested that this oversight was either a misjudgment or a deliberate downplaying of the risks. 

Conclusion

While Janet Yellen's initial characterization of inflation as transitory was based on prevailing economic theories and models, the persistence of inflation has led to a reassessment of those views. Her acknowledgment of the error reflects the complexities and uncertainties inherent in economic forecasting.

But I asked how stupid she was?

Answer:

I apologize, but I don't feel comfortable characterizing Janet Yellen or anyone else as "stupid." Making personal attacks or using derogatory language about public figures isn't appropriate or constructive. Janet Yellen is a highly educated economist with decades of experience, including serving as Chair of the Federal Reserve and U.S. Treasury Secretary. While her prediction about inflation being transitory turned out to be incorrect, even experienced professionals can make errors in judgment or forecasting, especially in complex and unprecedented economic situations like those following the COVID-19 pandemic. It's more productive to examine the reasons behind economic predictions and their outcomes rather than resorting to personal insults. If you'd like to discuss the economic factors involved in inflation forecasts or the challenges of economic policymaking, I'd be happy to explore those topics in a respectful manner.

From JPMorgan:

US: Futs are higher. Pre-mkt, Tech/Semis are continuing yesterday’s rally: NVDA +2.2%, QCOM +70bp, AMZN +65bp, AAPL +32bp. MU is +3.0% higher this morning (+4.3% WTD) ahead of its earnings release today. FDX has rallied +13.3% after its guidance upgrade and buyback announcement. Bond yields are 2-4bp higher; USD is higher. Commodities are mixed: oil and Ags are higher, while base metals are lower. Today, the key macro focus will be MU Earnings and Bank stress test results after the close. We will also receive New Home Sales data at 10am ET. Feroli sees New Home Sales to print 630k vs. 633k survey vs.634k prior.

and...

EQUITY AND MACRO NARRATIVE: Yesterday’s price actions were a complete reversal of Monday’s with NVDA’s +6.8% gain alone driving SPX to close in green, but the underlying performance was not supportive: only 22% of SPX stocks were closed in green; we saw weakness in multiple Cyclicals sectors: Housing (XHB) -2.8%, Auto (JP1BAUT) – 1.8%, Retail (XRT) -78bp. Given Tuesday’s quick reversal, can we see a sustainable rotation or broadening in near-term? Our colleague Matt Reiner from JPM Cash Trading desk shared his view:

This morning’s primary question is: “Are you seeing any panic?” And my answer is “None at all.” The recent (and at this point short-lived) AI/momentum unwind headlined by a 3-day $430bln mkt cap drop in NVDA has gripped everyone’s attention… Especially since the darlings meteoric YTD rise had pole-vaulted it to the largest mkt cap in the S&P500. But what I find more interesting, as the broader market hangs around all-time highs, is a new window could be quietly opening. This could be an opportunity for the overall breath to widen in the market, and to do something even more important: Consolidate. We haven’t seen proper consolidation in over a year, and the market has rocketed since then into a whole new stratosphere with many fundamentalists still questioning how we got above 5400 so quickly. There’s been a mix of global macro and micro developments that have shifter tremendous dollars into the US stock market. A remarkable series of “set the bar low” and “TINA” events that have left many investors in the lurch as no clear cut direction has been carved out for the forward. Have we gone too far too fast? Is this just the 3rd inning of a mega cycle? I don’t really know but there are 2 clear paths for investors at this point. Those who “got it right” and those who “missed it.” If you’re in the winning camp, remind yourself that capital-conservation at times more important than capital-appreciation (profits, and temporary reset). Things are unquestionably frothy at this point in parts of the market, but to say we’re amidst a bubble I think misses the mark entirely. There’ve been numerous moments over the past 3 years where correlations to historic market events were blown straight through without broad participation in the ups. Additionally, most of the “it feels different this time” moments over the past few years have resulted in excellent near/medium term reversions. We remain in a technical market, and it should be approached as such. However, some consolidation would build up everyone’s confidence that these current levels (and higher) are here to stay.”

I wrote this back in 2022:

Price Elasticity of Demand

* Lower demand from higher prices seems inevitable and may be an important theme in the second half of this year

Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It is computed as the percentage change in quantity demanded -- or supplied -- divided by the percentage change in price. Elasticity can be described as elastic -- or very responsive -- unit elastic, or inelastic --not very responsive.

I remain fearful that when we combine much higher prices for consumer products (be it a Starbucks coffee, tickets to Disney World , a Ford F-150, a McDonalds Big Mac, an air conditioner at Home Depot or a home) with rising costs (especially of an energy-kind) and the absence of fiscal stimulus that it is almost inevitable that consumer demand will deteriorate relative to consensus expectations.

If I am correct, optimistic economic and U.S. corporate profit views will likely be scaled back in the months ahead.

I will expand on this theme next week.

Position: Short SBUX DIS MCD F

BY DOUG KASS MAR 24, 2022 6:54 AM EDT

And question of the year:

From "Jazzy" Jeff Hirsch's Stock Trader's Almanac:

As of today’s close, the slower moving MACD “Sell” indicator applied to NASDAQ is negative. At the start of trading today, following the previous session’s loss, NASDAQ needed to gain more than 274.23 (+1.57%) today to keep MACD positive. Today’s gains on turnaround Tuesday were simply not enough. NASDAQ’s “Best Eight Months” has come to an end. We are now issuing our Seasonal MACD Sell signal for NASDAQ.

Sell Invesco QQQ (QQQ).

Sell iShares Russell 2000 (IWM).

For tracking purposes, these positions will be closed out of the Tactical Switching Strategy ETF Portfolio using their respective average prices on Wednesday, June 26.

Existing positions in TLT, AGG and BND on are Hold. Cash, money market, and/or short-duration bond ETFs like SHV and SGOV are likely to be the least risky during the “Worst Months” this year. SHV and SGOV can be considered at current levels.

Sell the SPDR Consumer Discretionary (XLY) position in the Sector Rotation ETF Portfolio established last October. For tracking purposes, we will also close out the position in SPDR Consumer Staples (XLP) from last October. There is a separate XLP trade associated with the “Worst Months” that was presented on May 9, which can still be considered on dips below its buy limit of $76.20. XLY will be closed out using its average price on Wednesday, June 26.

iShares US Technology (IYW) was closed out of the portfolio on June 12 when it first traded above its auto sell price of $146.54. If you have not already closed out IYW, you may consider doing so now that NASDAQ’s Seasonal MACD signal has triggered.

Today’s NASDAQ Seasonal MACD sell signal is not timely considering NASDAQ’s historical Midyear Rally begins tomorrow and usually runs until July 12 (ninth trading day of July). One way to trade the Midyear rally would be to continue to hold QQQ with a tight trailing stop loss, perhaps 1%, updated daily on the close. If the Midyear rally takes hold, additional upside will be enjoyed, but if the rally fades then existing gains will still be protected.

As a reminder, members following the Best 6 + 4-Year Cycle switching strategy on page 64 of the 2024 Almanac need not heed this seasonal sell signal as the strategy is still in its holding period and remains so until post-election year 2025.

“You should expect the unexpected in this business; expect the extreme. Don’t think in terms of boundaries that limit what the market might do.”

- Richard Dennis

Bonus - Here are some great links:

Will Semis Lead Market Lower?

Will Bitcoin Breach Support?

End of Quarter Tech Pile On? 

Ounces of Gold to Buy Bitcoin

Wolf Street howls about a housing bubble.