Part 1: Trading charts for Monday, March 20th
I have another Substack newsletter called Jonah’s Deep Dives where I publish a weekly deep dive writeup on my favorite growth stocks. I’ve published 8 deep dives so far this year: ALB, HIMS, MBLY, ONON, NU, SDGR, SQ and TDW.
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Good morning and Happy Monday,
Sorry that my morning newsletter is going out a little later today, I had something come up this morning that caused a delay.
For this week I’m going to try something different with my newsletter, instead of waking up at 4:45am and sending my newsletter out around 7am then going to the gym… I’m going to hit the gym first at 5:45am then working on the newsletter when I get home so I can send it out around 9am. Given the volatility in these markets, things are moving so fast from one hour to the next that I think it’s more prudent to send the newsletter at 9am versus 7am plus we get lots of macro data dumps at 8:30am EST so it would be nice if I could include them in my morning newsletter. Perfect example is today — when I woke up at 5am today the Dow futures were down ~150 points but now at 9am EST the Dow futures are up ~115 points.
I know that Friday seems like forever ago given everything that happened over the weekend with Credit Suisse essentially failing and being forced into a takeover by UBS. That is causing more fear/panic this morning in the US regional banks ie FRC (down -15% pre market) however you have other regional banks like WAL that are up 10% pre market. Personally I’m not going near any of them — just too risky to play the long or short side. Here’s a reminder of how we finished on Friday, pretty ugly, however growth/tech continues to outperform versus value/cyclical — but small/mid caps have clearly been the underperformer the past couple weeks, probably a combination of risk-off plus more sensitive to recession fears ie slowdown in the economy.
As I mentioned last week we have the FOMC meeting this Wednesday with the announcement coming at 2pm EST followed by Powell’s press conference. Based on the CME’s fed watch tool, there’s currently a 67.2% chance of a 25 bps rate hike and 32.8% chance of no rate hike. Personally I think a rate hike would be stupid and reckless. Not only do we have stress in the US banking system but we can see that inflation is coming down and these bank failures are guaranteed to tighten up the credit/lending markets which is deflationary. CPI might still be 6% YoY but we’re heading into some very easy comps with shelter/rent rolling over plus the lag effect of 450+ bps of prior rate hikes which means we’re likely to see CPI under 3% by the September FOMC meeting. Wayne Gretzky said “skate to where the puck is going, not where it has been” — the problem is the FOMC is pursuing a monetary policy based on where inflation has been, not where it is going.
As I noted late last week, energy prices have been plummeting, oil is down almost 50% from the highs last year which is also why energy stocks have been acting like crap. I’ll be shocked if we see oil below $60 which means there might be a trade setting up here since oil/gas prices tend to move higher into the spring/summer months. Last summer you had lots of “experts” calling for oil to hit $150+ per barrel but now I’m not sure if we ever see $100 again.
I’m not planning to start any new positions today, I currently have 6 positions and ~30% exposure which seems appropriate right now given the uncertainty in the markets plus the FOMC meeting on Wednesday. These markets are just too choppy for position/swing trades. Better to keep risk/exposure low and wait for better opportunities once we have more clarity.
With that said I’m going to send out a second newsletter in the next 45 minutes with some charts that I’m still watching and could be interesting to some of you.