Is the Music About to Stop? (April 8-April 12)
April 8-April 12, 2024 by Adit Dayal for RIPPYGLOBAL.
Happy weekend everyone and welcome back to the Rippy Global weekly outlook. After what has been consecutive green for us recently, the S&P 500 finally suffered its worst week of around -1% after an amazing Q1. Opportunities have set up to the long side and the short side and it’s time to take advantage.
Let’s take a look at what next week has in store for us!
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Investors this week were freaking out over the S&P’s mid-day crash this Thursday over geopolitical tensions and comments from the Fed. The Fed’s Kashkari made some comments this Thursday and said "If we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all…” which spooked the markets to a point of dropping the SPY >$10 in one afternoon session. These are the markets where us options traders make the most money. Puts were up 10,000% and even a slice of that is enough to make your month, but that wasn’t after an extremely difficult week of chop. As for the job report this Friday, the WSJ expected 200K new jobs, but the blowout report showed an increase of 303K jobs. As I mentioned last week, I don’t think three rate cuts are happening this year and the Fed Fund Rates imply the same thing with the odds of rates being held in June up to 46% by 100bps over a week. I said last week the rally in commodities shouldn’t go unnoticed, and I still believe that’s the case.
Crude oil remains strong with energy and oil names pushing higher (ex. Exxon Mobil new 52WK high) every day due to tensions in the Middle East. There was an Israeli strike on Iran’s Syrian embassy that had killed one of their generals. Iran is the third largest producer of crude in OPEC and the market is afraid of escalation here from Iran who has vowed to retaliate. The important thing to note when trading geopolitical events is how much they will actually affect corporate earnings. For example, although the Israeli-Hamas war is still huge and ongoing, there’s not a large effect on the earnings of US companies and the market has continued to ignore it. When energy and oil names go, these prices may rally in the short run. Below is the chart for gasoline (weekly) which seems to be breaking out but has a massive breakthrough at $2.90. I anticipate the government wants to keep the price of gasoline down going into the election year.
When it comes to energy, solar names other than FSLR faced weakness off the news that there may be additional tariffs on foreign made solar panels. Guggenheim stated that they expect anti-dumping petitions which refer to US companies filing petitions to the government that the foreign companies are dumping their products on the market at unfairly low prices and that FSLR is the best positioned for this- explaining the strength on Friday while every other name faced losses.
AI is still the talk of the town, no matter how much it feels it’s out of fashion. There are reports Apple has one of the best in-house AI that they will unveil this WWDC (June) to be used on their iPhones. There was another report that Google’s CEO is making many of the decisions revolving around AI in the business after they haven’t been able to find footing going against OpenAI. I think the theme needs a breather here and we actually need to see the effects of AI on companies earnings before we can see a real leg higher.
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#1) Earnings week is super boring this week. Pretty much nothing that will move markets or sectors.
#2) On Monday, the day of the full solar eclipse, Birkenstock’s IPO lockup expires and Intel is hosting an AI event.
#3) On Tuesday, the official short interest numbers from the Nasdaq will release.
#4) On Wednesday, at 8:30AM the CPI report will be released with a 3.5% YoY number and the 2:00 Fed Minutes will be released, both events which will likely move markets.
#5) On Thursday, the OPEC oil report will release, the European Bank will make its interest rate decision, and the PPI inflation number will be released. (BIG DAY!)
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S&P 500
The S&P 500 ($SPX index) has finally broke this channel here and is looking to pullback. Any good, healthy pullback has a 5% drop implying that we may have some more to drop.
My key breaks are $520.38 for bulls and $514.20 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
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INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
TSLA
Tesla is bouncing from support here, but it’s really just going to be chop until we either go above $185 or under $160. After that terrible delivery report I still think the pop from the robotaxi is going to be short lived. Looking for this to go down to $150 before some real buyers.
AAPL
Apple is another name in which every pop get sold off and there’s no excitement from the Street about their AI offerings, they’ve just cancelled their car and are now planning to enter home robotics? Not sure what’s the bull case for this with China slowing down as well and the Vision Pro not selling well, but I think this needs a pullback before another leg higher.
LMT
With geopolitical tensions rising, this name always gets volume and it’s in a bull flag here that can move. Over $457 this breaks out of this huge cup and handle.
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Insider Activity
Insider buys were pretty slow after a good run, TTE is a nice energy name looking for continuation and got a pretty big buy.
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Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/realaditdayal)