Showtime in Wyoming, Great Day for My Book (But Not Breadth), Charting Nvidia
The market will run through Jackson Hole Friday. Here are my thoughts as Kevin Warsh takes the stage.
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By the closing bell Thursday, I had become quite satisfied with the way my book had performed. Readers know that CrowdStrike (CRWD) is a top-five Sarge-folio holding. The stock had run 20.5% on the session.
IBM (IBM), another top-five Sarge name, gained 3.9%, and appears to be sizing up a run at its 50-day simple moving average.
Then there are the other semiconductor type names that populate my portfolios. While Nvidia (NVDA), which I am long, but is not a top-10 name of mine, soared 8.7%, other names that I am more exposed to, had nice days thanks to the pin action.
Despite my beloved Advanced Micro Devices (AMD) actually losing 0.9% Thursday, Intel (INTC) chugged ahead by 4.4%, and Taiwan Semiconductor (TSM) popped 2.3%. I am highly exposed to all three. TSM is currently in my top five. AMD and INTC are both top-10 names.
All in all, the semis had a very nice day. The Dow Jones U.S. Semiconductor Index gained a very impressive 4.84% Thursday with the Philadelphia Semiconductor Index adding 2.33%. It was a nice day for tech in general, as the Dow Jones U.S. Software Index was able to tack on a nifty 4.52%. Salesforce (CRM), a name that I am not long, outperformed CrowdStrike.
Still, as I spoke to two other investor/trader types after the closing bell, neither appeared to feel the “giddiness” that I felt coming off of that session. It was then that I realized (I should have been well aware, but I was too happy drinking the Kool-Aid) just how narrow Thursday’s rally really was.
The market, more broadly, was cautious. Why? Look no further than Fed Chair Kevin Warsh’s address this morning from Jackson Hole, Wyoming. Treasury yields moved slightly higher Thursday. The people, at least some of them, appear to be preparing for some tough love this morning.
Lumpy Index Performance
While tech stocks took the Nasdaq Composite and S&P 500 1.57% and 0.72% higher, respectively, there was some blood on the saddle on Thursday. The small-caps underperformed as the Russell 2000 gained 0.28%, and the S&P 600 actually gave up less than one point. The Dow Transports? Lost 0.66%. The KBW Banks? Lost 0.56%. Not awful. Certainly not some kind of broad rally.
Breadth
Readers who only pay some peripheral attention to broader markets might be surprised by this. Only one of the 11 S&P sector SPDR ETFs closed out the regular session on Thursday in the green. That was tech (XLK), which was up a gaudy 3.16%. Of the 10 funds that closed in the red, four of them, led lower by the Staples (XLP), gave up more than 1%. If there is a bright side to that, defensives underperformed both growth and cyclical sectors.
As we get granular, it does not get any rosier. Losers actually beat winners by a 5 to 4 margin at the NYSE. Winners did beat winners at the Nasdaq, but just by a smidgen.
Advancing volume took a 65.5% share of composite Nasdaq-listed trade, which is comfortable, though not commanding. Conversely, advancing volume took only a 46.2% share of composite NYSE-listed activity.
Hence, while we do have some green candles on the screen, there was no confirmation of anything. No confirmation of bullish reversal. No confirmation of a bullish trend. Just a nice day, if one was heavily exposed to tech. That’s all.
It’s Showtime!
They’re all there. Economists, central bankers, and former central bankers are all present, trying to appear relevant. Oh, and of course the financial media is there, being led around like mindless puppy dogs, pretending that everything uttered by the semi-clueless is pure gold.
They’re all at Jackson Hole, Wyoming. It’s really the Kansas City Fed’s show. They host this annual economic symposium that has now become a tradition where Fed Chairs sometimes signal policy shifts.
Kansas City Fed President Jeff Schmid made some welcoming remarks as his guests sat down to dinner last night. The main event is this morning, though. Forget all of the white papers. Forget all of the sideline interviews where central bankers with either honest economic opinion or politically driven agendas find sympathetic members of the financial media to plead their respective cases to.
Fed Chair Kevin Warsh will make his first major public speech since taking over leadership of the world’s most powerful central bank (save for two post policy statement press conferences) at 10 a.m. ET. This address will likely run counter to his dialed-down communications style. Even if he really wants to remain as vague as he has been concerning the trajectory for U.S. monetary policy, he’ll likely have to say something meaningful now that the Treasury Department has increased its participation in secondary markets.
I personally do not mind a more quiet Fed. That’s the Fed that I grew up with. Markets, or really keyword-reading algorithms, have been spoiled by a series of Fed Chairs and other Fed officials that spoke on more than they actually understood. Heck, over the last two decades, we have had one Fed Chair that openly boasted about his “courage to act” and another that openly admitted that the Phillips Curve was beyond her cognitive depth. Then there was the last guy. All of them were late to every meal, economically speaking.
I like Warsh as an economist. He’s a hawk at heart. As an Austrian style economist myself, I can appreciate that. I do not think that the timing is right for short-term interest rate hikes and I hope he sees things my way. My argument is and has been that making policy adjustments to slow policy does nothing to slow inflation when inflation is caused by a supply shock. I hope that Warsh “gets” that, as many of his colleagues (much to their professional embarrassment, in my opinion) do not.
Tamping down on demand, in my opinion, at the same time that artificial restrictions of supply have impacted both producer and consumer-level pricing, will almost certainly slow economic activity and possibly force a contraction in growth. This is something this nation needs, as demand for labor has clearly moved in the wrong direction, as much as it needs a hole in the head.
Kevin, the floor is yours…
Charting Nvidia
Readers will see that our Double Bottom pattern of bullish reversal in Nvidia has developed into a Cup with Handle pattern, which is also a bullish setup. That takes the pivot up to $228 from $214. That put my target price for NVDA at $296.
The one problem I see is that the shares have still not taken and held that pivot. Today is another day. How the flow of funds through our marketplace moves, though, will of course run through Wyoming.
Economics (All Times Eastern)
09:45 – Chicago PMI (Aug): Expecting 57.4, Last 57.6.
10:00 – Non-Farm Payroll Annual Revision (advance): Last -911K.
10:00 – U of M Consumer Sentiment (Aug-F): Flashed 51.0.
10:00 – U of M One-Year Inflation Expectations (Aug-F): Flashed 4.3%.
10:00 – U of M Five-Year Inflation Expectations (Aug-F): Flashed 3.3%.
13:00 – Baker Hughes Total Rig Count (Weekly): Last 588.
13:00 – Baker Hughes Oil Rig Count (Weekly): Last 452.
The Fed (All Times Eastern)
All Day – Jackson Hole Symposium
10:00 – Speaker: Federal Reserve Chair Kevin Warsh.
Today’s Earnings Highlights (Consensus EPS Expectations)
Before the Open: FRO (2.64)
At the time of publication, Guilfoyle was long NVDA, CRWD, IBM, AMD, INTC and TSM equity.
