From Barron’s, March 4, 2024 (Part 1, Market Week+)
Mar 2, 2024 11:56:09 GMT
chang, rhythmmethod, and 6 more like this
Post by yogibearbull on Mar 2, 2024 11:56:09 GMT
From Barron’s, March 4, 2024 (Part 1, Market Week+)
Pg 28, TRADER. Magnificent 7 are driving this unstoppable bull market. But some like AAPL and TSLA don’t belong to Mag 7 (should be Mag 5 or find better replacements). FOMO is high. AAPL is down 7.5% YTD and at an important support level. Chase this market carefully, if at all.
Food stocks are attractive – CAG, CPB, GIS, HSY, KHC, KLG, MDLZ.
Selloff for AI-data-analytics SNOW on lower guidance and CEO SLOOTMAN (65) leaving is overdone; the new CEO is RAMASWAMY. Stock is still expensive at fwd P/S 17.5 (S is for sales), P/FCF 63.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 3/20/24+ hold (cycle peak 5.25-5.50%)
FOMC 5/1/24+ hold
FOMC 6/12/24+ cut
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.11%, SP500 +0.95%, Nasdaq Comp +1.74% (new high; what would be a bull market without a Nasdaq high? SCs next?), R2000 +2.96%. DJ Transports -0.56%; DJ Utilities -1.89%. (Rotating spot rotting AAPL -1.57%) US$ index (spot) UNCH (remains too strong over 100), oil/WTI futures +4.55%, gold futures +2.37%.
YTD (index changes only), DJIA +3.71%, SP500 +7.70%, Nasdaq Comp +8.42%. (Rotating spot rotting AAPL -6.68%)
SENTIMENTS
(ALL sentiments remain good and steady but they peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose for a 6th week; ratio of winners:losers 3:2
FUND INFLOWS +/OUTFLOWS: Stocks -|0, taxable bonds +|0, munis -|-, money-market funds +|+. (NEW FORMAT: 4wMA|Weekly change)
(Observation in the TRADER that “Sideline money is rushing into the market now…” isn’t seen in the fund flows)
AAII Bull-Bear Spread +25.2% (high). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 62.49% (positive); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 73.6% (overbought); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 31, INTERNATIONAL TRADER. Forget REAL ESTATE in China, but it’s doing fine in many countries – India, Brazil, Mexico, Dubai/UAE (well, that’s a city is better known than its country). These countries are at a different rate cycle than the US or China (or Europe, Japan). Some property stock names that trade in the local markets are also mentioned.
Pg 32, OPTIONS. Use options to play with super-highflyers such as SMCI, NVDA, etc. Recommended are put-spreads – buy near-put, sell far-put. (News late-Friday was that SMCI is joining SP500)
SP500 VIX 13.11 (low), Nasdaq 100 VXN 17.20 (low), options SKEW 150.42 (high), bond MOVE 106.48 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: An up week in EUROPE (Sweden +1.53%, Belgium -1.47%) and an up week in ASIA (New Zealand +2.19%, Thailand -2.41%) (Japan had more new highs).
TREASURY* 3-mo yield 5.42%, 1-yr 4.94%, 2-yr 4.54%, 5-yr 4.17%, 10-yr 4.19%, 30-yr 4.33%;
REAL yields 5-yr 1.77%, 10-yr 1.87%, 30-yr 2.05%;
FRNs Index** 5.326% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR fell ^DXY 103.89, -0.05% (pg 50). GOLD rose to 2,050 (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 108.65, +1.81% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 14, COVER STORY, “How Larry CULP Saved GE by Breaking it Up”. Soon investors may be asking which GE? For the CEO Larry CULP (2018- ; he had retired from DHR a few years ago), breaking up was easy to do (with apologies to SEDAKA) and there will be 3 GEs – aerospace GE, healthcare GEHC, power GEV (pending 4/2/24). Stories will be written / rewritten about the rise-fall-RISE of GE. Under Culp, $100 billion in debt has been paid and only a very manageable $21 billion in debt remains; the FCF is $5-6 billion, to be shared among the 3 pieces. Moreover, being aware of the GE name and history, the spinoff pieces GEHC and GEV have sound financial footings and are destined to be leaders in their fields – with big brother GE smiling over them.
Pg 7, UP AND DOWN WALL STREET. Stop calling it a stock bubble, a trending term now in Google searches. It’s a BULL RALLY driven by FOMO. 2024 has been the best start for SP500 since 2019; fwd P/E is 20.6, but that for the top 10 stocks is in stratosphere, even above the dot .com bubble era. The FED isn’t in a rush to cut rates with inflation above +2% average target. Bitcoin is also approaching an all-time high (crypto Winter and Ice Age vanished fast; Bitcoin halving is the next notable event). Some highflyers like NVDA, SMCI etc are without parallel (these aren’t penny stocks or startups). The GDP growth is fine; Atlanta Fed GDPNow is at +3% for Q1. The global geopolitical situation is a bit concerning. There is a lot of hedging going on (high SKEW). The SP500 is an index of winners, and it has vastly outperformed the average stock whose proxy is the Value Line geometric average. Market breadth is important for the general health of the market, but it isn’t a winning strategy. Bulls say that the rally that started in 10/2022 is only half done and this is the MID-CYCLE point of the bull market (different strategies work in early-, mid-, and late- cycles of the bull markets). But mid-cycle markets can also be treacherous with low volatility and boring action but pray for companies that miss expectations by a few cents.
BUYBACKS are becoming popular again. But that isn’t good as companies aren’t price-sensitive for buybacks. Many companies have wasted a lot of money on untimely buybacks, but that is clear only in hindsight. There is a good correlation between buybacks and earnings growth – simply stated, buybacks go up when companies have money to blow. Buybacks may also mean that the company has run out of ideas to invest in capex, jobs, R&D, M&A, etc. Sometimes buybacks are just to neutralize large stock-based compensation.
(More later….)
LINK
Pg 28, TRADER. Magnificent 7 are driving this unstoppable bull market. But some like AAPL and TSLA don’t belong to Mag 7 (should be Mag 5 or find better replacements). FOMO is high. AAPL is down 7.5% YTD and at an important support level. Chase this market carefully, if at all.
Food stocks are attractive – CAG, CPB, GIS, HSY, KHC, KLG, MDLZ.
Selloff for AI-data-analytics SNOW on lower guidance and CEO SLOOTMAN (65) leaving is overdone; the new CEO is RAMASWAMY. Stock is still expensive at fwd P/S 17.5 (S is for sales), P/FCF 63.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 3/20/24+ hold (cycle peak 5.25-5.50%)
FOMC 5/1/24+ hold
FOMC 6/12/24+ cut
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.11%, SP500 +0.95%, Nasdaq Comp +1.74% (new high; what would be a bull market without a Nasdaq high? SCs next?), R2000 +2.96%. DJ Transports -0.56%; DJ Utilities -1.89%. (Rotating spot rotting AAPL -1.57%) US$ index (spot) UNCH (remains too strong over 100), oil/WTI futures +4.55%, gold futures +2.37%.
YTD (index changes only), DJIA +3.71%, SP500 +7.70%, Nasdaq Comp +8.42%. (Rotating spot rotting AAPL -6.68%)
SENTIMENTS
(ALL sentiments remain good and steady but they peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose for a 6th week; ratio of winners:losers 3:2
FUND INFLOWS +/OUTFLOWS: Stocks -|0, taxable bonds +|0, munis -|-, money-market funds +|+. (NEW FORMAT: 4wMA|Weekly change)
(Observation in the TRADER that “Sideline money is rushing into the market now…” isn’t seen in the fund flows)
AAII Bull-Bear Spread +25.2% (high). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 62.49% (positive); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 73.6% (overbought); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 31, INTERNATIONAL TRADER. Forget REAL ESTATE in China, but it’s doing fine in many countries – India, Brazil, Mexico, Dubai/UAE (well, that’s a city is better known than its country). These countries are at a different rate cycle than the US or China (or Europe, Japan). Some property stock names that trade in the local markets are also mentioned.
Pg 32, OPTIONS. Use options to play with super-highflyers such as SMCI, NVDA, etc. Recommended are put-spreads – buy near-put, sell far-put. (News late-Friday was that SMCI is joining SP500)
SP500 VIX 13.11 (low), Nasdaq 100 VXN 17.20 (low), options SKEW 150.42 (high), bond MOVE 106.48 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: An up week in EUROPE (Sweden +1.53%, Belgium -1.47%) and an up week in ASIA (New Zealand +2.19%, Thailand -2.41%) (Japan had more new highs).
TREASURY* 3-mo yield 5.42%, 1-yr 4.94%, 2-yr 4.54%, 5-yr 4.17%, 10-yr 4.19%, 30-yr 4.33%;
REAL yields 5-yr 1.77%, 10-yr 1.87%, 30-yr 2.05%;
FRNs Index** 5.326% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR fell ^DXY 103.89, -0.05% (pg 50). GOLD rose to 2,050 (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 108.65, +1.81% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 14, COVER STORY, “How Larry CULP Saved GE by Breaking it Up”. Soon investors may be asking which GE? For the CEO Larry CULP (2018- ; he had retired from DHR a few years ago), breaking up was easy to do (with apologies to SEDAKA) and there will be 3 GEs – aerospace GE, healthcare GEHC, power GEV (pending 4/2/24). Stories will be written / rewritten about the rise-fall-RISE of GE. Under Culp, $100 billion in debt has been paid and only a very manageable $21 billion in debt remains; the FCF is $5-6 billion, to be shared among the 3 pieces. Moreover, being aware of the GE name and history, the spinoff pieces GEHC and GEV have sound financial footings and are destined to be leaders in their fields – with big brother GE smiling over them.
Pg 7, UP AND DOWN WALL STREET. Stop calling it a stock bubble, a trending term now in Google searches. It’s a BULL RALLY driven by FOMO. 2024 has been the best start for SP500 since 2019; fwd P/E is 20.6, but that for the top 10 stocks is in stratosphere, even above the dot .com bubble era. The FED isn’t in a rush to cut rates with inflation above +2% average target. Bitcoin is also approaching an all-time high (crypto Winter and Ice Age vanished fast; Bitcoin halving is the next notable event). Some highflyers like NVDA, SMCI etc are without parallel (these aren’t penny stocks or startups). The GDP growth is fine; Atlanta Fed GDPNow is at +3% for Q1. The global geopolitical situation is a bit concerning. There is a lot of hedging going on (high SKEW). The SP500 is an index of winners, and it has vastly outperformed the average stock whose proxy is the Value Line geometric average. Market breadth is important for the general health of the market, but it isn’t a winning strategy. Bulls say that the rally that started in 10/2022 is only half done and this is the MID-CYCLE point of the bull market (different strategies work in early-, mid-, and late- cycles of the bull markets). But mid-cycle markets can also be treacherous with low volatility and boring action but pray for companies that miss expectations by a few cents.
BUYBACKS are becoming popular again. But that isn’t good as companies aren’t price-sensitive for buybacks. Many companies have wasted a lot of money on untimely buybacks, but that is clear only in hindsight. There is a good correlation between buybacks and earnings growth – simply stated, buybacks go up when companies have money to blow. Buybacks may also mean that the company has run out of ideas to invest in capex, jobs, R&D, M&A, etc. Sometimes buybacks are just to neutralize large stock-based compensation.
(More later….)
LINK