Market Briefing For Tuesday, Nov. 23

Treacherous spinning definitely kept traders on edge Monday, during what is a normally docile few sessions ahead of Thanksgiving.

Empty Gas Station

Pexels

I think this reflects what is a 'decidedly different' tax-related season this year, because prospects of higher taxes next year contributes somewhat to 'tax gain' sales, not merely the typical 'tax loss' sales so common this time of year.

Executive Summary:

 

  • Market enthusiasm is mixed, however there's a sense of relief about the 'steady as she goes' retention of Jerome Powell as Fed Chairman, while Brainard becomes Vice Chair of the Fed.
  • It was a sort of 'sell the news' on Powell's reappointment, however that's also the case (retreat) when you get S&P up out of the gate on Monday.
  • Oil remains the key to a temporary mitigation of the pace of inflation, but not the overall trend of higher prices across-the-board, as continues.
  • OPEC today obliquely threatened the U.S. and especially Japan, as the Saudi's might retract modest production increases 'if' either opens SPR's.
  • We lament the lack of courage against OPEC (such as threatening to cut sales of high-tech weapons, but argument is always they'd use Russia).
  • Keep in mind SPR's (Strategic Petroleum Reserves) are for 'emergencies' not simply price, but lack of availability for National Security purposes.
  • Using Strategic Petroleum Reserves to manipulate market oil price is not appropriate, the SPR is for an emergency, there is no emergency.
  • Rivian (RIVN) extended losses after 'our' Ford dropped Joint-EV plans, and that is a good development, since Ford can handle their category on their own and (while it was expected) Ford (F) also made good money on their share.
  • Importantly, everyone expected that joint venture to be cancelled, but yet another story was less delved-into, Amazon (AMZN) questioned Rivian's battery choice, range and so on, and that's at the heart of 'delivery van' demand.
  • While most of the big-EV speculative stocks got hit, Canoo did not, as GOEV surged significantly, and that's technically impressive, late easing is typical, especially in volatile (or even slightly controversial) stocks.
  • By the way the question about 'electric steering' in Canoo (that Jay Leno pondered about in a video) isn't a concern, as there is a separate battery back-up for the steering and electronics, a smart and practical move.
  • Ironically that's opposite of Tesla (TSLA) which had many 'owners' unable to get into their cars at times this weekend, and complained of poor customer support when they called Tesla (in fairness they weren't prepared for that many calls or stranded customers).
  • Canoo 'padding up the creek' against the current of selling from those who chased the LA Auto Show Design 'Win' or Arkansas factory news, was very impressive, because you don't bail-out those who bought on 'news' in most cases unless a stock is likely to go to even-higher levels.
  • A couple stocks had very interesting washouts and recoveries, notably AEHR Test Systems (AEHR) and Rockley (RKLY),
  • Most interesting to me was the 'outside-up' day in Rockley without news.
  • Meanwhile Bitcoin (BITCOMP) got crushed again, reinforcing our view that what we were looking at was a double-top/distribution, avoid at least near-term, I agree we won't see it back at the lows we identified in 2018 (or the top at the time near-term), but I do envision it working (process) lower for now.
  • Owning a piece of that network is nonsense talk, while 'blockchain' is real, if anything most cryptos rewarded those who bought earlier, make it risky for now, even if it does well 'eventually' again.
  • The correlation some make with Gold (GLD) seems sensible because precious metals have been relatively boring, however for now they look better and cheerleaders for pushing what's overpriced, rather than lower risk levels.
  • On COVID, China's 'zero-tolerance' makes pandemic restrictions fluid, to say the least, lower reported cases fueled speculation travel to Macao will be widely opened, helping the casino stocks, follow Las Vegas Sands for that, we're not close to it now (had a great short and long years ago), but for those who want it gambling on China being 'truthful', it's a fair 'bet'.
  • Market Tuesday should be defensive or choppy early, then an important rally effort, mega-caps rolled-over today, they'll try to bring 'em back alive but it's harder with so many try to 'bank' the year's earlier gains.
  • Now in the small stocks it can get very wild and alternating swings, most especially in RKLY and in GOEV, but also flipping in AEHR.

In-sum: 

The market is mixed and everyone tries to read too much into swings that are fairly normal, if exaggerated because of probable 2022 tax changes.

After-the-close we got news that the CEO of Canoo bought 35,000 shares in the open market (in addition to his holdings), and likewise one of the Directors bought another 40,000 shares. That's being taken as a 'plus' for all the debate about what happens next, and may be sort of a signal of optimism at least. On the Pacific in late trading the shares are up more. Tuesday will be interesting.

Insider confidence is always welcomed. In regards to AEHR where there was some very recent insider selling, I reached-out to their IR counsel and surprised I got a fast direct reply (unlike some other companies with no IR retained). I'm told that (I didn't know this) a few employees took salary abatement during the pandemic so wanted some compensation for their work. The rest of the sales were related to 10b5's or similar option executions and sales.

It's feasible (implied elderly) long-term investors waiting years for things to gel took some gains (there the higher taxes next year factors in). So, no adverse developments or other factors perceived by IR, and management's optimism persists. They appreciate our coverage (as I appreciate clarification as well as their achievements). AEHR recovered smartly, as appears solid accumulation (institutional or otherwise) jumped at the first shakeout as an opportunity, not a concern. It's actually amazing it took so long to get a correction.

This is an excerpt from Gene Inger's Daily Briefing, which typically includes one or two videos as well as more charts and analyses. You can subscribe for  more

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