1/20/2022

STOCKS – AMZN, NVDA, NFLX

MACRO – SPY, QQQ

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• ICYMI: LIVE Q&A SESSION TOMORROW @ HIGH NOON ET

• RTM: Real Yield Spike Causes Market Reversal

• RTM Exclusive: PayPal’s Next Leg Lower Is Near

Stocks got smashed again today, with the S&P 500 finishing lower by 1.1% and the Qs finishing lower by 1.3%. It was much worse, though. Intraday, the Qs traded up to $373.87, so peak to trough the ETF fell by more than 3%

Well, if you had been watching the five and 10-yr TIP, you’d know why we saw the significant reversal. For days, maybe a few weeks now, I have been telling everyone to watch the real rates. Sure enough, the 10-Yr TIP auction at 1 PM resulted in real rates spiking higher, and the rest was history.

If you were watching nominal yields, you have no idea what happened and are thinking: But I don’t understand yields went down today. 

Anyway, it would be best to find a way to track these real yields during the day. The whole bull thesis was based on low real yields allowing for these obscene multiples. Well, guess what? Real yields are probably going much higher because the Fed will tighten policy and whether the Fed causes a recession or not, the tighter policy will result in inflation rates subsiding over time, and these TIP rates are just too low. Not to mention the Fed owns something like 25% of the TIP market, and with QE over and the potential run-off of the balance sheet, it will be hard for rates to move back to -2%, which is where they were in November.

S&P 500 (SPY)

The S&P 500 went right through support at 4,495 like it didn’t exist. With the next level of support at 4,440, and then after the October gap at 4,368.

Nasdaq (QQQ)

The entire BS fourth-quarter rally has vanished for the Qs. It is trading below the October gap at $359 in the post-market.

Netflix (NFLX)

Netflix is trading lower by around 20% after hours after its first-quarter net adds guidance missed expectation by a few million users. This is huge because the first quarter is generally their best quarter for subscriber additions, and the second quarter is their weakest. They like to underestimate guidance sometimes, but now thinking about the price hike. It seems the price hike may have been due to the significant slowing of subscriber growth and their need to make up for lost revenues someplace so they would be able to self-fund their content. This stock trades at $406 after hours and down over $100 per share. It will need to hold above support at $402 to avoid going back to around $385.

Amazon (AMZN)

Amazon fell today by 3% and is now trading below $3,100. I eluded to this trading back to below $3,000 yesterday, and I still think that is on the table. It is trading at $2,995 after hours.

Nvidia (NVDA)

Here comes the gap fill on NVDA at $232.

Anyway,

Mike