The Super-Bowl of the Stocks is Wednesday (February 19-February 23)
Happy weekend everyone and welcome back to the Rippy Global weekly outlook. The stock and bond markets are closed this Presidents Day. For eleven weeks, bears didn’t get a single win, but they finally got their day after higher than expected inflation numbers this Tuesday. And then the market reversed much of those losses closing down 0.48%. After some eventful earnings releases and macroeconomic data, this should be another fun week.
Let’s take a look at what next week has in store for us!
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Almost every trader over the last week hasn’t been able to keep their eyes off of SMCI, aka Super Micro Computer, which has been on nothing short of an amazing run due to its link to AI servers. This is one of the “instead of gold, sell the shovels” names that people are flocking to- making it really difficult to figure out what the actual valuation of it is when there’s this much volatility attached to it. But most of this volatility is coming from the trading of short term options on the name and the hedging that comes with that as seen by the massive sell-off on Friday. The AI craze will have its “Groundhog Day” this Wednesday during NVDA earnings to see if the music will continue or if the hype has been overdone. SMCI briefly went over $1000/sh, but closed -20% on Friday, right after bagging most of retail:
Hedge Fund 13F’s released this Wednesday giving traders an insight into what positions some of the best managers on Wall Street were in, and we’ll take a look at those in a minute, but first I want to advise against something you’ll see online. Options are reported on these filings, but they are reported as the $ amount the CONTROL, not how much they are worth. They also don’t show their shorts, so a lot of headlines can be misleading/we don’t have enough data to actually interpret it the way it truly is. That being said, some of the most interesting releases this week was Michael Burry’s investment into China names like BABA and JD. Another name I thought was super interesting was Millennium’s investment into eBay and Palantir.
There were signs of persistent inflation this week with there CPI up to 3.1%, hotter than analyst expectations. Core PPI told the same story with it rising at 0.5% vs. and expectation of 0.1%. The market is still very unsure about future rate cuts, with the original expectation around 60% of a March cut a month ago to just 10% now after the data. That didn’t stop the market with inflows still at highs as reported by BofA and the market recovered from the downturn.
Bitcoin continues to run and mining stocks with it as well. What was interesting to me was that mining difficulty has also increased, which can put a strain on mining stocks if price stagnates here. To put simply, to mine a bitcoin, a mathematical problem must be solved to “mine” the coin and the difficulty for that has passed the 80T mark for the first time. Crypto traders are ready for the next “halving” of Bitcoin as a catalyst to trade around after the last one in 2020. I think Ethereum can benefit from the difficulty of Bitcoin mining getting stronger, so it may be something to watch.
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#1) Earnings week is slowing down after what has been a great season, but the finals round is this Wednesday with Nvidia reporting and telling us if the AI craze is something to watch or something to wave goodbye to.
#2) On Monday, the markets are closed for President’s Day.
#3) On Tuesday, there are many catalysts. First, the monthly OPEC oil report will be published for commodes traders, but the big news for quite markets is the CPI report for January which will release at 8:30 AM at an expected 3.7% YoY. MGM (owner of BetMGM as mentioned above) will also be discussing sports betting on their earnings call.
#4) On Tuesday, crude oil futures expire so expect added volatility. The AMD CEO is also speaking during the day before NVDA earnings on Wednesday.
#5) On Wednesday, the Fed will release their minutes notes at 2:00 PM.
#6) On Friday, video game stocks may move on results of sales during January.
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S&P 500
The S&P 500 ($SPX index) continues to trade up in this channel. The 1.618 huge Fibonacci extension is at $508.73 and where I think we may see a small pullback.
My key breaks are $504.04 for bulls and $496.46 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 trading higher after breaking out of this consolidation, but I personally don’t think the move is that long lived and will reject near the gap fill above around $206. Nothing has really changed for this name recently, other than Elon owning more of the stock.
AAPL
Apple is forming a bearish topping pattern here after their earnings and isn’t really keeping up with the market. I think we may top out here and the chart gets pretty bearish under $180, especially after reports of people returning their Vision Pro headsets.
CART
Instacart is an interesting trade here with huge 43% short interest and a mini-squeeze on Friday (as you can see by the price spike and decrease in short interest). Their lockup expired on the 15th and they’ve committed to buying back shares which can make this a super interesting squeeze trade over $28.
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Insider Activity
Insider buys were interesting again with some breakout setups showing up, like PEPG, TNYA, and SANA getting massive hits.
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Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)