Good Thursday morning. Just prior to publishing “The Big Bribe” in the fall of 2022 we went aggressively long the market, citing our primary base case;
We’re in the Roaring 2020’s, powered by consumers and US co’s in their strongest financial shape in decades…
Read MoreGood Thursday morning. We’ve dedicated much of the last week's VRA Letters to the “war risks” and corresponding action in the broad markets. We’re now just a few days away from Q1 tech earnings kicking off in style, with high profile names Tesla (next Tuesday), META (Wednesday) and Alphabet, Amazon, Intel and Microsoft set to report next Thursday. We see a great setup unfolding…
Read MoreGood Thursday morning. To start the week we barely had a day of (some) selling pressure in US equities and the same people that rarely (if ever) beat the markets are already warning of a severe market correction.
Read MoreGood Thursday morning. The AI “king of the hill” did it again yesterday with Nvidia posting (another) quarter with absolutely stunning growth.
NVDA Bottom Line, as Tyler outlined in his podcast yesterday:
- Earned $5.16/sh, beating already sky-high estimates of $4.64/sh.
- Revenue also came in above expectations, totaling $22.1 billion vs forecasts for $20.5 billion.
Read MoreGood Thursday morning. Long-time VRA Members may remember that from the end of the bear market (10/13/22) we’ve written often about the “action” of this market and the fact that it’s largely been “textbook bull market action”. We’ve seen this repeating pattern again this week, as the Nasdaq and Semis continue to rally into market closes finishing at/near their highs of the day.
Read MoreGood Thursday morning. As I explained on my podcast yesterday, J Powell went off script at his presser and likely just made “another” policy mistake, which will be his 5th since taking the appointment to Fed Chair.
I repeat; J Powell is the worst Fed Chair of my time…
Read MoreGood Thursday morning. Following what has been a near-parabolic move higher from the 10/27 lows, strength in the semiconductors has now led to key breakouts for the Nasdaq, S&P 500 and Housing stocks, negating what had bears believed was a picture-perfect short for these indices at resistance
Read MoreGood Thursday morning. Following the parabolic move higher in each major US equity index from the 10/27 lows…just as seasonality was turning bullish…on the VRA System we now have each index hitting extreme overbought levels, but importantly this is only on our shortest term momentum oscillators. Combined with the shockingly bullish technical signals that we’ve seen over the last 8 trading days it remains our view that important lows are in place and that pullbacks from here should continue to be bought (if we have pullbacks, that is).
Read MoreGood Thursday morning. All eyes were on the Fed yesterday, as they delivered their latest interest rate decision. The Fed left the fed funds rate unchanged at 5.50% after its two-day meeting.
The Fed is Done
Read MoreGood Thursday morning. Third quarter GDP was reported this AM and showed blistering growth in the US economy of 4.9%, beating estimates of 4.5%. This is the strongest economic growth since Q4 2021 when growth was just shy of 7% (coronavirus insanity). Of note in the report, consumer spending rose 4% in Q3, soaring past Q2 consumer spending, which came in at just .8%.
Read MoreGood Thursday morning. This morning's CPI report came in slightly above estimates with September prices paid for consumers rising .04% month/month vs estimates of .03%. Year over year, core CPI came in at 4.1% vs estimates of 4.1%.
Read MoreGood Thursday morning. Quick hitters this AM.
As Tyler covered in yesterday's VRA Investing Podcast, as seasonal weakness continues to weigh on stocks we’re already seeing a sharp rise in put/call ratios.
Read MoreLast year, and well into 2023, you could throw a rock at 100 mainstream economists…grouped together like sardines…and not hit a single one that wasn’t predicting a recession (outside of Evercore’s Ed Hyman, that is). It was essentially unanimous; the US was headed into a recession and it was barreling towards us like a freight train.
Read MoreGood Thursday morning. A bit of air is coming out of the tech melt-up move higher this AM, post earnings reports, as Netflix (-6%), VRA 10-bagger Tesla (-4%) and IBM (-2%) are each selling off this AM. The moves higher in each has been parabolic this year and with our markets trading at extreme overbought levels on the VRA System, a shake-out does not surprise. Nasdaq is -120 in premarket.
Read MoreIt hasn’t been straight up from the 10/13 bear market lows but in (most) ways this has been a textbook bull market move higher. From the overwhelming level of fear from 3 bear markets in 4 years to last years August — October waterfall mini-meltdown that culminated in the 10/13 bear market capitulation, from those lows the move higher has checked all of the “new bull market” boxes.
Read MoreBreaking; we just learned that the Fed’s favorite inflation gauge (core PCE) fell to 4.2% in March from 5.1% in February. This marks 8 straight months that we’ve had “disinflation”. With both US and European GDP reports coming in weak, we reiterate our call for the Fed to cease rate hikes and to begin cutting rates. The 10 year yield is 3.44% this AM while the Fed funds rate is 5%. The Fed never leads, they only follow. The markets are screaming at the Fed to “pause and pivot”.
Read MoreGood Thursday morning. Disappointing afternoon action in the markets yesterday following the March CPI report (that was essentially in line), with talking heads reporting that the primary culprit for market weakness was FOMC minutes that forecasted a “mild recession” at the end of the year. If we listened to the talking heads we’d probably keep our heads in the sand and remain 100% in cash.
We continue to be bullish on stocks and look for a solid rest of the month which will likely include Q1 earnings that surprise to the upside. We’ll get a taste of Q1 tomorrow morning with JP Morgan and Citi earnings reports. If I didn’t dislike bank/financial stocks so much I would be a buyer here. I think they might just blow the doors off…certainly the behemoths.
This morning we got more proof that inflation continues to evolve into disinflation. Huge drop in PPI this AM. The Fed will cut rates by year end. Were it not for the Trump Economic Miracle we’d likely be in a deep recession today.
But even with this beat (to both CPI and PPI), the odds have increased that we have a “negative credit impulse” building with rising odds of a recession, certainly after the implosions of SVB and Signature Bank NY. The latest inflation reports did not capture these banking failures and potential credit crunch as it’s inherently backward looking. The CPI report is always a “fade” and I think this report is especially the case. A Fed pause and pivot should now be here. I’ll be surprised if the fed hikes again on 5/3, but we have 3 more weeks of data plus of course earnings reports of Q1.
My forecast (of the last 4 months) remains unchanged; the Fed will start cutting rates in the 4th quarter and by years end the 10 year yield will fall below 3%.
Financial markets and the Fed are reading from two different playbooks but as history has taught us well, the Fed never leads, they only follow.
Chart Review S&P 500
The largest and most important equity index in the world continues to flash “buy me”. From the 10/13 bear market lows…just classic capitulation…SPX has a clear series of higher highs and higher lows as it remains well above its 200 dma and has worked off its overbought levels over the last week. I expect a breakout to take place in the next 1–2 weeks which would lead to a rally to 4300 + (5% + from here).
Semis (SMH)
Full VRA System look at the chart of SMH, which has worked off its extreme overbought levels and looks ready to make its next major move higher.
Well above its 200 dma and advancing steadily from the 10/13 lows using the blue trend line as stellar support.
Check out the supporting trend lines for RSI and MFI. Again, perfection. As goes the semis, so goes the market.
Precious Metals and Miners; overbought but still flashing “BUY”
While the miners are hitting extreme overbought levels on the VRA System, our top buy signal for this group (precious metals) continues to flash strong buy.
Below is a chart of the relative strength of miners (GDX) to gold. When the miners are leading gold higher, its an extraordinarily strong buy signal.
This group has been doing exactly what it’s known for, acting as a discounting mechanism for what comes next; rate cuts and eventually more QE/money printing. The bull market of bull markets is underway for metals and miners.
Rising Housing, Transports, Semis and Bitcoin; discounting mechanisms and high probability correlations that tell us “the markets are headed higher”.
From our new book “The Big Bribe” (below). Housing is a long term bullish mega trend & should continue to propel the US economy. Housing bears are just plain wrong.
VRA Bottom Line: we remain long and strong as we’ve entered a top 2 month of the year and the best year period (pre-election years are highly bullish). As always, we’re keying off of the semis. We have been aggressively long from the 10/13 bear market lows and will likely remain long well into April, although last week we hit overbought levels that we paid attention to. We’ve now worked off those ST overbought levels and the markets reaction to Q1 earnings is “everything”. We look for the rest of April to be stellar.
Heads up; we have a target in mind for potentially taking profits on some of our ETF positions. It rhymes with “sell in May and go away”.
Until next time, thanks again for reading.
Kip
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Another volatile day of trading yesterday influenced by fears of global bank runs. Of note, in the last two trading sessions the smart money hour was met with strong buying pressure (with tech leading the way).
Read MoreGood Thursday morning all. Another day, another "lower open” that was met with buying pressure throughout the day, leading to another strong smart money hour and resulting in (another) troubling pattern for the bears. And it’s not just that its happened every day so far this week, it’s been the repeating pattern of 2023. Add that market internals were right at 2:1 positive…again, another repeating pattern this year…combined with another day where we had more 52 week highs than lows, an event that has taken place every day so far this year.
Read MoreGood Thursday morning all. From the 10/13 capitulation lows it’s been our view that the equity markets have bottomed and that rates, the US dollar and inflation have all peaked. The action in semis/tech and housing have solidified our views. When the most important market/economic elements of the VRA Investing System… are leading the markets higher…
Read More
"Kip's VRA financial newsletter is a MUST read for every saavy investor in this country. Disregard it at your own peril. His mantra is my mantra. Kip Herriage's newsletter is my financial Bible."
--Wayne Allyn Root
2008 Libertarian Vice Presidential candidate
Author, "The Conscience of a Libertarian"
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