2 Down 1 To Go
FOMC Minutes. Check
NVDA Earnings. Check
Jobless Claims - up next!
"Restrictive" For Longer
This afternoon, the Federal Reserve released their Nov 1st minutes, showing the Fed is in no hurry to cut rates - despite what markets have priced in.
While they point to better behaved inflation, they admit it is still a concern.
They know, and are watching just like us, how during the 1970s inflation came back with a vengeance - not once but twice. The Fed wants inflation but not that much inflation!
The Fed is saying that policy should remain “restrictive” until it’s clear that inflation is headed back to 2%.
In discussing the policy outlook, participants continued to judge that it was critical that the stance of monetary policy be kept sufficiently restrictive to return inflation to the Committee’s 2 percent objective over time.
All participants agreed that the Committee was in a position to proceed carefully and that policy decisions at every meeting would continue to be based on the totality of incoming information and its implications for the economic outlook as well as the balance of risks.
Participants noted that further tightening of monetary policy would be appropriate if incoming information indicated that progress toward the Committee’s inflation objective was insufficient.
Data dependent, yada yada yada.
Well, while Fed talks tough, they aren't making an tough decisions, and markets continue to call their bluff.
Odds of a rate hike at the December FOMC meeting are currently at 5% - which is too high in my opinion.
For March, traders see a 28% chance of a Fed cut - and that was pulled forward from June.
Ironic. Powell said recently, 'Fed isn’t even talking about rate cuts'.
But market expects to see THREE rate cuts by Election Day!
Classic case of market getting ahead of itself?
Well, just in case, consider this factoid according to SecGen:
The cost of a 80% strike put is at the lowest levels in modern times for SPX and the SX5E (EuroStoxx50)
2. Nvidia Beats Afterhours
As expected by analysts, NVDA reported and double beat on top and bottom lines.
I posted for members soon after under #Chase with thoughts on levels, options and what market is pricing in.
In short, they want you to believe their annual revenues are exponential - despite growing competition, export bans and sales growth warnings:
Q4 SALES TO CHINA EXPECTED TO SIGNIFICANTLY DECLINE
As Steve Sosnick of IBKR reminds:
"While stock sports a trailing P/E of 115 – understandable when we consider how rapidly earnings have grown – it still sports a forward P/E around 45. That means that a considerable amount of earnings growth has been priced in."
The IBKR Probability Lab shows a peak in the $482-485 range for options expiring on Friday.
Bigger picture, I still contend:
"Not only does Nvidia need the PERCEIVED crypto/bitcoin proof of work to fend off the REALITY of Moore’s Law, but I would also contend that Nvidia needs the PERCEIVED AI hype to fend off the REALITY of Amara’s Law!"
3. Jobless Claims in the morning!!
I'm expecting a hot print - above 241K.
Flows Over Macro
GS reports equity-binging CTAs are exhausted:
"We model CTAs have net bought $40bn in S&P the past week. Our models suggest this strong CTA tailwind that has been present in the market is firmly in the 7th or 8th inning and as such, we no longer model them of buyers in S&P (still buying GLOBAL equities in most scenarios)"Worth noting is that they have bought $153bn of global equities over the past 10 days, the most on record.
But I still see SPX 4575 before we can rollover as that is the August 1st gap down just after my call in July that markets were "Priced To Perfection.
Matt Maley, chief market strategist at Miller Tabak + Co, says they are again:
“The stock market is once again priced for perfection"
“Since the stock market is more ‘overbought’ right now than it was ‘oversold’ three weeks ago, investors will need to remain very nimble as we move through the end of November and into December.”
Maybe Bullish Bet on Oil
Oil prices are consolidating after rallying more 6.3% over the past two sessions on ideas of further OPEC+ cuts that could be announced this weekend.
I have been teeing up a bet that Friday could bring an oil move of size - just because it's Friday after Thanksgiving.
With that, even if WTIC doesn't look particularly bullish right now, CTAs are buyers of oil in an up scenario.
As a reminder, CTAs are the price-insensitive buyers that only care about $80 brent trigger for example.
Another words, FLOWS that trigger more flows.
Bob reminds #bobs-oil-and-gas :
open interest data as of this morning shows open interest is declining as prices rise, so not new buyers (yet), just shorts covering.
Well, as reported here early in the month, CTAs had bonds and equities to buy in ANY scenario.
Now they are targeting oil.
If shorts are triggered and CTAs join in, it will be another great opportunity to short the pop.
Finally
Daily Chase Summary and Swing Summary have been posted in their respective channels!
I was very busy with lots of analysis, including ADDING 3 NEW SWING LONGS today, so go check them out in #swing-ideas.
plus I updated sector themes and stocks of interest including custom trade analysis based on client requests!Again, trading room is open Wed and Fri morning, but if busy with family: SAFE TRAVELS!
BLACK FRIDAY ALL WEEK
Switch from CLUB or EDGE monthly to ANNUAL plan and get 20% off + 2 free months
Upgrade from CLUB to EDGE monthly or annual and get 20% off
To avail of this member exclusive - you only need to send an email to james@laductrading.com confirming they you want to switch or upgrade and he will take care of it for it!!
Did you enjoy #samanthas-market-thoughts posted above? Then you would love full access to her and her live trading room, detailed macro and intermarket analysis, not to mention full portfolio of trades across Chase, Swing and Trend timeframes!
Upgrade to CLUB or EDGE today!