Stocks – AMZN, SQ, LMND, BYND
Macro – IWM, EWY, TLT, UUP
- Earnings Previews For The Week Of January 18
- T.W.A – Yields Pressuring Mega-Cap Stocks
- Morning Note- Negative Gamma Regime Will Act As Headwind For Equities
- MIDDAY – A Short Squeeze Of Epic Portions
- Morning Note- Waiting On Volatitly To Break
It will be a holiday-shortened trading week with very little economic data as earnings step up. Companies like BofA, Netflix, P&G, Intel, and IBM will report their results, and I reviewed all of these companies and the key metrics to follow in a PowerPoint and video –Earnings Previews For The Week Of January 18. This is part of my subscriber services; the first two weeks are free to try, and as long as you cancel before the trial period ends, you should not be charged. I welcome you to try that service on the SA marketplace; if you like the free write-ups, I really think you would enjoy the paid version; it comes with podcasts, videos, written commentaries, and spreadsheets. (Mott Capital’s – Reading The Markets)
South Korea (EWY)
The markets here in the US are closed on January 18, but the futures are open along with every other market in the world. Risk-off has taken on a strong tone the past few trading sessions, especially in South Korea. The KOSPI is down about 8% since peaking on January 8. But then again, this is a market that is up 32% since the beginning of November, including the recent declines.
Russell 2000 (IWM)
The Russell 2000 and the KOSPI have a lot in common, as the chart below shows. Perhaps it is because the indexes are made up of companies that will see big benefits from another round of US stimulus. A KOSPI starting to show signs of weakness could be a key tell for what is coming here in the US when the market re-open on Tuesday.
As I talked about in this week’s paid column, the number of stocks in the most shorted-index up by 10% and in the Russell 2000 was rather stunning, with the biggest weighted stock being Plug Power, which jumped nearly 12%. (Paid content, first 2-weeks free- T.W.A – Yields Pressuring Mega-Cap Stocks)
One reason for this shift in risk could be a direct result of the dollar index, which has been climbing and appears to have formed a reverse head and shoulders pattern, indicating that higher prices may be on their way. The dollar index could climb to around 91.80.
The dollar has been rising because yields have been rising in the US, and spreads against foreign bonds have widened. For example, the US and German 10-years are at their widest point since March.
The higher rates are beginning to impact some of these big mega-cap technology stocks like Amazon. I discuss the higher 10-year rate impacts on the free cash flow yield. (Should be free to read – Amazon’s Biggest Risk May Be Rising Rates)
The stock has really struggled, and a drop below support $3,065 likely sets up that decline to $2,870 we have been looking to happen.
I think Lemonade is likely to continue to struggle as the gamma squeeze unwinds. The stock’s next likely stop is somewhere around $136. (Should be free to read – The Lemonade Squeeze Grows More Insane)
Square’s stock has been a big beneficiary of the rising Bitcoin prices. But the company makes hardly anything on all of these bitcoin transactions, and it really has more to do with the appearance of the big revenue gains. Hardly any of its Bitcoin transaction revenue makes its way past gross profits since Square is basically acting as a market maker, selling bitcoin from its own inventory. Anyway, I guess that could be interesting if Bitcoin collapse. (You should be able to read for free- Square’s Bitcoin Gains Are Not As Impressive As They Seem)
Beyond Meat (BYND)
Beyond Meat finds itself in a similar position as Lemonade, and I think that this one is likely to fizzle out, too, with the stock filling the gap at $124. (Should be free-Beyond Meat’s Short-Term Gain May Result In Long-Term Pain)
Anyway, that’s all for today.
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