Market Briefing For Wednesday, Nov. 10

'The Great Chase' ran into seasonal re-balancing, as cross-currents clearly dominated, in down-then-rebound ways, on Tuesday. It's really a mosaic that requires recognizing the evolving end of tax-selling, evacuation from some big caps (Tesla (TSLA) particularly having a negative impact on the S&P), the commencement over the weeks ahead of an advance in many small-caps, while the Russell (IWM) signifies that.

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The bond market action in our view isn't suggesting a slower economy (more or less the classic explanation for lower rates) but probably expectation of a continued dovishness, regardless of whether Brainard replaces Powell at Fed. And yes the Fed is sort of boxed-in for this reason and not wanting to derail a fairly nascent recovery that brings with it persisting inflationary pressures.

So far traders treat markets presuming there's an 'underlying bid' to every retreat, and so far that's the case. For now the market 'is vested' in this from a conceptual perspective too, and would be even more so 'if' President Biden were to pick Brainard to replace Powell as Fed Chair (hence he tends to be a bit more dovish than he'd like, perhaps, since he wishes reappointment).

Executive summary:

  • Rotation continues and you see the strongest stocks rebound from their morning shakeouts, so far this pattern hasn't been reversed, but that's a frequent characteristic especially on Tuesday, greater risk late this week but again it may be for nothing more than a shaky consolidation.
  • VIX has been firm even when S&P was up, hence traders trust the upside less than they proclaim in public, while exhorting investors to buy high.
  • If one does play the downside, doing so in S&P or QQQ are usual ways to do it, with VIX not a common approach aside expert option-on-futures players (and avoid VXX for various reasons), however we're not short.
  • For now the 'infrastructure bill' beneficiaries or new small tech plays may someone offset the decline of the overworked 'grand dame' leaders, or a few old-era conglomerates which have steadily vanished from the scene.
  • Interesting question: will Amazon (because of streaming video and their successful Web Services division not to mention Whole Foods) become a new variation of a conglomerate (AMZN), as Apple (AAPL) has tended to diversify income streams and so on, and the answer is yes.
  • GE is truly the old but the sum of parts might succeed as they happen to make what seem to be the most reliable jet engines at the moment (the Pratt & Whitney and Rolls Royce engines have had more 'issues') (GE).
  • Back to overall stocks, there might be a big of concern by the hacking of millions on Robinhood (HOOD) we spoke to yesterday, and then today they failed in other ways, as clients could not withdraw funds (I soured on 'the hood' right away when I learned they were asking for 'bank credentials' not just routing numbers, which reflected poorly on their selected linkage service).
  • Tesla dropped 12% today, part of which is Musk 'or' his brother probably selling (his brother filed to do so a day before Elon's cute Twitter polling).
  • The selling weighed on S&P somewhat, and Tesla is facing one word that I have forewarned of from too early, but rightly, and that's: competition.
  • Now Rivian is about to trade and that denotes my point, also while Tesla no doubt has the best 'beta' data on autonomous driving (using owners as the test .. pilots to be gentle), they don't use LiDar, which is viewed better by almost all analysts with respect to accurate object & distance details.
  • Speaking of LiDar, Luminar we observed has been acting better, today a significant deal was announced with Nvidia (NVDA) for the latter's 'new platform' for autonomous driving, now we await to see if one will compete from our AMD (which has not hinted on this topic at all).
  • Luminar (LAZR) shares exploded on the upside pre-opening but surrendered the bulk of gains during regular trading, nevertheless it probably bottomed for the year around the area we had estimated awhile back (mid-teens), we'll likely see it alternate, maybe even decline a bit, then do well next year.
  • And yes when we say Luminar we think about LightPath (LPTH), which shows a few signs of life, but really needs a catalyst to move, we believe the CEO gave a good hint during last week's call to anticipate that during 2022.
  • Temporarily 'irregular' or oscillating patterns that make holders nervous at the same time nothing changes much, could be the case for Palantir (PLTR) and of course Ford (F) as well as numerous other stocks for a short time.

On COVID, we've been mentioning rises cases in Europe, Russia, China and a couple of U.S. states. In California, areas with lower vaccination rates, such as Riverside, San Bernardino and Fresno all see deteriorating conditions.

I've warned about this as we resumed international travel, including noting the use of Russia's terrible Sputnik vaccine in some parts of Eastern Europe. As for Germany, about 70% of the population is vaccinated yet they just hit high levels of cases.

In this country, places with relatively high vaccination rates are seeing COVID hospitalizations, not just infection, tick upward, including Orange County, we note since it has almost total vaccine compliance. So why? Well the vaccines are not that great, plus seniors who got shots last winter are seeing immunity wane. And we still don't know why California Governor Newsom disappeared from public view (a quick peek at the Getty wedding is all) for some time after he received the booster. His staff denies he got Bell's Palsey from the shot.

With the 'supposed' protections from vaccines, maybe mask-wearing should be reserved solely for the un-vaccinated, with the rest forgetting about it?

The 'mosaic' of this market crushed a lot of high flyers today, and especially with EV sector leader Tesla getting creamed (that can't be surprising), it was and is difficult for the Senior Indexes to advance.

Bond yields are plummeting, which makes dividend-paying stocks attractive, even if they are often pricey. Our markets have been magnets for escaping cash (legally or otherwise) from certain places in the world, regardless of the rates of return (which is the excuse analyst use to explain capital flight).

So while the stock market action does not suggest 'transitory inflation' (and of course I'm aware that some use that as an excuse for low rates), tomorrow a hot CPI will affirm that inflation is with us and unfortunately fairly enduring. I've consistently argued that 'clawing back' wages after gunning them isn't logical.

Also I'd felt Oil would be strong all year and that's a contributor. Politicians as well contribute to oil-related inflation by the lunacy of curtailing pipelines while every aspect of our society 'still' requires petroleum. I'm not against moving to renewable energy and so on, however until such an infrastructure 'seriously' is able to deliver the megawatts I will suggest moving against Oil is illogical.

Again it's late year activity, and it is a mosaic filled with crosscurrents. We will see more of this tomorrow, with rally efforts generally defensive in nature, just maybe along the lines I've warned of with more risk later this week, but again just short-term jitters, with the backdrop for any horrendous behavior absent.

(Of course to those who bought mega-caps near recent highs, I guess they're shaky and should be, because the idea is buy stocks low and have patience, not chase very old trends, which this one in the S&P has been).

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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William K. 2 years ago Member's comment

About "curtailing Pipelines", please know that the reason relates to the age and condition of line 5 and the increasing probability of a major leak. Certainly adequate instrumentation could do a rapid shutdown in the event of a leak, but given the track record of responses to leaks that happening does not seem like a reasonable assumption. Worse, the pipeline company has not made any claims that they DO have an adequate monitoring system. All that would be required would be an adequate showing of the protection system to some engineers who could understand it, not politicians, and if the system was adequate the problem would be solved. But that has not been offered, so my assumption is the system does not exist. Failing to be prepared is prepairing to fail!

Gene Inger 2 years ago Contributor's comment

Good point; I certainly did not dig into that issue so deeply; although my point is simply policies of an anti-petroleum industry bias while advocating buying more from Saudi Arabia; which is nuts.

William K. 2 years ago Member's comment

Certainly you are correct on that! The problem is that those in that 1% have no clues about the daily life of the lower 75%, and they do not seem to care, either.