Momo traders drive stocks up, Fed watch intensifies

This feels very familiar…. stocks just keep going up and then up again – the Momo guys (momentum traders) are driving the bus……. This is where they buyers become anxious to ‘get back in’ causing the sellers to say – Really?  ‘come and get me’….as they keep raising their offers forcing the buyers to ‘pay up’….But notice this action creates excitement in the market – Everyone is ‘happy’ – everyone is talking about how NVDA gained another 4.5% (now up 40% since the lows of August 5th ) - leaving the impression that ‘they’ didn’t panic two weeks ago when the bottom appeared to be falling out - when the sellers became anxious hitting bids as the temperature rose- when they tried to convince you that the AI story was over….….. Remember how the news over that weekend that Uncle Warren sold ½ his AAPL position caused so many to ask – What does he know?  If he is selling AAPL then ‘I’ should get out as well…. Well, how’d that work out?  AAPL is now up 30% since Monday August 5th.   

And yesterday was no different – investors, traders and algo’ keep pushing higher and higher all because they believe that the FED will lay out the plan on Friday (at Jackson Hole) and then begin cutting rates on September 18th  - recall the next FOMC meeting is September 17th & 18th……..The Dow up another 235 pts or 0.6%, the S&P up 54 pts or 1%, the Nasdaq surged higher – gaining 245 pts or 1.4%, the Russell added 26 pts or 1.2%, the Trans up 140 pts or 0.9% and the Equal Weight S&P added 52 pts or 0.75%. 

And while this all feels good (if you stayed invested) it leaves us to wonder – OK great…. but what will happen when they DO cut rates?  Will we get that ‘Buy the Rumor/Sell the News’ type of reaction?  Will the same people forcing it higher be the first ones to ‘lock in recent profits’ by hitting the sell button?  And then if that happens – will the long-term investor get spooked – causing him/her to hit the sell button too?

Every one of the 11 major groups in the S&P advanced…..Tech led the way up 1.7%, Consumer Discretionary up 1.25% (think strong consumer?), Communications up 1.15%, leaving Industrials, Utilities, Energy, Healthcare, and Real Estate all up 0.6%, Financials up 0.55%, Basic Materials up 0.5%, and Consumer Staples up 0.35%. 

According to Bloomberg’s Group Ranked Returns – YTD – Tech is up 29%, Communications + 24%, Utilities + 17.8% (How’s that!), Financials + 16.7%, Consumer Staples + 13.4%, Health Care + 12.6%, Industrials + 12%, Energy +8.6%, Basic Materials + 6.25%, Consumer Discretionary and Real Estate up 5%. 

Further down the line – we saw Homebuilders + 2%, Airlines + 1.5%, Disruptive Tech - + 2.3%, The Growth Trade – SPYG + 1.3%, Semi’s + 1.9%, Metals & Miners + 1%, Cybersecurity + 1.3%, Expanded Tech – Software + 1.15%, Coal stocks + 2.7%, Oil & Gas Exploration + 0.7%, Natural Gas stocks + 3%, Aerospace & Defense + 0.5%....and the list goes on….

And naturally – any of the names that bet ‘against’ the markets continue to get slammed- the DOG down 0.55%, PSQ – 1.5%, SH – 1%, VIXY –2.25%…the triple levered short – SPXS down 2.7% ….but again – remember – none of these names are long term holdings at all…You use them strategically when you sniff weakness… conversely the triple levered LONG – SPXL gained 2.8% as you would expect.

Now the volumes have  been trending lower as we move into the end of the month – we talked about this – people are away enjoying the waning days of summer…and moves will be and are exaggerated as a result….and I think -  the recent rally is proof of that exaggeration….but let’s see.

Look – the FED is at the ‘do or die’ point…..markets are paying all kinds of attention to the Jackson Hole boondoggle…..and not only do they expect to hear that cuts are coming in September but they also expect JJ to tell them the size and pace of the additional expected rate cuts…..all while they keep their eyes on inflation and unemployment.  The question is willing JJ walk the line or will he become an obvious ‘dove’.    Here is my appearance yesterday on Mornings with Maria and we discussed this very point.

I think he walks the line, I do not think he becomes a dove and nor do I think he will be a hawk…I think he will be exactly as he always is – methodical and keenly focused….He will say what he says and the market will hear what it wants….period. The risk is that if the market does not hear EXACTLY what it wants then to watch as the momo guys do a 180 and run for the door. 

Bonds held steady; 10 yr. yields fell by 1 bps.

Oil fell by 3% yesterday…. the word is that Benny Netanyahu has accepted a cease-fire in Gaza – (Hamas has yet to accept) and that is causing the whole ‘supply risk’ issue to fade…. all as Chinese demand wanes.  WTI fell $2.20/barrel to end the day at $74.37… yesterday I said -

“We are now once again below all 3 trendlines…. the long term trendline is $76.55.  A failure to take back this trendline could see oil test the June and July $72 lows…”  Overnight we tested $73.50 – inching closer and closer to that $72 low.

Now the sense is that IF OPEC+ raises production in October as they suggested 2 months ago…then we could see oil collapse – something the Saudi’s do not want to happen.  As a result, I do not believe that OPEC will raise production – especially since some forecasts suggest that global oil demand will slow in 2025 while NON-OPEC supply growth will surge…and this creates a migraine for the crown prince.

Gold continues to surge…up another $20 – trading at $2561 this morning – all on the idea that rates are coming down.

Last night was the first day of the DNC convention…..the big event was Jo Jo’s goodbye speech….next up is Kammy – we just need to know what’s the plan…because right now- she is planning on raising taxes, imprisoning price gougers in the food industry while leaving the border wide open…oh and she has decided that she is not going to tax tips – after she was the deciding vote in the senate that implemented that very policy.  Today is a new day – let’s see what it brings.

US futures are flat…. Dow futures -2, S&P +6, while the Nasdaq + 29 and the Russell is unchanged.

European markets are mixed….Sweden cut rates by 25 bps – now 3.5% and signaled at least 2 more cuts are coming….but they want to see what JJ does….Currently the spread between Sweden and the US is 2% - they do not want it be any wider…so before they move again – they have to see what the FED is going to do. 

The S&P closed at 5608 up 54 pts…. We are now only 50 pts away from the all-time high while we are in the final weeks of summer – volumes tend to be lower – resulting in more exaggerated moves in either direction.  Remember - You are invested, so you are participating….You are not missing out on anything….and if you have more money to put to work – be patient…you’ll get your chance…for now – keep in the gov’t mm fund that is paying you 5%.   

In the end – update your shopping list, take advantage where it makes sense if your favorite names pull back, add to defensive positions.…. make sure you know what you own and in times like this talk to me if you are concerned.

Chicken thighs with pancetta and balsamic vinegar

For this you need:  Olive Oil, Diced Pancetta (Or Bacon), 8 Medium Sized Skinless Chicken Thighs, Onion, Diced, Garlic Cloves, Peeled & Minced, Dry Red Wine, 1 Can Diced Tomatoes, Tomato Paste, Water, Chopped Rosemary, Chopped Thyme, s&p, Red Hot Pepper Flakes (Optional), Balsamic Vinegar, Chopped Fresh Parsley.

In a large heavy skillet, heat the oil over medium heat and cook the pancetta until cooked through and lightly browned, about 5 minutes.  Remove the pancetta to a plate, set aside, and brown the thighs well on all sides, about 10 minutes.  Remove the chicken to the plate and cook the onions until translucent and soft, stirring often, about 5 minutes.

Add the garlic and sauté for 3 mins or so, Add the wine, (about ½ cup) increase heat to medium high heat, and cook just until the wine is reduced by half.

Now add the tomatoes, tomato paste, water, rosemary, thyme, salt, pepper, and red pepper flakes if you are using.

Bring to a boil, then reduce to a simmer and return the chicken and pancetta to the pot. Cover the pan, and simmer for 20 mins, or until the sauce has thickened, adding additional water as needed if the sauce thickens too much. Taste the sauce, and adjust s&p as needed. Now stir in about 1 tblsp of balsamic vinegar – mix well and place the chicken on a platter.

Top with the sauce, then sprinkle with the chopped fresh parsley.