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Monday February 10th
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“A wild longing for strong emotions and sensations seethes in me, a rage against this toneless, flat, normal and sterile life. I have a mad impulse to smash something, a warehouse perhaps, or a cathedral, or myself, to commit outrages…”
– Herman Hesse
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Happy Monday folks. Hope the Super Bowl hangover isn’t too bad. I myself was scouring charts last night for you. This is how I spend my Sundays, so I can deliver only the most choice setups to my readers.
Today, I want to zoom out a bit and talk about the macro forces affecting the markets right now (or is “effecting?”). Trump is set to install 25% tariffs on steel and aluminum this week. This will mostly affect Canada, which is responsible for the majority of our aluminum imports.
Apparently Trump is serious about annexing Canada, and these tariffs are being used as a tool both to spur American manufacturing, and poke holes in the Canadian economy just to prove that they should be part of the U.S. Will it work?
I don’t know.
But Alcoa did gap up this AM.
So, we’ll see how that pans out.
Next up, if you haven’t been keeping abreast of the AI news, LLMs are rapidly becoming a commodity. Especially now that Deepseek is out, other tech companies have realized the error of their ways. We’re in a race to the bottom with AI — soon LLMs will be both cheap and ubiquitous.
AI agents — which will be capable of replacing many white collar workers — are going to be the norm. Investment-wise, this will be a boon to consulting companies like IBM, Accenture, and Deloitte that can bring in custom AI agent models to other companies at cost.
Also, the big mega cap earnings are pretty much behind us now. Apple, Google, Meta, Amazon — the market was fairly unimpressed with all the earnings. Google gapped down hard with its CAPEX announcement, Apple is slowing and stagnant, and the Amazon sales were hit pretty hard.
What we’re witnessing is the transition of big tech from innovation to market pillars. The last 15 years saw much tremendous growth in the tech sector — AMZN revolutionizing ecommerce, Apple creating the iPhone and iPad, and META doing its thing.
Now, these tech innovators are becoming bean counting companies, instead of innovators. This is the natural progression — Apple is calcifying just like Coca-Cola did. Amazon will likely get hit by the trade wars, as well as some of the import changes that the Trump administration is doing.
Google and Meta stand alone as the two tech giants still capable of growth IMO. Meta because of its AI investments, and the fact that Zuckerberg still controls the company and can push it to innovate more rapidly without being beholden to a board. And Google because it still controls so much of the way people access information.
Google is already recovering from its gap down. And long-term, Meta could reach $1,000 a share in my opinion.
All of this is to say that the current large cap environment should favor premium sellers for the rest of the year. So, credit spreads on AAPL, Google, AMZN, and the other big names could be a winning strategy.
For SPX this week:
We’ve basically been in the same range for the three weeks. Low-volume moves up at the beginning of the week, followed by a Friday sell-off. This week is looking to be more of the same. Therefore, the levels for this week are a support line around $5964, and a resistance line right under $6100. $6100 has been a key psychological level for a few months. Any time we’ve briefly touched it or breached it, a sell-off has followed.
UBER
If self-driving cars actually ever come, UBER is well-positioned to benefit from it. Huge network effects and relationships with local governments are something that takes a large amount of time to create. I think that we could see UBER hit $85 over the next month or two. And I don’t hate the 21 MAR 25 $85 calls
SMR
I’ve been long nuclear power for quite a while. We recommended OKLO about a year and half ago, and it’s up 441%. SMR is another nuclear power company that is a little cheaper, so may have more room to run. If the 21 MAR 25 $30 calls drop to $3 or so, it could be a good entry.
-Alex
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Testimonial of the day
Jack P. about the Calendar Club service: “Made $673 on PYPL and $493 on RCL”
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To Better Trading,
Alex Reid
