Weekly rollup | Feb 20-26 2023
Stocks Mentioned:TESLA (TSLA), US Dollar Index Bullish Fund (UUP), Japanese stocks (EWJ), Teck Resources (TECK), Cheniere Energy (LNG), Carvana Co. (CVNA)
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February 21 2023
The news cycle is getting worse for TSLA. Watch the stock price. If Tesla rips higher on bearish news, I'll admit I've been too early in shorting tech and cut back. A lot of supposedly smart investors like Julian Robertson were "right" about the dot-com bubble, but didn't survive to cash in when their ideas worked because they were too early in getting short. A lot hinges on today's move in Big Tech - we should see momentum wane starting this week.
Rising wedge in bitcoin hourly chart. Note the volume decline. Chartists interpret this to be bearish. However, this is an evolving pattern so you'll have to interpret the chart with the benefit of hindsight. I'd simply leave it alone and not trade it either way.
Buy US Dollar Index Bullish Fund (UUP)
This is the inverse of the USD.JPY short. If the dollar can reverse a downtrend vs the yen, it can rip higher. Nobody is a dollar bull anymore, although the chart looks to be biased to the upside. Stop loss at $27.56 for a risk of under 2%.
Sell Japanese stocks (EWJ)
Today's yield spike is an ominous sign. Also, it looks like the dollar is ready to rip higher (no idea why) which is bearish for all risk assets. Sell EWJ for now. This leaves Zim, Century Plyboards and UUP as the only remaining long positions.
Cover the Teck Resources (TECK) short. The company announced a plan to spin off its coal business, which will also see a cash infusion of $1 billion from Nippon Steel. The company is going to spend $250 million on share buybacks, simplify its share structure by eliminating Class A shares carrying preferential voting rights. The market seems unsure as to how to parse the news, and so am I.
If I were to short Teck because I don't like their assets or their valuation, that would be different. As a way to short copper, I prefer to short SCCO over Teck. I don't like complicating my trades by adding in a layer of corporate action.
February 22 2023
“The Fed has made two of its most dramatic monetary mistakes since its establishment in 1913"
- Professor Steve Hanke from Johns Hopkins University.
The growth rate of broad M2 money has turned negative – a very rare event – and the indicator has contracted at an alarming pace of 5.4pc over the last three months.
A staggering $6.3 Trillion of US corporate debt is maturing in the next three years (~$2T each year). Source: The Mad King.
Pegs don't get tested unless there's some underlying stress in the system. Yet another warning sign flashing red.
In hindsight, that was great timing on closing the EWJ position. Clean breakdown below the 100 DMA on the Nikkei.
February 23 2023
Americans on Twitter are making a big fuss about egg prices and scarcity. Well, what do you expect will happen when you deliberately torch egg farms and cull birds in the name of an imaginary flu? Note the lag of 6-7 months between supply curtailment and prices rising. The same logic applies to the Fed induced recession as well. 50 bps in March will not result in an immediate recession, their policy will work with a lag. No different from eggs at the supermarket shelf.
Cover the Cheniere Energy (LNG) short.
The company reported terrible results but shares are surging on permitting news and renewed optimism on LNG demand picking up. I think this stock has an intrinsic value of zero (if you follow GAAP accounting, the auditors agree as well, valuing the stockholder's equity at negative 3 billion). However, markets can stay irrational longer than you can stay solvent (ask CVNA shorts how long it took for that stock to meet its intrinsic value). Cover the position and call it quits.
Island reversals are beautiful
Bitcoin is range-bound on the hourly chart, with multiple inside candles. Bulls would like to see a hourly close above $24,250. But I suspect we'll not get there. My guess is the $23.5k support breaks, and then the real move lower begins. Bitcoin is not very amenable to TA so there's no trade recommendation for now. I'm not going to trade an opinion.
February 24 2023
Traders are running stops on bitcoin. Should see a big move lower once it goes below $23.5k.
February 25 2023
February 26 2023
Not the first time this has been attempted, but this is the future. The sheer hassle involved in getting a brokerage account set up makes this a much needed solution for the small investor.
I wrote about this way back when I was still writing for The Dollar Vigilante. Ironically, my colleagues there completely missed the DeFi bubble even though I was pounding the table on it all throughout. Check it out here - Why DeFi Is The Future