I am coming to the conclusion that nearly every "talking head" is full of B.S.:

As of 4:15 p.m.:

Intraday, Week-to-Date

Closing Volume

- NYSE volume 22% below its one-month average;

- NASDAQ volume 12% above its one-month average

Breadth

S&P 500 Sector ETFs

Percentage Movers

Nasdaq 100 Heat Map

This is funny —  rather, this is ridiculous:

Heckuva "Trade of the Week"...  (MSOS)  at $6.88. (Kidding!)

Last sale, $6.89. Can I annualize the one penny gain?

Homebuilders represent today's downside leadership.

FCronkhite

Boy, getting hammered by short PE bets. And, am concerned about the middle of the month and nasty things happening in the past about that time. Think need to tighten my stops and lock in some gains!!

Dougie Kass

Most retail investors should not short stocks.

Shorts require extreme risk management and should mostly be viewed as trades (and should always trade around core short positions) for the multiple reasons discussed over the decades in my Diary.

PE stocks are among the most volatile sectors which means what I just wrote by 10x.

* I added more significantly to my short book today...

I have three research calls this afternoon (!) so "Things" will be early today.

Thus far, the market has been volatile (down, up, down...?)

The big macro numbers were hotter inflation and weaker jobs.

Today's "things":

* I added more significantly to my short book today.

* With S&P rallying off of the lows I added to my short Index calls on three occasions (from -13 to +1 in S&P cash).

* I added to my  (TSLA)  short at $243.77 and covered half between $232-$233 within, what seemed to be, minutes.

* I added to my  (NVDA)  short, twice. Around $134.72 on average.

* Added to homebuilder shorts. 

* Added to cannabis longs — TSNDF,  (CURLF) ,  (GTBIF) .

From Jesse Redmond:

* Yields up and equities remain unconcerned...

Not surprisingly, considering the hotter inflation data, bond prices are at the day's lows (and yields at the day's highs).

(TLT)  continues to fall in price, we remain short.

* The yield on the 1-year Treasury bill is 4.23% (-2 bps).

* The yield on the 10-year Treasury is 4.10% (+4 bps).

* The yield on the long bond is 4.39% (+6 bps).

Added to Nvidia  (NVDA)  short at $134.89.

With S&P cash up on the day I continue to scale into more Index calls (short).

From Peter Boockvar:

'Say, isn't that r-star?'

John Williams speaking at an event at Binghamton University today said “Looking ahead, based on my current forecast for the economy, I expect that it will be appropriate to continue the process of moving the stance of monetary policy to a more neutral setting over time. With this progress toward achieving price stability, moving toward a more neutral monetary policy stance will help maintain the strength of the economy and labor market.”

The problem with this commentary is that the Fed itself doesn’t even know what the ‘neutral’ (r*) rate should be. Jay Powell has said multiple times that he’ll know it when he sees it. Pre Covid, their econometric models spit out a .50% REAL neutral rate ASSUMING inflation was running at 2%. Historically, the spread of the fed funds rate to inflation has been around 200-250 bps but sometimes with higher inflation.

To the point that this is a level that no one really knows what it should be, with permission from my friend Jim Grant, I post below what his brilliant illustrator Hank Blaustein included in this week’s new issue of Grant’s Interest Rate Observer.

"OpenAI projected that it will not turn a profit until 2029 when it estimated its revenue would be USD100bn. Before it gets to that point, losses could rise to USD14bn in 2026, not including stock compensation which is one of its biggest expenses, with cumulative losses of USD44bn through 2028."

- MacroStrategy Partnership

Maybe someone can explain how this works to me (notwithstanding the fact that with most startups the projections will be wrong and the results much worse)? Is the money going to keep coming to fund this, and at the ever-increasing valuations needed to make the cap table work? 

I guess for the time being they sit at the nexus of one company, Microsoft  (MSFT) , funding it to keep expenses off their own books, and another company, Nvidia  (NVDA) , funding it to buy more of their product. There is a real cost to everything and everything that doesn't create the utility to pay for itself – it is capital destruction. But then again, given the excess money in the world, and whose money it is, in this case, capital destruction might not be a bad thing, and I am not kidding. 

The less influence these companies have on the world, the better off people will be. Hopefully there is enough money left over for these hypocritical blowhards to buy a ball gag for their big mouths, and hopefully there is enough electricity (affordable) left over for me to make ice cubes, although those guys want me to pay for the power cost and grid upgrades too. 

Uggh!

With S&P cash down by only -9 handles I am adding to my short Index calls.

- New York Stock Exchange volume is 25% below its one-month average

- Nasdaq volume is 11% above its one-month average

- The Volatility Index is up 0.19% to 20.90

Here are price increases by major category over the last 4 years, which are a fair bit understated in many cases, too.

Some were arguing that it was all related to supply chain disruption or price gouging, because corporations learned to try and maximize profits all of the sudden I guess?

Many of those increases have nothing to do with goods produced overseas and are also services. This hurts the poor- and middle-class the most (ergo most of the population), and ultimately creates social tension and unrest. No wonder Americans are increasingly divided.

It is scary when the voting base learns they can raid the public treasury, and the politicians will gladly abide. But ultimately the voters (and politicians) hurt themselves. Badly. However, I am not sure of the way out, because from a political perspective, once things are in place, it is very hard to take them away. Even worse, to get elected, they have to promise more.

Although Millei in Argentina, what he has done is fascinating. He somehow got elected, and stripped out the bloat, and it seems to be working out quite well actually. It is so odd that we are unable to learn from history. 

Tesla  (TSLA)  is -$11 from our premarket short this morning!

Taking off half at $232-$233.

With S&P cash -13 handles I have added to my short Index calls.

This Goolsbee needs to go take a hike.

Neel Kashkari at least has stopped running his mouth so much, after being wrong about everything, but instead Goolsbee ended up taking up the torch I guess.

One more reason not to stick partisans on the Fed, it is already bad enough there.

The so-called SuperCore CPI also increased on a YoY basis to +4.6%...

From Peter Boockvar: 

Inflation is not so easy to tame/Claims jump Hurricane Helene related?

September CPI rose .2% headline and .3% core m/o/m, both one tenth more than expected. The y/o/y gains are now 2.4% and 3.3% respectively vs 2.5% and 3.2% for headline and core. Energy prices fell 1.9% m/o/m and are down by almost 7% y/o/y. Food prices though jumped .4% m/o/m and by 2.3% y/o/y. Prices for food at home saw a rise of .4% m/o/m, though up a modest 1.3% y/o/y. Prices for food away form home were up by .3% m/o/m and 3.9% y/o/y, experiencing more of the food inflation. Regardless of how much money you make, don’t you flinch when you see a $78 steak on the menu or a $48 pasta? I do.

Service prices ex energy continues to be, and always is, where the inflation remains as prices rose .4% m/o/m and 4.7% y/o/y. After two months of declines, medical care costs rose .4% m/o/m and up by 3.3% y/o/y (never transitory in this category). Health insurance prices rose .4% m/o/m and 7.5% y/o/y, getting closer to reality. Owners’ Equivalent Rent rose .3% m/o/m as was Rent of Primary Residence. They are up 5.2% and 4.8% y/o/y respectively. Yes, real world rents are running below these trends (likely closer to 3% on a blended basis) but they never rose as much as real world rents did in 2022 and 2023. Motor vehicle insurance continues to run hot, jumping another 1.2% m/o/m and up by 16.3% y/o/y. Fixing a vehicle too became more expensive with prices up 1% m/o/m and 4.9% y/o/y. Airline fares jumped 3.2% m/o/m and up by 1.6% y/o/y. We’ve heard from many airlines that have gotten more disciplined in cutting excess capacity and Delta said that again today. Hotel prices on the other hand fell by 2.3% m/o/m but after jumping by 2% in August. They are down 3.7% y/o/y. 

Stemming a 3 month run of declines, core goods prices rose .2% m/o/m, though still down 1% y/o/y. The main reason was the .3% m/o/m rise in used car prices after a string of declines but they are still lower by 5.1% y/o/y. New car prices rose too, by .2% m/o/m, but down 1.3% y/o/y. Apparel prices helped too with the increase in core goods prices in the month as prices here jumped 1.1% m/o/m and up by 1.8% y/o/y. Prices for ‘household furnishings and supplies’ were unchanged m/o/m but down 2.2% y/o/y.

Bottom line, while I’m sure some will take out everything they don’t like and the best one is when housing prices are taken out even though Fed policy and interest rates are most influential here and for most it’s their biggest expense, the path down to a SUSTAINABLE path to 2% inflation is a bumpy road. Looking at PCE and not CPI and thinking the inflation war has been won is like a kid who covers its eyes and thinks they are invisible.

As yields have backed up over the past few days, particularly yesterday, yields both on the short and long ends are down post figure, maybe responding to the claims data. But, inflation breakevens continue higher. The 2 yr is back to 2% vs 1.64% the day before the Fed cut 50 bps. The 5 yr breakeven is up for the 8th day in the past 9, up 1% bp to 2.24% vs 1.99% on September 17th, right before that last FOMC get together.

There was a huge jump in initial jobless claims to 258k from 225k and well above the estimate of 230k but I assume it’s mostly related to Hurricane Helene so I’m not yet worked up. That said, continuing claims, delayed by a week, did jump by 42k w/o/w to 1.861mm and that was 30k more than anticipated. That is just 10k from the highest since November 2021 and pointing to a slowing pace of hiring, notwithstanding the payroll report just seen.

Core CPI y/o/y

Initial Claims

Continuing Claims

From Peter Boockvar:

Maybe one more instead of two?/Bears at lowest of year/Remember Helen of Troy?/Another BoJ rate hike?

Voting Fed member Mary Daly yesterday said while she "fully" was on board with the Fed's 50 bps cut last month, she is leaving open the possibility that we only get one more rate cut of 25 bps over the following remaining two meetings rather than two. She said at an event yesterday "I think that two more cuts this year, or one more cut this year, really spans the range of what is likely in my mind, given my projection for the economy." Rate cut odds in the fed funds futures market is at 76% for two more this year. The 2 yr yield is at the highest level since mid August while the 10 yr yield at 4.08% was last seen in late July.

I mentioned Monday my belief that Friday's robust payroll number didn't square with other stats and anecdotes and the confusing nature of it all. This is what the Fed minutes revealed yesterday as they too try to figure out what's going on. "Many participants observed that the evaluation of labor market developments had been challenging, with increased immigration, revisions to reported payroll data, and possible changes in the underlying growth rate of productivity cited as complicating factors. Several participants emphasized the importance of continuing to use disaggregated data or information provided by business contacts as a check on readings on labor market conditions obtained from aggregate data."

There was nothing new mentioned on the balance sheet in the minutes and it will continue to shrink even as they cut rates further. As of 10/2, it stood just above $7 trillion, still well above where it stood in February 2020 and as a % of GDP it stands at about 25% vs 19% in February 2020.

10 yr Yield

Fed's Balance Sheet

With respect to stock market sentiment, it remains pretty bullish but nothing extreme, except for the Bear count in AAII which we should take note off from a contrarian perspective. Investors Intelligence yesterday said Bulls fell a touch to 53.2 from 55.7, though still remaining above the elevated level of 50. Bears were up by 1.3 pts m/o/m to 22.6. Extreme would be considered a 40+ point spread between the two. In today's AAII, Bulls rose 3.5 pts to 49 after losing 4.1 pts last week. Bears dropped by 6.7 pts to just 20.6 and you have to go back to mid December 2023 to see a lower reading. The CNN Fear/Greed index closed at 72, around the border of 'Greed' and 'Extreme Greed.' It was 71 one week ago and just 38 one month ago.

AAII Bears

Remember Helen of Troy, the maker of hair dryers, curling irons and other consumer products and the stock that fell 28% on July 9th when they reported disappointing numbers and cautious comments on the US consumer? They reported again yesterday and the stock jumped 18%, more in part due to internal execution rather than any change in the macro and here were some of the notable comments from their call.

"despite persistent macro headwinds, we are generating results on our efforts to reset and revitalize our business, which we believe indicates we are on the right path to improve our operating performance."

Overall sales fell 3.5% y/o/y and "The sales decrease was primarily due to a decline in Beauty & Wellness, reflecting lower sales of hair appliances, air purifiers, and humidifiers, primarily driven by softer consumer demand, reduced replenishment from retail customers, and a strong competitive environment in hair appliances and air purification." Their Home & Outdoor business rose 1% y/o/y.

With regards to guidance, "We remain cautious as external headwinds of increased promotional activity, softer and more variable retail replenishment, and macro pressure and uncertainty remain...We also expect a y/o/y headwind from a shorter holiday shopping season between Thanksgiving and Christmas this year."

There has been some confusion with how the Bank of Japan will proceed from here based on differing comments from members and the appointment of a new PM who has chimed in on what he thinks the BoJ should do. Today, the Deputy Governor of the BoJ Ryozo Himino said that if their economic forecasts are realized, "the bank will accordingly continue to raise the policy interest rates." However, "we are not on a preset course."

JGB yields did rise but are also following the global lift in sovereign bond yields over the past few days. The yen is a touch higher following its recent pullback. The yen carry trade may have unwound mostly but the BoJ is still a global liquidity influencer that we have to pay attention to, especially as it slows the pace of JGB purchases.

Homebuilders getting hit in premarket.

Probably related to possible damage to inventory in the path of the hurricane.

I have been steadily adding to my short positions.

Back to  (SPY)  from yesterday at 10 a.m.:

Upside:

-TPST +36% (announces agreement with Roche to support advancement of Amezalpat Combination Therapy into First-Line Hepatocellular Carcinoma Pivotal Trial)

-FFIE +13% (Founder gives the company 10% stake in Grow Fandor with value not disclosed)

-GXO +11% (said to be exploring sale after having received interest)

-NOVA +7.7% (Jefferies Initiates NOVA with Buy, price target: $15)

-ZENA +6.0% (unit ZenaDrone launches its IQ Nano product, part of the IQ series of indoor/outdoor drones)

-EVGO +5.4% (signs MoU with Delta Electronics to co-develop next-generation charging architecture; UBS Raised EVGO to Buy from Neutral, price target: $8.50)

-CELH +5.1% (positive comments from Stifel)

-NEOG +4.1% (earnings, guidance)

-AKBA +3.5% (CMS Grants TDAPA Reimbursement for Vafseo beginning Jan 1st, 2025)

-LC +3.0% (Keefe Bruyette Raised LC to Outperform from Market Perform, price target: $15)

-INMD +2.3% (reports prelim Q3)

-CVS +1.6% (Barclays Raised CVS to Overweight from Equal Weight, price target: $82)

Downside:

-GRTS -51% (files voluntary petition under chapter 11 in US bankruptcy court)

-TXG -27% (reports prelim Q3 revenue)

-ETWO -22% (earnings, guidance)

-INDV -21% (earnings, guidance)

-IMTX -16% (announces updated Phase 1b Clinical Data on ACTengine IMA203 TCR-T Targeting PRAME in Melanoma Patients; files to sell $150M public offering)

-SBSW -4.4% (reportedly loses UK suit over $1B Brazil mines deal)

-TD -4.2% (to plead guilty to DOJ charges regarding anti-money laundering failures; faces $3.0B in penalties)

-DAL -3.0% (earnings, guidance)

-BTOC -2.7% (provides update in collaboration with Temu)

-SWKS -2.7% (Barclays Cuts SWKS to Underweight from Equal Weight, price target: $87)

-PYPL -1.7% (Bernstein Cuts PYPL to Market Perform from Outperform, price target: $80)

Charts from 8:29 a.m. ET:

Chart from 8:49 a.m. ET:

9:15 a.m. ET: Fed Board Gov. Lisa Cook speaks on "Entrepreneurship and Innovation" before the Women for Women Summit presented by the College of Charleston School of Business, Charleston, SC.

10 a.m.: Fed Bank of Chicago Pres. Austan Goolsbee (Non-Voter) Television Appearance - CNBC; 5 p.m.: Radio Appearance - Marketplace;

10:30 a.m.: Fed Bank of Richmond Pres. Thomas Barkin (Voter) participates in fireside chat, "2025 Economic Outlook and Beyond" before the Virginia Maritime Association 2024 International Trade Symposium, Norfolk, VA

11 a.m.: Fed Bank of New York Pres. John Williams (Voter) gives remarks and participates in a moderated discussion on the economic outlook and monetary policy before event organized by Binghamton University, Vestal, NY

Given the hotter inflation print....

Apropos to my prior post, Revisiting My Market Tactics, I would expect the market (as I wrote yesterday) to possibly challenge Tuesday night's lows in the S&P futures.

Yesterday's short Index calls and shorts in NVDA,  (TSLA)  and  (AAPL)  may pay off in the near term.

From the estimable Charlie Munger:

* While the equal weighted S&P Index did well yesterday, the Russell Was Not Crowing .

* Unlike many in the business media, I make many mistakes and I am always in doubt.

* Despite yesterday's robust market gain I am sticking to my strategy and cautious positioning.

Early in the morning yesterday I described why I was considering positioning negative short term — raising the possibility that Tuesday night's low in SPOOs would be tested Wednesday or today.

I was obviously wrong yesterday (I am often wrong and always in doubt!) — despite the massive underperformance (and non broadening) of the Russell Index (which was flattish) and despite the continued rise in open market interest rates.

Here is what I wrote on Wednesday morning:

How I Think Tactically (Very Short Term)

* Of course the market is more complex, but nonetheless...

In the wee early morning hours S&P futures fell by over -20 handles and Nasdaq futures were down by over -100 handles.

As I write, those losses have been wiped out — with S&P futures -1 and Nasdaq -15.

My guess is that we could possibly revisit those levels today or tomorrow — despite the S&P Short Range Oscillator moving back to slightly oversold (-0.61%) from neutral.

As I often write, overnight futures trading sometimes tells a story. It's a chapter in a twenty-four hour book/story.

So, in my trading I will be biased tactically towards shorting today — especially with my ursine market outlook combined with the narrowing of leadership yesterday:

* The equal weighted S&P Index (RSP) dramatically underperformed the senior averages, up by only +0.24%

* Compared to (SPY) +0.94% and (QQQ) +1.4%.

* And Tom Lee's beloved (IWM) was only +0.05% on the day (an Index which is flat/down from July when he forecast a greater than +40% rally!)

By Doug Kass Oct 9, 2024 7:30 AM EDT

The yield on the 10-year Treasury note is up by another two basis points and is now approaching 4.10%.

As noted above (and yesterday), the equity risk premium continues to shrink:

What, me worry?

From last night:

Oscillator Back to Overbought

The S&P Short Range Oscillator moved back to overbought tonight — at 0.75% (from -0.61%).

Position: Long SPY common (S); Short SPY calls (M)

By Doug Kass Oct 9, 2024 5:00 PM EDT

Truist maintains Occidental Petroleum  (OXY)  with a neutral and price target of $56.

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

From JPMorgan:

US: Futures are mixed with Tech showing modest movements. TSLA is leading with a +1.1% pre-market move ahead of the Robotaxi event. Bond yields are higher and USD is lower; 2-, 5-, 10-yr yields are 2bp, 5bp, 10bp higher. Commodities are mixed with Oil higher, Base Metals lower, and Precious Metals higher. Today, key macro focus will be CPI, along with AMD (Advancing AI) and TSLA (Robotaxi) events.

and...

EQUITY AND MACRO NARRATIVE: Yesterday, SPX reached another all-time high today. We saw a healthy rally with 9 out of 11 sectors finishing in the green. FOMC minutes did not provide much incremental news but the discussion around inflation progress are mostly positive. Today, the key focus will be CPI: on MoM basis, Feroli expects headline CPI to print 0.1% vs. 0.2% prior and core CPI to print 0.29% vs. 0.28% prior; both are in line with the Street. On YoY basis, he expects headline CPI to print 2.3% vs. 2.5% prior and core CPI to print 3.2% vs 3.2% prior. In addition, we will hear from AMD’s AI event and TSLA’s Robotaxi unveiling event. Given Fed’s focus on growth, CPI alone will be unlikely to shift the Fed’s view of 25bp. However, in the event of another NFP print that is higher MoM and a CPI that is higher YoY, this hawkish combination may lead to some discussion of 25bp vs. no cut scenarios.

"The height of the pinnacle is determined by the breadth of the base."

- Ralph Waldo Emerson

Bonus — Here are some great links:

Is Volatility Back? 

Silver Prices Face Major Inflection Point!

I Am Not Satoshi Nakamoto

The Bull Market Turns Three

I added to my Tesla  (TSLA)  short at $243.77.

The Equity Risk Premium:

escondida1

On equity risk premium - I've been looking at it all year. It's not as bad as earlier this year as we're working off '25 #s. Click on pic to see better... Not great.