Before the Bell April 19

Inspiration 

If you are reading this I will assume that you’re an aspiring trader with a certain amount of capital to speculate in the markets. That puts you in elite company on this planet. So when you hit a rough patch, start feeling sorry for yourself, or get disgusted comparing yourself to the Fintwit geniuses who remind you every 5min how successful they are, hit the pause button. Focus on Gratitude. You got it pretty good.

Earnings

Companion Video  

The video is a detailed technical review of the indexes and FATMAAN names. All the key trading levels are identified along with commentary and trade plans for each ticker. Trade ideas are also discussed.  Run the video at  1.5x to maximize efficiency without loss of clarity.

The Companion Video Will Return tomorrow

Macro Data Releases Week of April 18

• Monday – Housing Market Index; Bullard 4pm
• Tuesday – Housing Starts; Evans Noon
• Wednesday – Existing Home Sales; Oil Inventory; 20yr bond auction 1pm; Beige Book
• Thursday – Jobless Claims; Philly Fed; Leading indicators; NatGas inventory; 5 yr TIPs Auction
• Friday – PMI Composite Flash; Rig Count

NFLX – Canary in the Tech Mine ?

NFLX reports tonight after the bell.  Like a prize fighter that has taken multiple body blows and is a bit wobbly, TECH is still standing.  That makes NFLX earnings tonight, and the market reaction,  moderately important to mega-cap tech.  Some type of disaster reaction? or does NFLX hold serve for the sector and stabilize things?   Let’s wait and see.

All about Banks

Banking expert Chris Whalen spends an hour with Jack Farley discussing the state of the banks and prospects for the near and mid-term.

Whalen dispels some myths regarding banks and crystallizes the opportunities in the Sector.    Find it HERE

Macro Backdrop until further notice

Shrinking Liquidity

The combination of aggressive rates hikes and balance sheet run-off are bearish for markets.  Markets thrive in times of ample liquidity and starve in times of low liquidity.  JPOW & Co. now have a singular mission to knock down inflation by the reverse wealth effect. These guys won’t stop until the market is down substantially. There will be lots of trades both bullish and bearish between now and then, but they’ve made themselves clear, they will insist on the market going down. This will be the over-arching theme from now through the summer.

Persistent Inflation

While inflation may moderate later this year, I think that inflation will be persistent for at least a year. The FOMC’s rate hikes will tighten financial conditions and thus make it tough on financial assets, but it wont affect oil or gas prices, a grain shortage or a myriad of other commodity based inflation inputs that are the root causes of the problem.  s

Commodity Super Cycle

“Spot Prices cure Surpluses; Long-Term Contracts solve shortages”  Jeff Currie Head of Commodities at Goldman Sachs.  Commodities, historically speaking, tend to trend in broad 10 year Boom –  Bust cycles. This is also coincident with capital funding of the sector. The commodity boom of 2000-2008 was met with a wall of capital investment. THis greatly expanded capacity of all manner of commodities. Then from 2012 – 2020 was a period of capital destruction and collapsing returns. The emergence of ESG has constrained re-investment into these “dirty Sectors”.  We are now in the upswing of the commodity cycle.  We are probably in just the first year of the upswing. We are literally YEARs away from seeing supply expand because no capital is yet flowing into the sector.  The exception of course is a recession. A recession will kill demand and cause most asset classes , including commodities.  Here is a 60min podcast that summarizes the commodity situation.  Find it HERE

Earnings Season & Bracket Trades

As earnings season kicks into gear, a reminder that this is prime time for Bracket Trades. Bracket Trades are those trades created when a stock gaps up or down from a news driven event. Bracket Trades are set up as “2nd day trades” where you alarm the high and low of the prior day’s trading range, then patiently wait for price to either break lower or higher from the range.  You then follow price out of the range. I will do my best to help identify them for you, but you can easily find them yourself by doing a sort for “GAP ups” and “GAP Down” on your trading platform.  I add additional filters for only stocks above $10 and at least 500,000 shares traded. You can add additional filters to cut down the sort further. Generally speaking, stocks favor continuing in the direction of the gap higher or lower.

You can find out more about Bracket Trades in the video Run the Player at 1.5x      HERE.

Trades about to Happen

NOTE: Please Check earnings dates for all these. 

$ASIX  Daily

Specialty chemical maker $ASIX breaking out of a beautiful Bull flag with a measured move somewhere on the dark side of the moon…way up there.  Liquidity on the option chain isn’t the best so use limit orders and try to get at least a mid-point fill.  Pretty Chart.

$LYB – Weekly

Staying in the Materials sector but with commodity chemical makers $LYB.  Alarm $110 on the weekly chart and be ready for a blue sky breakout.

Pipelines – $ET and $OKE

Pipelines have been good steady performers for me. Grinding higher while paying 5.5% – 6.5% yield.  I own ENB, EPD, and KMI.  I added two new names yesterday.  ET and OKE.   Charts below.  All of these positions are small on their own. I lump them into a category I call “Income Holdings”.    Not a big part of what I do, but they have been a stabilizing force against my more volatile directional trades.

$CENX – Century Aluminum

I expect CENX to breakout of this pennant and move higher as commodity focused companies continue to do well. THe exciting part is the monthly chart. A move above $30 with a hold would open up the chart to some free-range running having taken out the 2014 highs and leaving an open path to the 2008 high.

INDEX CHARTS

Use the following pivots and levels in your active and swing trading. Added color is provided on the video.  Link above.

QQQ 30 min

IWM 30 min

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