Things you need to know.

• The Churn continues – US futures are down this morning.
• BK jumps into the Bitcoin pool…. Who is next?  JPM? GS? C? Fidelity? Schwab?
• BofA – Bull Bear Indicator – running ‘Hot’…. Are you taking your temperature?
• Pot Stocks retreat – after Wednesday’s surge – Was it a flash in the pan? No.
• Bitcoin – higher after the BK announcement
• Try the Veal.

And the churn continues…..while the indexes all opened higher – they failed to hold onto those gains for most of the day – Now there wasn’t anything specific – other than the sense that the market is tired, buyers are exhausted, earnings season is nearing its end, and valuations are stretched and many continue to wait to hear about the efficacy of the vaccines against some of the newest strains….….on the other side of the argument are those that talk about how none of this matters because earnings continue to impress (and future expectations are for them to continue to impress in the quarters ahead), interest rates remain at incredibly low levels and will remain there, the dollar is under pressure – helping to support commodities and the big multinationals, the vaccine is fine and let’s not forget – the massive stimulus package that is about to hit the economy…..so depending on which side of the argument you’re on – will dictate how you position yourself….As the afternoon came to a close – the algos’ managed to send 3 of the 5 major indexes into positive territory.  The S&P gaining 6 pts, the Nasdaq up 54 pts, the Russell up 3 pts while the Dow lost 7 pts and the Dow Transports gave up less than 1 pt.

Now let us be clear…. for the trader – you love the ups and downs and back and forth – because that is how you make money….and for the long-term investor – you need to eliminate the noise, forget the daily machinations, build a well-balanced portfolio, and go to the beach…. In either case – what I see is optimism – why?  Because if you are a day trader – you are optimistic about the daily opportunities that the noise provides and if you are a long-term investor – then you are optimistic that the portfolio you created will carry you to where you want to go.  And that is what is important in the end.

Now – if you have not seen it – BofA (Bank of America) publishes a ‘bull & bear indicator’ and it looks like that semi-circle fuel gauge with a needle that moves depending on the ‘temperature’ that fades from Green to RED.  (Scale of 0 – 10).   Extreme BUY signal is on the left (0) and extreme SELL signals on the right (10) and yesterday they published the latest gauge reading – via twitter – chart and all…And the needle is hovering at 7.7 on the ‘Richter scale’…… in the red zone…. which suggests a SELL signal – because so many people are bullish…. So, we will see if the indicator is right or not….

Eco data yesterday continues to improve yet does suggest that more work (think stimulus) needs to happen to and that is putting more pressure on DC to do something big…. again, reminding us that Biden’s $1.9 tril plan is more likely to happen than not.  There is not any eco data today to continue to tell that story…. but next week brings us a slew of data points that the market and investors will be paying attention to.  In any event – unless the data points are much weaker than the expectations, I would not expect them to be that much of a directional driver.  Why? Because investors are already pricing in the expectations…so if they are in line – ok – we knew that, but if they miss (weaker) then again that will put more pressure to do something big – which will only re-iterate and support the call for nearly $2 trillion of stimulus which will cause investors and algo’s to hit the BUY button….  Just for the record – I remain on the side of caution….and will take advantage of the recent surge to trim and re-allocate…. But that is me…. remember – there are bulls, bears and pigs…. (the phrase suggesting that Bulls make money, Bears make money and Pigs get slaughtered…)  It is an old Wall St saying that warns against excessive greed.

And then in what is a move that continues to change the world…Bank of NY Mellon ($42.13 +1%) – the nation’s OLDEST (STODGIEST) bank announced that they are making the leap…. the leap into Bitcoin……in a sign of much broader acceptance of the cryptocurrency……. In a midafternoon announcement that they will hold, transfer, and issue the currency on behalf of its asset management clients…. saying

“Digital assets are becoming part of the mainstream, until now those money managers have had to use separate custodians for their cryptocurrency holdings.” 

And now they do not!  And what this says is that it is not going away.  It is a big step – and they have been working on this for years now (as many of them have and we will surely hear more in the coming weeks) …but they have also been waiting for regulators to say ‘go for it’….and the regulators are beginning to open that door………. earlier this year the Office of the Comptroller of the Currency wrote a white paper weighing in on the use of blockchain technology by the big banks…. (blockchain technology is the very foundation of Bitcoin and other cryptocurrencies). What this really says is that it is a new world, and everyone needs to evolve with it….

And Bumble – the latest unicorn IPO to come to market…. was priced at $43/sh and rose 64% to end the day at $70.31…. it is a dating app….and as the BB description says – The company offers an online dating application that enables users to meet people for dating, friendship and relationship.  And the best part is – it serves customers worldwide….and when the market corrects, and the irrational exuberance subsides the headline will be “Bumble Tumbles!”.

And yesterday those POT stocks we discussed all backed off a bit – after their surge on Wednesday…..but that doesn’t mean that story is over…it is not – because as discussed investors are piling into these names ahead of what is expected to be the legalization of marijuana in the US and the day trader types are creating a lot of noise …..so expect the volatility to continue in those names, but I would expect the path to be up in the long term.   These are the most popular ETF’s in the space….  MJ, MSOS, YOLO, POTX, THCX, CNBS and HMUS.

This morning US futures are down….in what is a continuation of the exhaustion trade – 1 step forward, 2 steps back….  The Dow -78, S&P’s -10, Nasdaq -26, and the Russell -9.   It is looking for a fresh catalyst…. because the current headlines are not doing it for now……Because none of it is new…. again, you can feel the exhaustion….so do not go chasing anything…and in fact – be patient….

European markets are down…. At 6:45 am the FTSE +0.01%, CAC 40 +0.02%, DAX -0.51%, EUROSTOXX -0.03%, SPAIN -0.71% and ITALY -0.35%.  UK data reports that the UK economy collapsed by 9.9% (sounds better than saying 10%).  And this is the biggest annual decline in output since they started keeping records!  But are we surprised?  No, not at all…. did you see what they did to the Brits?  Locked the whole place down…. What will we hear from France, Italy, Germany, Spain, etc.…? Russia – not a country we talk about a lot – kept its key interest rate at 4.25% as well as announcing that they are about to sever their ties to the European Union….EU sanctions, the arrest of Alexei Navalny, the expulsion of 3 EU diplomats from Russia etc. all adding to the building pressure…. Russian Foreign Affairs Minister – Sergey Lavrov saying

“We don’t want to isolate ourselves from global life, but we have to be ready for that. If you want peace, then prepare for war.” 

Hmmmmm……Is this just noise or is this something to be concerned about?

Bitcoin + $750 at $47,685…

The S&P closed at 3916 after testing 3890 and 3925…  it remains hovering right around that trendline that I identified months ago….3900…. Now while we are above it – my sense is that it is a struggle right now….and today’s early indication is that we will test support at 3900 again…. It still feels a bit tired…. And futures are down, and it is a long weekend….…there is nothing new to cause investors to keep chasing….so a pullback would not be a surprise….

Stay the course – You are invested so you are not missing out. Stick to the plan, call you advisor if you have one and feel like you need to talk.  I am sitting back with new money (as I await a pullback) and letting my invested money do the work….
Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what Slatestone can do for you.

Take Good Care

Chief Market Strategist, Consultant
kpolcari@slatestone.com

Veal Scaloppine in Lemon Sauce

For this you need:  10 pieces of Veal scaloppine pounded thin, s&p, flour, butter, oil, dry white wine, parsley – finely chopped, chicken broth, fresh lemon juice.

Take the pounded scaloppine pieces and season with s&p – then dredge in the flour and shake off any excess.

In a lg sauté pan – melt ½ stick of butter and add in a splash of olive oil so that the butter does not burn.  Brown the veal on both sides for about 2 – 3 mins.  Remove and set aside.

Now in the same sauté pan – add in 1 cup of the white wine and 2 cups of chicken broth. Bring to a boil and then add the lemon juice and the parsley.  Add the veal back to the pan and simmer for about 5 mins.

Serve on warmed plates with the vegetable of your choice.  Always serve a mixed green salad dressed with olive oil, lemon juice, s&p, and oregano.

Buon Appetito.