Good morning. Stocks fell again yesterday – and that should not have been a surprise considering what global markets had done overnight Monday into Tuesday…. global Momo guys along with a lot of ‘leveraged bets’ sending stocks down again. By the end of the day – the scoreboard looked like this – and there were a couple of things that are interesting…..
Dow lost 500 pts or 1.1%, the S&P gave up 55 pts or 0.8%, the Nasdaq gave back 275 pts or 1.2%, the Russell bucked the trend and rose 7 pts or 0.3%, the Transports ended flat, the Equal Weight S&P down 2 pts while the Mag 7 gave up 570 pts or 1.75%.
Now this is interesting — because I think the Equal Weight, and maybe even the Russell and the Transports, are telling us a new story. Here’s why:
Yesterday the Equal Weight S&P lost less than 2 points — basically flat. Russell 2000 actually finished higher after falling 8.5% off the recent high. The Transports ended flat after getting slammed 4.5% and landing right on converging trendlines — strong technical support.
Meanwhile, the S&P 500, Nasdaq, and Mag 7 all got whacked again.
So, what does that tell you? Well…….
Remember: The Equal Weight index strips out the giants. Every stock gets the same influence — whether it’s Apple or a mid-cap industrial. So when Equal Weight holds firm while the S&P and Nasdaq get hit, it means the selling is concentrated in Big Tech — not the rest of the market.
It means investors are quietly stepping in below the surface — buying the other 493 names: the value names, the beaten-up names, the under-owned names. That’s called rotation — and that’s also called opportunity. It tells you investors recognize that Tech is tired (HELLO????) And it’s time to go shopping elsewhere.
So, while the headline indexes look ugly, the Equal Weight is acting like a horse whisperer — quietly communicating what’s really happening underneath the surface.
(Recall – A horse whisperer is someone who has an almost mystical, intuitive ability to understand, calm, and communicate with horses — using body language, tone, patience, and trust rather than force. In short – A horse whisperer is someone who can communicate with a horse in a way the rest of us can’t even see happening).
And in markets, calling someone a “horse whisperer” means the same thing – so ask yourself – is the Equal Weight S&P whispering?
And don’t forget Uncle Warren – he says –
“Be fearful when others are greedy, and greedy when others are fearful.”
Recall – he sold a bunch of stock on the highs and now has A LOT of cash to put to work…..(at lower prices) – BINGO!
So maybe — just maybe — there’s a buying opportunity forming under the hood. Tech is under pressure (and rightly so – you can’t be surprised), but the broader market is not falling apart. When the Equal Weight holds on a risk-off day, that’s often the first signal investors are reallocating, not retreating.
And does that rotation include the SMIDs? Well… the Russell did finish higher. You decide!
Ok – so no need to rehash all of the concerns that has caused all the drama – if you’ve been reading my note – you are well aware so let’s move on.
Bonds ended the day flat – and guess what that tells us? It says that the selloff is not panic driven. (think momo/algo driven – amplified by margin calls and leverage). If investors were truly scared, bonds would surge and yields would collapse in a classic flight to safety. Flat bonds tell you this is equity-specific selling — driven by momo unwinds, trendline breaks, and repositioning — not a macro or recession fear.
In short – bonds are saying “slow down Big Boy.” Suggesting that this rotation is most likely technical pressure, not systemic stress.
At the end of the day the 10 yr is yielding 4.12% while the 30 yr is yielding 4.75%. Your gov’t mm fund is still paying you 3.77% while Mortgage rates remain at 6.2% for a FICO score of 720+.
Oil did nothing…. WTI is trading at $60.30 and remains well within the trading band of $55/$62.50.
Gold – yesterday it rose by $22 or 0.5% while this morning it is up $40 or 1% at $4,110 and this is ALL about the release of the October FED mins – that come out at 2 pm. A rally in gold suggests that gold bugs are betting that the FED WILL cut rates next week. It could also suggest that investors and traders that got their heads handed to them in Bitcoin (down 30% in one month) are ‘re-allocating’ funds to the traditional, tried and truly precious metal. And don’t forget all of that central bank buying that is alive and well.
The VIX? Well that did remain elevated – thus the pressure on stocks (specifically tech)….this morning – the VIX is down 1 pt or 3.7% at 23.75…and while this is elevated – I suspect it is going to retreat….Understand that it surged by 64% in the last 2 weeks, so it remains ‘edgy’…..Don’t take your eyes off the ball, but I am still in the camp that it is starting to settle down…. This morning US futures ARE in the plus column and that will cause the VIX to retreat. (more below).
Ok – so boyz and girlz – let’s be honest…..today is all about Jensen Huang – in his classic black leather jacket and NVDA – Full Stop! Some will have you believe that it’s about retail – we are due to get earnings from LOW (they beat) – stock quoted UP $10 or 4.5%, WSM and TJX.
But after the bell – it’s all about the show!
Again, the options markets are pricing in a 90% chance of a ‘substantial beat’ on the numbers, and they are pricing in a +/- 7% move after the announcement.
Now let’s discuss!
The stock is down 14% in two weeks — classic! It’s sitting right on top of its intermediate term trendline at $179. It closed yesterday at $181.36 and this morning it’s quoted up $1.30 at $182.60.
And yes — the media has gone out of its way to remind you that Softbank, Uncle Warren, and Petey Thiel all sold their stakes recently. Again, I ask: Where did they buy it? Did it hit their target? Because not one of them came out to say they sold their position due to negative fundamentals. And that matters – Why?
Because a target price is exactly that — a target. When a stock hits your number, you sell it (unless of course you raised your target). That’s discipline. And when you’re managing millions — or billions — discipline isn’t optional. It’s the whole game.
US futures are UP! Dow +70, S&P’s +20, Nasdaq +110 and the Russell is +12. In percentage terms – the Russell is this morning’s outperformer – see comments above.
European markets are UP as well. Spain +0.4%, Germany +0.3% – Italy is the only one not participating – but is only slightly negative. Inflation in the UK came in cooler at +3.6% and that is causing investors to bet on a BoE rate cut. Don’t forget – next week is the big UK Autumn Budget – which is sure to cause distress for Britains. Get ready to ‘tighten your belt’!
The S&P closed at 6,617 – down 55 pts. Now after all of this – the S&P is down 5% off its all time high (6,920). This is hardly a reason to light your hair on fire….In contrast the Equal Weight S&P is off 4.2% – but let’s be honest – at the moment its all about TECH….because it is a crowded trade, everyone is in it….and the Nasdaq is down 7.2% while the Mag 7 (more specifically) is down 8.4%.
For anyone keeping track – none of these moves puts us in correction territory (down 10+%). Now yes, individual names are in correction territory – NVDA is one of them – there are more – and that, my friends is the opportunity. Look for good quality names, whose story has NOT changed in order to find hidden value. (hint: there are a lot of them). More specifically, find comfort in the good quality names that have held up…AAPL (down 4%) comes to mind! Just sayin’…. It’s not all doom and gloom….and I do think that Santa is not going to disappoint….
Sweet sausage risotto
This dish can be a first or main course depending on how hungry you are.
You will need: olive oil, butter, onions, sweet Italian sausage (removed from casing), minced garlic, thyme, Arborio Rice, white wine, chicken broth, frozen peas and Parmegiana Cheese.
In a saucepan – heat up about 6 cups of chicken broth.
In a heavy pan – heat the oil and 1/4 stick of butter over med heat. Add chopped onion and sauté until soft and translucent.
Next add the sausage meat and brown. When ready add minced garlic – no more than a tblspn, and some thyme….do not overdo…. about 3/4 tspn. You can always add less and then taste. Sauté for another couple of mins to blend the flavors.
Now add 1 1/4 cup of Arborio Rice – toss to coat – let it cook for 3 mins.
Now add about 1 cup of dry white wine…mix well and stir until the wine is absorbed. Season with a bit of pepper. NO SALT is needed.
Now – one ladle at a time…add the hot stock to the rice and stir…you must stay at the stove – this is key. You need to stir the rice and not allow it to stick. As the stock is absorbed – add another cup and stir…continue this until the rice is tender and creamy…. maybe like 20 mins…. but taste as you go to determine. (You will not need all of the stock – but just in case you did it wrong you can always try to save by adding a bit more stock.)
Now add 1 cup + of frozen peas…you can always add more if you like peas…..and a handful of grated Parmegiana Cheese. Stir well for about 5 mins so that the peas have time to warm up……taste. Taste good? then you are ready to serve…If not – keep stirring. Do not let the rice dry out… This meal should take you about 30 mins – (40 max).
Serve in warmed bowls and garnish with a bit of chopped Parsley…always have extra cheese on the table for your guests.
