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Stocks managed to finish the day higher somehow. It seemed more like an unwind of volatility than a big rally. The S&P 500 opened higher right from the start, after the futures rallied during the middle of the night on no volume, following some hopes of Russian de-escalation.

S&P 500 (SPX)

These gap higher days, followed by sideways action, tend to resolve themselves by closing the gap within a day or so. So I fully expect today’s rally to vanish by tomorrow or Thursday. Of course, it is possible that it doesn’t disappear, but with a slate of economic data in the morning and the Fed minutes at 2 PM, the news flow certainly supports such a lower move.

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5-Yr TIP

Real yields did tick higher on the 5-yr TIP, rising to -0.88 bps, but I think it will need a push at this point to get to higher highs, which I believe will be required to push stocks down.

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Financial Conditions

It appears that financial conditions continue to tighten, with the IEF/LQD ratio yet again rising today. Tomorrow the Chicago Fed national financial condition index will come out. We care about tighter financial conditions because it will ultimately reduce leverage in the market, and that is precisely what has started to happen. Margin levels in January fell to $829 billion from $910 billion. The last time they were that low was back in was March 2021, it looks like.

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Roblox (RBLX)

Roblox is falling after hours due to weaker than expected bookings and daily active users. The numbers were barely a miss, with bookings of $770 million versus estimates of $772 million. DAU’s came in at 49.5 million versus estimates of 50.4 million. I know a miss is a miss, and the market has been brutal to companies that miss. But to me, this is a rounding error, and I’m not particularly concerned about it. It’s like back in the old days when estimates were for Tesla to deliver 10k cars, and they came in at 9,100, and the market would go nuts. I am using the same template for Roblox that I used for Tesla and Netflix. As long as bookings and users continue to rise on a sequential basis, I don’t care if they miss by a little. Of course, I want it to stay above $60, and I think it will.

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Broadcom (AVGO)

The big rally in Broadcom didn’t look like it accomplished much. It managed to stay below resistance $605.50 after going above it at one point today. It seems like it is trying to form a bearish technical head and shoulder pattern.

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