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Tuesday March 11th
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“Many men go fishing all of their
lives without knowing that it
is not fish they are after.”
– Henry David Thoreau
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Ok ladies and gentlemen. Yet another red day yesterday.
We’re opening in the green today. But there’s a big battle going on. It will be interesting to see where we end up at market close. This is the first time the SPX has dropped below the 200 DMA since September 2023.
This week is going to be super important. We have CPI data on Wednesday. Thursday we have jobless claims and PPI data. I have no doubt that both numbers will come in hot. Really the only hope at this point to stop inflation is a recession. Which if you’ve been reading me for any length of time, you’ll know that I believe Trump wants a recession in order to slow down inflation.
Again, crash equities and yields fall.
Now, the question is, “How far will we fall?” I personally think we could see at least a drop to 5,000. There’s a saying on Wall Street that “Topping is a process. But bottoming is an event.” In other words, markets chug to new highs, but dramatically and precipitously drop towards the bottom. Now, we haven’t had the event yet. The current sell-offs have actually been quite orderly, structured around the key levels and pivot points.
That’s partially the reason why I believe we still could see quite a big tumble in the future. What will the event be? Hard to say. That’s why it’s the event. No one really knows what will cause it. It could be a foreign war, maybe a Chinese invasion of Taiwan; or maybe a lurking structural issue in the economy.
Just this weekend, it was revealed in the Wall Street Journal that the FHA under Biden had been subsidizing foreclosed mortgages. This has led to a giant housing bubble, and if Trump were to end that, an estimated 400,000 new houses would flood the market. This could be the tender that explodes everything.
I don’t know. No one knows. I’m going to pull in a quote here from Lenin:
“There are decades where nothing happens; and there are weeks when decades happen.”
We’ve been in a persistent bull market for a long time. Notwithstanding the small selloff in 2022/2023, we’ve pretty much been in a bull market since 2011. The longest bull market in history. But this is unwinding right now. Over the coming weeks, every day is critical.
I’m watching the JPY/USD every night and throughout the trading day. With stocks already on shaky ground, if the Yen rises during the day, that’s an instant liquidity drain that’s going to depress equities.
Meanwhile, you have European stocks. It’s clear that the U.S. is reevaluating its role as global security blanket. Following the aid pause on Ukraine, France, the UK, and Germany have committed to bolstering their own defense spending. I’ve been bullish on Euro defense companies since December. And the DAX (the German market index) is up 15% since Trump took office.
This will be interesting to watch. Because as much as the Europeans may want to actually stand on their own, they’ve all been in a process of de-industrialization for almost a decade. They might not have the short- to medium-term capacity to actually grow.
Only time will tell.
On the single ticker front, today I’m looking at:
ABNB
There are serious headwinds facing AirBNB. The first of which is the economy; more people are hurting, they pull back on vacation. We can see this in the recent airlines earnings, all of which talked about consumer not spending as much on travel. This will trickle down to rental companies like ABNB. Also, many rentals will simply be sold off as it becomes uneconomical to maintain them.
Right now, ABNB is $126. The 21 MAR 25 $105 puts are around $1.07. I like the risk:reward on this one.
That’s all for today folks!
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Testimonial of the day
Barrie W. about the Lazy Trader’s Club: “Won on about 8 trades. No losses”
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To Better Trading,
Alex Reid
