81% of Traders Are Bearish
Bullish sentiment just fell a cliff. We created this sentiment survey in October 2021, so we have a short history. Still, it’s fascinating that we have all-time lows in bullish sentiment on the SPX, Bitcoin, Apple (AAPL), and Tesla (TSLA). Meanwhile, bullish sentiment on gold and oil hit record highs. Let’s dig in. SPX Mood Is Super Bearish Last week, bullish sentiment on the S&P 500 was 58%.This week, it dropped to just 19% – by far the lowest reading we’ve ever had in our admittedly short 18 week history. Traders appear to be spooked by the market dropping into the end of last week, combined with existing concerns over inflation and central banks removing the punch bowl. Plus, the Russia-Ukraine conflict is adding tension. Bitcoin Sentiment Collapses Bitcoin sentiment hit a record low this week, with just 30% of surveyed respondents saying they think it will go up over the next 30 days. This appears related to a general fear of risk assets — which is the big theme this week. Apple Bears Are Here Apple (AAPL) delivered a monster earnings report 3 week ago… but it doesn’t seem to be helping. Just 32% of respondents think the world’s biggest stock will rise, Tesla Gets No Love Tesla (TSLA) really has a lack of love, with just 22% of traders saying they are bearish. Gold Bulls Rise With traders seeking safety, and gold surging last week, bullish sentiment on gold hit record highs at 81%. Traders Still Love Oil Oil has raged higher in 2022 to hit 8-year highs, and as you might expect, energy stocks have led the market. So it’s no surprise that oil remains in favor, with 80% of surveyed traders expecting oil to rise. The Russia-Ukraine conflict has been a driver of oil prices, since there are worries about supply disruptions in the region. What Happens Now? Traders are very, very bearish. And that’s no surprise given the aforementioned concerns over inflation and central banks pulling back after a very long bull market. Sometimes — but not always — the market bottoms when traders show maximum fear. It will be interesting to see if that’s the case this time around.
Continue Reading -->Elon Musk: 5 Fun Facts You Need to Know
Elon Musk… you can love him. You can hate him. But you can’t ignore Tesla’s (TSLA) polarizing CEO. Because most executives can’t move markets with a single Tweet. But you might be surprised to learn the self-proclaimed “Dogefather” hasn’t always liked crypto and is a citizen of 3 countries. So let’s learn a little more about the man.. Musk Was the First Person in History Worth $300 billion Tesla CEO Elon Musk is the richest person in the world and his climb to the top has been historic. The Bloomberg Billionaires Index shows Musk had a net worth of $27.6 billion at the end of 2019. By the end of 2020, that number ballooned to $161 billion. That’s the biggest one-year increase for any person in history. In 2021, he became the first person ever to be worth more than $300 billion. Musk crossed that milestone on October 28, 2021 as Tesla shares jumped to $1,114. Musk’s worth has fluctuated along with Tesla’s share price, but he still remains on top of the billionaire’s list. Tesla is the Only Stock Musk Owns During a 2018 interview at South by Southwest, Musk said, “I actually don’t invest in anything. In fact, the only public security that I own of any kind is Tesla.” As of February 2022, Musk holds an estimated 177 million Tesla shares, after selling a bunch of the stock in the second half of 2021. Those share sales were part of a 10B5-1 trading plan filed by Tesla with the SEC in September 2021. But Musk had a little fun before executing the sales, sending out a Twitter poll in November asking if he should sell 10% of his stake. Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this? — Elon Musk (@elonmusk) November 6, 2021 That poll prompted a short-lived selloff in the stock, and Musk proceeded to sell more than $16 billion worth of shares by December 28. But he also exercised options to purchase more shares at the same time, increasing his total stake by the end of the year. Although he doesn’t own any other stocks, Musk has become a big fan of cryptocurrencies. Speaking of which… The Dogefather Has Not Always Liked Crypto It’s safe to say Musk’s feelings about crypto have changed over the years. In a February 2018 tweet, the Tesla CEO said he literally owned zero cryptocurrency. Not sure. I let @jack know, but it’s still going. I literally own zero cryptocurrency, apart from .25 BTC that a friend sent me many years ago. — Elon Musk (@elonmusk) February 22, 2018 We don’t know exactly when his attitude about crypto changed, but Musk was all-in by 2021. He boosted the value of Dogecoin by tweeting about it, and even proclaimed himself the Dogefather before hosting SNL in April 2021. The Dogefather SNL May 8 — Elon Musk (@elonmusk) April 28, 2021 But he’s also worked to enact change in the crypto space. Musk changed his mind on Tesla accepting Bitcoin as payment in May 2021, raising concerns about the environmental impact of mining. Speaking at the virtual B Word Conference in July 2021, he said the automaker would probably accept Bitcoin again in the future. “I wanted a little bit more due diligence to confirm that the percentage of renewable energy usage is most likely at or above 50%, and that there is a trend towards increasing that number, and if so Tesla would resume accepting bitcoin,” Musk said. Tesla’s 2022 annual report with the SEC showed the automaker still holds about $2 billion worth of Bitcoin. PayPal Helped Musk Start Tesla In March 1999, Musk cofounded the online banking site called X.com. A year later, X.com merged with Max Levchin and Peter Thiel’s PayPal. When PayPal was bought by eBay for $1.5 billion in 2002, Musk received a $180 million payout $70 million of that money went into Tesla. Musk is from South Africa Hearing Elon Musk speak, you might wonder where he’s from. He was born in Pretoria, South Africa on June 28, 1971. The billionaire was raised in that town by his South African father and Canadian mother. He moved to Canada at 17-years-old to avoid being forced to enlist in the South African military. Musk then came to the U.S. two years later when he transferred to the University of Pennsylvania. He holds triple citizenship in South Africa, the U.S., and Canada. So an immigrant from South Africa started the most valuable car company ever and cemented himself as the richest person in history. Talk about your success stories…
Continue Reading -->Scott Redler Talks Moving Averages and More on Seeking Alpha
In this video, Scott Redler joins Daniel Snyder of SeekingAlpha for a special interview:Scott goes over:How he views the 8, 21, 50, and 200 day moving averagesWhy Scott predicted 2022 would be trickyWhy the market is so challengedWhat a healthy market looks likeThe signal Meta (FB) and Alphabet (GOOGL) is sendingWhy Scott is watching Apple (AAPL) and Microsoft (MSFT)Why bank longs are happyWhether or not the Fed watches the marketHow stocks like PayPal (PYPL) and Peloton (PTON) have fooled tradersWe hope you enjoyed this interview!Scott’s Positions as of 2/8/2022 at 5:06 p.m. ET
Continue Reading -->The Fed: 9 Things Traders Need to Know
Fun fact: the Fed’s job is not to make the stock market go up. Believe it or not, the Central Bank doesn’t care about your 401K balance. So what is the purpose of the Federal Reserve system in the U.S., and how did it come to be? We’re gonna talk about that and a whole lot more today: The Fed Was Born Out of a Fake Duck Hunt on Jekyll Island The U.S. Federal Reserve system was born out of a secret meeting disguised as a duck hunting trip on Jekyll Island off the Coast of Georgia. Seriously. No wonder there’s so many conspiracy theories about the Fed… Rhode Island Senator Nelson Aldrich invited five friends, mostly bankers, on a “duck hunting trip” at the private Jekyll Island Club in November 1910. But the trip wasn’t for hunting. The group was meeting to establish a framework to centralize the U.S. banking system. JP Morgan was a member of the club and is believed to have arranged for them to use the clubhouse. The meeting came in the wake of a series of U.S. financial crises, including The Panic of 1907, and was kept secret to avoid controversy over banking executives being involved in reforming the banking system. Aldrich took the group’s ideas back to the National Monetary Commission established by Congress to study reforms of the banking system. After three years of debate, Congress passed the Federal Reserve Act in late 1913. President Woodrow Wilson signed it into law on December 23, 1913, creating the Federal Reserve System simply referred to as “The Fed” or “The Central Bank” today. And the Jekyll Island meeting? Participants did not publicly admit it happened until the 1930’s. But it’s more than just one big bank. There Are 12 Federal Reserve Banks The Fed is more than just the central bank located in Washington, D.C. The system consists of regional Federal Reserve Banks in 12 districts: Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Each regional bank has its own nine-member board of directors who appoints a president, subject to the approval of the larger Federal Reserve Board of Governors. Each president serves on the Federal Open Market Committee which sets monetary policy, including interest rates. The New York Fed is the Most Important District The Federal Reserve Bank of New York is the most important district and is the only regional bank with a permanent voting position on the Federal Open Market Committee. New York is the bank that actually implements the policies decided by the FOMC. The New York Fed’s Open Market Trading Desk buys Treasury bonds and mortgage-backed securities from large commercial banks in order to manipulate the money supply in the U.S. economy. The Fed System Has a Board of Governors In addition to the regional Fed presidents, the U.S. Federal Reserve system has a seven member Board of Governors. All seven members are nominated by the U.S. President and confirmed by the Senate for a 14-year term. Their terms are staggered, with one of the seven expiring every two years on January 31. This stagger is meant to create political independence at the Fed by ensuring one President cannot “stack” the board with members of a particular political persuasion. A Fed Governor cannot be reappointed after serving a full 14-year term. The President chooses the Federal Reserve Chair and Vice Chair for four-year terms out of the members of the board. The Chair and Vice Chair can serve multiple terms throughout their 14-year board term. The FOMC Was Not Established Until 1935 The Banking Act of 1935 established the Federal Open Market Committee (FOMC) as the policy decision body of the Federal Reserve. Before this, the 12 Fed regional banks worked together to decide monetary policy each year. The FOMC consists of all seven members of the Board of Governors and the 12 regional Fed presidents. But the 12 presidents don’t all have a voting seat at every meeting. The seven Fed Governors and the New York Fed all have permanent voting positions. The other 11 regional presidents serve on a rotating schedule in the other 4 voting seats on the FOMC. The rotation schedule is as follows: One from Boston, Philadelphia, or Richmond One from Cleveland or Chicago One from Atlanta, St. Louis, or Dallas One from Minneapolis, Kansas City, or San Francisco Each voting member serves a one-year term in the seat before it rotates to the next one in line for their seat. By tradition, the Fed Chair is elected by the FOMC as its chair and the New York Fed president is elected the FOMC vice chair. The Fed Has a Dual Mandate You might be surprised to learn the Fed’s job isn’t to make the stock market go up. In 1977, the Fed was given a mandate from Congress to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.” Although that’s actually three goals, this is often referred to as the bank’s “dual mandate”. In plain English, that means the Fed’s purpose is to ensure economic conditions in the U.S. are conducive to a fully-employed labor market with stable inflation. They accomplish these goals by changing interest rates and manipulating how much cash is circulating through the economy. The Fed Doesn’t Set the Interest Rate on Your Car Loan The Fed’s most widely used tool is interest rates. But we’re not talking about the rate on your mortgage or car loan. The interest rate set by the Fed is the federal funds rate, which directly impacts banks, and then consumers down the line. Commercial banks lend each other money for short periods in order to meet the cash reserve requirements from the Fed. These are typically one-night loans. But when one bank sends another money, the recipient bank must send the cash back the next day with interest. The rate on that interest is the federal funds rate, which
Continue Reading -->The Bearish Breaking Point
Figuring out the bias of the market this week should be pretty clear, at least according to Sami. What level is he watching for, and how does that tell him whether or not the market is bearish? In this video, Sami explains: – What an hourly chart shows for ADGI – How many ideas he’s planning on taking this week – Which group of stocks is very bullish – Why DAC may be headed towards all-time highs – What kind of breakout can be found in MDRX
Continue Reading -->Traders Are Starting to Like Bitcoin Again
What’s the big story in today’s sentiment report? The Bitcoin bulls are returning. So let’s get to it. SPX Mood Is Semi-Sour SPX sentiment is off the lows, but in semi-sour territory at 58%. This is slightly below the long-term average of 63%, and basically flat from last week. Bitcoin Sentiment Rising Bitcoin sentiment is up for a second week in a row, which is no surprise given Bitcoin’s big pop over the weekend. Apple Mood Unchanged Apple (AAPL) delivered a monster earnings report after the close two weeks ago, which improved the mood in short order. But the mood is basically flat from last week: Tesla Looks Like Apple Tesla (TSLA) is not much different from Apple – up from the lows but largely unchanged. Gold Still All Over the Place Gold sentiment has been largely all over the place from week-to-week, which is no surprise given that it’s so hard to get a read on the metal itself. Traders Still Love Oil Sentiment on oil has been bizarrely stable for the past 5 weeks in the 70% range. And that’s no surprise given how strong oil and related stocks have been in 2022. What Happens Now? Traders have gone from very bearish 3 weeks ago to relative neutral now. We would likely need more upside to get traders outright positive on the action. So this feels like a bit of a no man’s land. What are your thoughts? Let us know in the comments below!
Continue Reading -->Scott Redler’s Dog Bytes: Bears vs. Tech
Last week, the markets had a nice calculated bounce to bring the Oscillator from -100 to +20. The question is now did we just see the 2022 low or will we digest and rebuild for new highs? Now I’m using SPX 4451 as active support and 4539 as resistance. Some stocks can be held with care which I’m doing, along with range trades for cash flow. I did put on a bit more risk Friday.AAPL will be interesting. The bears can’t growl too loudly if it holds the $170 area. If we have a positive week, there’s room to $176. MSFT is sloppy at times. We can’t be too bearish if it stays above $299.97, but it needs time to rebuild and be trusted. GOOGL will be good for clues and a potential swing long. Some will try to be long vs. $2810. And if tech gets better, this should help lead the way. Getting back above $2900 would help sentiment. AMZN worked well for us. I netted 100+ points in my call spread. Now I’ll see if it can create a new pattern to tactically approach but I’m not in a rush. $3012 is new active support. Pivot resistance is $3224. NFLX gave a decent tactical move from $395 to $458. On Friday, I focused on the pullback. Some bought it with the Red Dog Reversal at $404. I sold puts for last Friday (which worked) and this Friday.Positions Disclosure as of 2/7/2022 at 8:40 a.m. ET
Continue Reading -->Which Stocks Are Working in 2022? Not a lot…
2022 has been a crazy year for stocks. After 3 years of eye-popping gains, the S&P 500 is down 5% with major weakness in tech stocks and small caps. We’ve seen the collapse of the Ark Innovation ETF (ARKK) amid a larger crash in growth stocks. And earnings season has been total chaos with plenty of winners (SNAP, AMZN) and losers (FB, SPOT). We even had “Ugly Chart Time” on January 21. But let’s shift our tone and ask a more optimistic question: what has been working in 2022? The answer overall is… energy, banks… and not much else. The Energy Stock Craze Is Real In April 2020, oil prices went negative when demand collapsed because of the COVID-19 pandemic. Fast forward to February 2022, and oil is above $90 at 8-year highs. So as you might expect, energy stocks are BOOMING. The Energy Select Sector SPDR Fund (XLE) fund is up 27% in 2022 after a 46% run in 2021. OIH is also doing well, up about 25%. What else is working? Banks Are Doing Okay With the rising rate environment, banks are up in 2022, with the Financial Select Sector SPDR Fund (XLF) rising about 4%: But like everything aside from energy, XLF is off the highs and peaked back in January. And outside of energy and banks, there are very few stocks up in 2022, period. We just saw big post-earnings pops in Amazon (AMZN), Snap (SNAP), and Pinterest (PINS)… but they are all down YTD. And what’s not working in 2022? While the embattled ARKK recently came off the lows, it’s still down 23% year-to-date. Time will tell if the Jim Cramer “drowning” incident on January 27 marked a long-term bottom: I’ve disagreed with most of Cathie’s investment theses since last year (been in $SARK since its inception), but this is just brutal after today’s price action… @jimcramer $ARKK $TSLA $COIN $HOOD pic.twitter.com/oJ3YynrGfP — sᴇɴᴛɪɴᴇʟ 🎲 (@KryptoSentinel) January 27, 2022 Small caps remain a sore spot, with IWM down 11% YTD, more than double the SPX’ loss: Social media has been in rough shape, with Meta Platforms (FB) down 30% YTD after its weak earnings report: Meme stocks are also feeling the pain, with AMC (AMC) down a crazy 42% YTD. The cannabis sector had a horrible 2021 and things aren’t looking much better this year, with MSOS off 14% so far: But overall, traders appear to have destressed a bit, because the VIX is well off the highs: The Big Picture: Derisking The big picture in 2022 remains the same: traders fear rish. Yes, we are off the lows and sentiment has improved, but traders are looking for confirmation that the recent bounce can extend. Where can that confirmation come from? Growth stocks picking up (ARKK is the easy way to watch them) Small caps and tech showing relative outperformance Traders buying the dip in risky sectors like biotech and cannabis)
Continue Reading -->The Top 11 Economic Indicators Traders Need to Know
Traders are obsessed with economic indicators and data. Why? Because economic numbers move stock prices, commodities prices, options prices, interest rates, and just about everything else you can think of. So it’s a good thing the government is always giving us a fix! But which ones should you pay most attention to as a trader? Here’s a breakdown of the top 11 indicators that traders like you need to know about. 11. Homebuilder Sentiment From the National Association of Homebuilders Released at 8:30 a.m. ET in the third week of the month Measures builder confidence about current and future market conditions To judge Homebuilder Sentiment, The National Association of Homebuilders conducts a monthly survey of its members in partnership with Wells Fargo. The survey asks NAHB members to rate market conditions based on their personal experience. The questions are centered around the current state of the market, conditions 6 months from now, and the traffic of prospective buyers. Builders are asked to rank current and future sales conditions as “good”, “fair”, or “poor”. Prospective buyers are rated as “high to very high”, “average”, or “low to very low”. NAHB seasonally adjusted the number of responses in each category, “Good/High” or “Poor/Low” They then use this formula: (Good/High – Poor/Low + 100), to calculate the monthly index on a scale from 0 to 100. If every response was Good/High then the index will be 100. If all responses were Poor/Low it would be 0. Readings above 50 are considered positive. This index is a leading indicator for future home construction, since it is based on future expectations. The market uses this report to gauge how builders themselves are feeling about their future. NAHB has conducted the monthly survey since January 1985. 10. New Home Sales, Starts & Building Permits From the U.S. Census Bureau Housing Starts and Building Permits report released on the 12th workday of the month at 8:30 a.m. ET New Residential Sales report released on the 17th workday of the month at 10:00 a.m. ET Measures pace of new home construction and sales of newly built homes Housing starts measure how many new homes builders broke ground on each month. It’s a lagging indicator because it measures past activity. Building permits measure how many new permits were approved to build homes in the months ahead, making it a leading indicator. The numbers are reported together by the Census Bureau to measure the health of new home construction. Housing starts and permits include both single-family homes and multi-family buildings. The Census Bureau also reports new residential sales each month. This is a measure of how many newly constructed homes were sold the previous month and is a lagging indicator. The report includes sales data on both single-family homes and multi-family units. The data is reported at a seasonally adjusted annualized rate in order to avoid large swings based on season. The new residential sales report includes data on supply (how many units were for sale at the end of the month) as well as prices. It also breaks down new homes by construction status: not started, under construction, or complete. This group of reports gives the stock market a measure of the overall health of the new home market. 9. Existing & Pending Home Sales From the National Association of Realtors Existing Sales report released in the 3rd week of the month at 8:30 a.m. ET Pending Sales report printed in the 4th week of the month at 8:30 a.m. ET Measure of existing home sales closed in the previous month and number of contracts signed to purchase a home The National Association of Realtors reports existing home sales around the 20th of each month. This report measures the total number of closed sales in the previous month, making it a lagging indicator. Sales are reported at a seasonally adjusted annualized rate, which means the numbers are smoothed out to eliminate the impact of seasonal changes. Home sales are typically faster in summer and slower in winter. The existing sales report also includes data on supply levels and home prices. NAR reports pending home sales in the week after existing sales. This report is a measurement of the number of contracts signed to purchase a home in the previous month. Pending Home Sales are a leading indicator for the housing market. This report typically impacts home building stocks directly. 8. Retail Sales From the U.S. Census Bureau Released mid-monthly at 8:30 a.m. Measure of consumer spending in the U.S. The retail sales report measures the total amount U.S. consumers spend on goods and services per month in 13 categories: Motor vehicle & parts dealers Furniture & home furnishing retailers Electronics and appliances Building materials and gardening Food and beverage stores Health & personal care Gasoline Clothing and accessories Sporting goods, hobby, musical instruments, book store General merchandise Miscellaneous retailers Nonstore retailers (online) Food services and drinking places (restaurants and bars) The monthly report includes a headline number, and retail sales excluding auto and gasoline sales. Auto and gas numbers are considered volatile because prices rise and fall more often than other categories. Each monthly report also includes revisions for the two months prior. Retail sales is a lagging indicator, reporting data from the previous month. The market will typically rise on a good retail sales report and fall with a bad one as it signals the strength of the consumer side of the economy. 7. GDP From the Bureau of Economic Analysis Released at 8:30 a.m. ET, typically on the last Thursday of the month Measures U.S. economic growth by quarter GDP stands for Gross Domestic Product. The Bureau of Economic Analysis reports GDP on a quarterly basis. The advanced estimate for each quarter is typically released on the last Thursday of the first month following the conclusion of the quarter. The first revision is then printed the following month and the final revision the month after that. So for the first calendar quarter ending in March, you
Continue Reading -->Scott Redler’s Dog Bytes: Earnings Action in F.A.A.N.G. Stocks
The SPX hit a low of 4222 and held 4287 Friday, giving a relief rally. It feels like this can continue for a bit. But I think things would be hard if it sees the 4495-4505 area, with 4530-4569 above. If we get an oversold bounce it might form a right shoulder to complete a macro head & shoulders pattern, but we’ll measure it daily.AAPL responded well to earnings on Friday. Can money hide here and buy dips? We shall see. I’m long and will see if it can hold the $167 area to start a better active sequence. Below that, it gets sloppy. NFLX: Reed Hastings buying stock (after Ackman last week) has it trading better. It’s hard to chase. But if it holds the $295 area, it can test the earnings gap pivot up near $408. FB has earnings on Wednesday. I’m not doing an options strategy but it will be interesting. See if it holds today and goes green for a trade. $293 is the low. AMZN broke $3300 and hit a low of $2709. There is a defined lower pivot ahead of earnings Thursday. There’s room to $3125-$3150 before the report. GOOGL has earnings on Tuesday. It will be important for sentiment. I’m not playing it. Big resistance is at $2786ish.Positions Disclosure as of 1/31/2022 at 9:01 a.m. ET
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