Investing General Discussion

Big Phoenix · Jun 14, 2023

Why would you hold off on raising rates because you dont have enough data to be sure raising them now is good or warranted but at the same time say youre likely to raise rates at least two more times? Doesnt seem to add up there.

Im guessing the cucks at the fed are scared of blowing up more banks so they do the thing government parasites love to do the most; kick the can down the road.

Jysin · Jun 15, 2023

I’ve come to the same conclusion. Fed is buying time for banks. There is no other explanation.

Kirun · Jun 15, 2023

Creslin said:
unless the fed fucks up and lets deflation kick in

How are they going to have a choice if people start defaulting on auto-loans/home loans en masse?

Jysin · Jun 15, 2023

I dont see the big housing crash that some are talking about. This isnt 2008. You have so many people sitting on piles of equity in their homes that appreciated in the last 2 years, so basically no one is at risk of being underwater. Then you have all of the people that locked into a 3% covid-era mortgage rate (either new buys or refis). Why would they choose to jump into something else at 7% now? There is 0 motivation to sell. Then you have demand still at highs. Any slight dips are going to be bought.

The ONLY thing that changes this outlook is large scale layoffs. It can be argued this is a possibility, but the Fed really wants to push for this soft landing narrative. The markets believe it (so far), so why fight that?

Auto loans is a whole other kettle of fish, but autos aren't going to break the country's finances by themselves.

Big Phoenix · Jun 15, 2023

Jysin said:
Then you have demand still at highs. Any slight dips are going to be bought.

Not so much demand as nonexistant supply of affordable homes. Looking at my zipcode on Zillow there is less than 8 single family detached homes for sale and the cheapest is $360k. And this is an urban zipcode packed full of mainly "starter" homes.

Jysin said:
The ONLY thing that changes this outlook is large scale layoffs. It can be argued this is a possibility, but the Fed really wants to push for this soft landing narrative. The markets believe it (so far), so why fight that?

The market is incredibly distorted.

IWM up 6% in the past month
SPY up 5.5% in the past month
QQQ up 10.6% in the past month, with Nvidia and Tesla being massive outlier performers driving a huge chunk of that gain;

Market would be looking pretty meh if it wasnt for AI mania and Tesla gamma squeeze.

Then you look at the larger economic picture, Eurozone in a recession, China cutting rates, lots of layoffs off here, banks blowing up just a few months ago etc.

Jysin · Jun 15, 2023

I am not at all disagreeing. Just countering what Kirun was mentioning with housing. It's going to take a lot more to crash that mess, specifically mass layoffs.

Markets, I do agree somewhat. The first change in trend was the bank blowups, which basically have everyone betting that would cease the Fed hikes. That was the first leg up. Then you had (seemingly out of nowhere) NVDA earnings that guide some blowout Q2 quarter and ignited the AI mania. Initially the next big leg up was driven by a handful of tech names. This is, by all accounts, unsustainable. We have absolutely rocketed on this. The thing the bulls have going for them is that IWM (small caps) has gained traction too. For a real bull market turnaround to continue, we need to see broadening across all sectors. The fact IWM is up so much is a healthy and necessary thing.

If we start selling IWM again, this recent bullish momentum is likely dead. But, for now.. all the momentum is in favor of the bulls.

Yes, there are macro headwinds out there, but markets are always forward looking (perhaps now more than ever). There has been a ton of money sitting on the sidelines and many are trying to get in knowing we are far closer to terminal rates on Fed hikes.

Jysin · Jun 15, 2023

Speaking of NVDA AI mania:

Bullish!?

Sanrith Descartes · Jun 15, 2023

ECB said Fuck Janet Powell and raised again.

ECB raises rates to 22-year high and signals more to come

The European Central Bank raised interest rates for the eighth successive time as expected on Thursday and signalled further policy tightening, as it battles high inflation. The ECB has now increased borrowing costs by a combined 4 percentage points in a year, its fastest pace on record, but a...

finance.yahoo.com

Jysin · Jun 15, 2023

Sanrith Descartes said:
ECB said Fuck Janet Powell and raised again.

ECB raises rates to 22-year high and signals more to come

The European Central Bank raised interest rates for the eighth successive time as expected on Thursday and signalled further policy tightening, as it battles high inflation. The ECB has now increased borrowing costs by a combined 4 percentage points in a year, its fastest pace on record, but a...

finance.yahoo.com

In fairness, every other central bank is behind the US. We started raising first, they've all been playing catch-up.

More importantly from the ECB notes was:
Growth revisions down for 23 & 24
Inflation guides up for 23, 24, & 25

Sanrith Descartes · Jun 15, 2023

Jysin said:
In fairness, every other central bank is behind the US. We started raising first, they've all been playing catch-up.

More importantly from the ECB notes was:
Growth revisions down for 23 & 24
Inflation guides up for 23, 24, & 25

Fair enough. Keep an eye on CRE, not private homes. CRE is the real ticking bomb in the road.

Gravel · Jun 15, 2023

Jysin said:
I am not at all disagreeing. Just countering what Kirun was mentioning with housing. It's going to take a lot more to crash that mess, specifically mass layoffs.

Markets, I do agree somewhat. The first change in trend was the bank blowups, which basically have everyone betting that would cease the Fed hikes. That was the first leg up. Then you had (seemingly out of nowhere) NVDA earnings that guide some blowout Q2 quarter and ignited the AI mania. Initially the next big leg up was driven by a handful of tech names. This is, by all accounts, unsustainable. We have absolutely rocketed on this. The thing the bulls have going for them is that IWM (small caps) has gained traction too. For a real bull market turnaround to continue, we need to see broadening across all sectors. The fact IWM is up so much is a healthy and necessary thing.

If we start selling IWM again, this recent bullish momentum is likely dead. But, for now.. all the momentum is in favor of the bulls.

Yes, there are macro headwinds out there, but markets are always forward looking (perhaps now more than ever). There has been a ton of money sitting on the sidelines and many are trying to get in knowing we are far closer to terminal rates on Fed hikes.

We're also still about 10% off the all time high, which was a year and a half ago.

Now, that was also a bit of a bubble, so maybe it doesn't mean anything. But it probably helps with the algo's.

ShakyJake · Jun 15, 2023

I feel like the tech sector is being pumped up in order to do a big drop. See my question from yesterday.

One of the traders I follow on YouTube does a measurement thing where he tracks how far away the stock price is from the 50 day moving average. Keep in mind that stock prices don't typically get very far from the moving average before snapping back (or, it could run sideways until it catches up). Anyway, QQQ is, as far as I can tell, the furthest from the MA since the COVID run up.

Jysin · Jun 15, 2023

I use the 20D EMA as a metric for how stretched out we are, and by any measure we are at extreme overbought levels here. But, we were also extremely overbought 10+% ago on many stocks too. There is unbelievable demand for every minor dip in these markets.

Sanrith Descartes · Jun 15, 2023

Sanrith Descartes said:
Maybe today is the day I take the shares. 25 minutes to go and things are looking tight.

edit: hey @Blazin how does assignment work with mid-week expiry? I have only ever dealt with Friday expiry.

That volume...

View attachment 470741

edit 2: Doesn't matter. I live to 0DTE another day...

View attachment 470745

Blazin said:
Sanrith Descartes you may end up wishing you had those shares

Gravel · Jun 15, 2023

Yeah, this is getting a bit out of hand. Markets up almost 8% in just the last month?

Lightning Lord Rule · Jun 15, 2023

I was just reading a chart guru that says that major resistance for the S&P is at 4524 (452 SPY). Anyone agree/disagree?

Looking at it myself, that's nearly the level of Mar-22, which was a bounce after the initial Jan-22 drop off. I can't imagine this current run is going to get us back to the ATH-ish levels of late '21... but then again...

ShakyJake · Jun 15, 2023

Is this a proverbial "melt-up"? I don't even understand why. Euphoria over what?

Big Phoenix · Jun 15, 2023

Vix up almost 4% again for the day and market is positive.

Gravel said:
Yeah, this is getting a bit out of hand. Markets up almost 8% in just the last month?

ShakyJake said:
Is this a proverbial "melt-up"? I don't even understand why. Euphoria over what?

I believe this is one of the text book examples of the market can stay irrational longer than you can stay solvent(in my case).

Nvda and amd down on a very green day though.

Jysin · Jun 15, 2023

Yep, anyone paying attention today has watched VIX climb with markets all day. Simply put, someone is hedging this market with 30D+ options activity. We are massively due for a pullback, but can't see any big dramas unfolding until Q2 earnings (aside from a macro surprise). Q2 earnings will need to have some perfection in the AI tech names. Any misses or down revisions will be punished. We're still a month away from getting into that though.

ShakyJake · Jun 15, 2023

Jysin said:
Yep, anyone paying attention today has watched VIX climb with markets all day. Simply put, someone is hedging this market with 30D+ options activity. We are massively due for a pullback, but can't see any big dramas unfolding until Q2 earnings (aside from a macro surprise). Q2 earnings will need to have some perfection in the AI tech names. Any misses or down revisions will be punished. We're still a month away from getting into that though.

But at some point, don't people take profits? You've got this massive run up and I would think the big boys would begin cashing out.

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