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Michael Lebowitz and Lance Roberts



Articles by Michael Lebowitz and Lance Roberts

The Next Big Shock

November 18, 2021

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Fed’s Williams says “we must think about how to shore up the Treasury Market so it can better endure the next big shock.”

That “big shock” headline and similar comments from Fed President Loretta Mester make us wonder. Does the Fed foresee a big shock on the horizon that could destabilize the Treasury markets? The only apparent events we can think of are a quickened pace of tapering or the coming debt ceiling debate in Congress.

The bond market is also worrying about something. The graph below charts the MOVE index. The index measuring bond implied future volatility is similar to the VIX index measuring equity volatility. Currently, it is on the rise and near the peaks of the last five years, excluding the spike in March 2020.

What To Watch Today

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Crypto’s Crash and Stocks Head Higher

November 17, 2021

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“Crypto’s Crash,” says some financial news headlines. The reality is Bitcoin, Ethereum and others are down about 10-15% in the last few days. The word “crash” may seem appropriate to describe the sharp decline, except 10%+ moves in a matter of days is the norm, not the exception for crypto.

Ignoring the crypto crash, the S&P 500 went higher. The index is up over 25% this year. Despite such an outsized gain, the table below from LPL Research argues we should be optimistic for 2022. Of course, it’s worth noting some of these outsized returns were coming off of major bear market lows such as 1975, 2003, and 2009.

What To Watch Today

Economy

7:00 a.m. ET: MBA mortgage applications, week ended Nov. 12 (5.5% during prior week)8:30 a.m. ET: Building

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Stock Options Expiration Looms

November 16, 2021

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Stock options expiration has been a source of volatility over the last year. Despite a record number of stock options expiring this Thursday, stocks drifted with little concern. As noted yesterday, over the past year, monthly stock options expirations have tended to usher in brief market declines.

Will it happen this week? We do not know, but we do know that the volume of November options is at record levels and that general liquidity is low. The recipe for volatility is in place, so trade with caution and keep an eye on your key risk levels.

What To Watch Today

Economy

8:30 a.m. ET: Retail sales advance, month-over-month, Oct. (1.5% expected, 0.7% in Sept.)8:30 a.m. ET: Retail sales excluding auto and gas, month-over-month, Oct. (0.7% expected,

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Consumer Sentiment At 10-year Lows Spurs Stocks Higher

November 15, 2021

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The latest University of Michigan Consumer Sentiment Survey fell sharply to a new 10-year low. Despite dour consumer sentiment, investor sentiment is optimistic. Stocks rallied on Friday despite little news and light volume. Given the recent spate of weak volume, it doesn’t take much to move markets. Likely some of the impetus is coming from the options markets which seem to be increasingly the marginal driver of stock prices. With options expiration occurring on Thursday, we should prepare for the possibility of significant swings this week.

What To Watch Today

Economy

8:30 a.m. ET: Empire Manufacturing, November (22 expected, 19.8 in prior print)Earnings

Pre-market

7:00 a.m. ET: Oatly (OTLY) to report adjusted losses of 10 cents on revenue of

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Inflation Smacks Stock and Bond Markets

November 11, 2021

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Higher than expected inflation data smacked the stock and bond markets. The CPI inflation data weighed on the U.S. Treasury 30-year bond auction. In the minutes before the auction, bonds were trading at a yield of 1.888%. The auction went off at 1.940%, over .05% higher than expected.

CPI came in at 6.2%, well above expectations of 5.8%, and the stock market tumbled on the news. Concerns are rising the Fed may be well behind the curve and will have to hike rates more aggressively than previously expected.

What To Watch Today

Economy

No notable reports scheduled for releaseEarnings

Pre-market

6:00 a.m. ET: Yeti Holdings (YETI) to report adjusted earnings of 59 cents on revenue of $356.93 million6:45 a.m. ET: Tapestry (TPR) to report adjusted

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Tesla Shares Stumble & Drags Down The Market

November 10, 2021

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Tesla shares (TSLA), after gaining about 50% over the last month, finally succumbed to financial gravity, falling 12%. As a result, TSLA’s decline accounted for almost all of yesterday’s S&P 500 decline. Given the winning streak, TSLA and the market were on, such a down move was expected.

Also concerning for investors, PPI is running at 8.6%. Such high inflation foreshadows profit margin pressures on companies that can’t pass on higher costs to consumers. CPI, due at 8:30 am ET, will provide a more complete picture of inflation.

What To Watch Today

S&P 500 Drug Down By Tesla Shares

As noted, the S&P declined 0.33% yesterday almost entirely due to the decline in Tesla shares. The market did manage to recover from the low a bit near the close,

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Elon Musk Puts Tesla’s Fate in Twitter’s Hands

November 9, 2021

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Elon Musk, head of Tesla and its largest shareholder, once again surprised the market. Over the weekend, Elon Musk put out the survey below asking Twitter followers to sell 10% of his Tesla holdings. About 58% of the 3.5 million people that voted support his proposal to sell. In reply to his survey, he says he will “abide by the results.” Elon Musk owns nearly a quarter of Tesla. Shares in Tesla fell 5% yesterday. But, surprisingly, his survey and its results did little to slow down the broader market.

What To Watch Today

Economy

6:00 a.m. ET: NFIB Small Business Optimism index, October (99.5 expected, 99.1 in September)8:30 a.m. ET: PPI Final Demand, month over month, October (0.6% expected, 0.5% in September)8:30 a.m. ET: PPI excluding food and

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Bulls Push Stock Market Valuations To Extremes

November 8, 2021

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The S&P 500 “buying” stampede continues, pushing stock market valuations to extremes. As of Friday, the Shiller PE valuation rose above 40. As noted in “Did The Fed Set The Market Up For A Crash,” current valuations now dwarf that seen in 1929 and only bettered by the latter months of 1999.

While the stock market rallies, pushing valuations higher, there are concerning signs a peak may be near. For instance, the VIX volatility index is higher. Typically stocks and volatility are negatively correlated. Thus, at the rare times when they do move upwards in unison, a reversal in stock prices is expected.

What To Watch Today

Economy

No notable reports scheduled for releaseEarnings

Pre-market

6:30 a.m. ET: Coty Inc. (COTY) to report adjusted

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Nvidia Stock Pops and Crude Oil Dumps

November 5, 2021

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Nvidia stock (NVDA) and crude oil went in two separate directions yesterday. Nvidia is the newest market darling, rising over 12% on the news they will announce a “platform for connecting 3D worlds in a shared virtual universe.” As we saw with Tesla and Hertz, it doesn’t take much to get the animal spirits in this market roaring.

Crude oil opened Thursday morning with gains of over $3 a barrel. Traders were optimistic because OPEC was not persuaded by President Biden’s call to produce more oil. After peaking at $83.50/barrel, at around 10 am, crude was dumped. It hit a low near $78 before recovering a little by the end of the day.

What To Watch Today

Economy

8:30 a.m. ET: Change in non-farm payrolls, October (450,000 expected, 194,000 in

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Fed Says No Interest Rate Hikes in Sight, Market Rallies

November 4, 2021

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Fed Chairman Jerome Powell makes it clear there are no interest rate hikes in sight. “The level of inflation we have right now is not at all consistent with price stability.” As he states, inflation is a problem, but he seems willing to ignore it to nurse the employment market back to full health. On the rather dovish outlook, stocks extended their recent rally into more extreme overbought territory. Stocks are now pushing more than 2-standard deviations above the 50-dma.

With all of our signals extended and overbought, we continue our process of raising cash, hedging risk, and rebalancing portfolios to models.

What To Watch Today

Economy

7:30 a.m. ET: Challenger job cuts, year-over-year, October (-84.9% in September)8:30 a.m. ET: Initial jobless

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Avis Stock Price Goes Through the Roof

November 3, 2021

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Avis Budget Group Inc. stock (CAR) was up 215% yesterday morning before sellers pushed it lower. Despite decent selling pressure later in the day, it closed up over 100% higher on the day. The impetus behind the massive gain is a combination of solid earnings, a new share buyback program, short-covering, and rumors they may buy Tesla cars. EPS of $10.74 was more than $4 above expectations and well above its 2019 pre-pandemic earnings of $3.98. CAR is up almost ten-fold since 2019.

Stocks continue to grind higher, seemingly unconcerned about today’s Fed meeting. At 2 pm ET, the Fed will release its statement on monetary policy. Expectations are for the Fed to begin tapering QE by $15 billion per month. Jerome Powell will follow up with a press conference at 2:30 pm ET.

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Tesla Stock Soars as The Market Drifts

November 2, 2021

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Once again, the stock of Tesla soared on the back of options traders. The call volume on Tesla alone last week was 8 million, which accounts for about 8% of total options volume. Because of Tesla’s high stock price and implied volatility, the 8% figure grossly understates its influence on the options markets and market indexes. As we share below, the total premiums outstanding on Tesla call options are over 50x that of the next largest premium, Amazon. Dare we say, as goes Tesla as goes the market?

What To Watch Today

Economy

 No notable reports scheduled for releaseEarnings

Pre-market

6:40 a.m. ET: Marathon Petroleum (MPC) to report adjusted earnings of 70 cents per share on revenue of $25.65 billion6:45 a.m. ET: Estee Lauder (EL) to report adjusted

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Ford Cruises & Facebook Becomes Meta

October 29, 2021

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Ford and Facebook both rose yesterday, along with Amazon and Tesla, to help the S&P 500 brush off Wednesday’s late-day decline. For the day, the index rose nearly one percent. Ford helped boost the market’s mood, jumping over 8% as they smashed earnings estimates for the third quarter. In addition, Facebook is trying to improve upon its tarnished image by changing its name to Meta. (I guess MySpace and ZuckBook were already taken.) Effective December 1st, FB will trade as MVRS.

More importantly, GDP weakened to 2.00% in the third quarter, well below estimates of 2.70%. While the first estimate gets matched to economists’ estimates, we will likely see the subsequent two calculations track lower toward the Atlanta Fed’s 0.2% forecast. PCE, the Fed’s preferred inflation

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Microsoft and Google Couldn’t Keep the Market Green

October 28, 2021

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4.20% and 4.80% gains from Microsoft and Google, respectively, were not enough to offset a late-day market sell-off. Despite their significant gains and 10% contribution to the S&P 500, the market ended lower by half a percent. Bond yields fell sharply with the 30-year UST bond leading the way, down ten basis points. Economic data continues to show signs of weakening, yet the Fed is on the precipice of tapering QE. Might the bond market be warning us of a mistake in the making by the Fed?

What To Watch Today

Economy

8:30 a.m. ET: Initial jobless claims, week ended Oct. 23 (288,000 expected, 290,000 during prior week)8:30 a.m. ET: Continuing claims, week ended Oct. 16 (2.420 million expected, 2.481 million during prior week)8:30 a.m. ET: GDP

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Investors Brace Themselves for a Flood of Earnings & Fed

October 27, 2021

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Volatility is picking up as investors brace themselves for a flood of earnings announcements this week and the Fed meeting next week. The VIX volatility index closed up 5.60% on Tuesday even though the S&P was up 0.15%.

Facebook (FB) fell 5% on Tuesday despite better than expected earnings. Dragging on the stock is weaker than expected revenues and reduced expectations for Q4 revenues. The political scrutiny on FB is also not doing shareholders any favors.

FB is down over 20% since September and is close is flirting with the 200-dma. It is currently repeating its price action from March, where it found support and rallied to all-time highs. However, investors may want to be more cautious about the stock for now until price action improves.

What To Watch

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Tesla Joins The Trillion Dollar Club

October 26, 2021

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Tesla jumped over ten percent bringing its market cap to over one trillion. Hertz announced it will buy 100,000 cars from Tesla, making over 20% of its fleet electric. The order is worth $2 billion but resulted in a $100 billion jump in its value.

“Following Tesla’s better than expected 3Q results, MS Research raised their price target to $1,200 (from $900 previously) and reiterated their OW rating. The change in target is driven predominantly by higher volume. MS previous forecast of 5.8 mm units by 2030 implied an annual growth rate of 23% (from 2021 to 2030) which trailed overall EV market growth. MS revised volume forecast of 8.1mm by 2030 units implies an annual growth rate of 28% which is slightly more than 1/2 the 50% growth rate targeted by the company over the

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Trump Social, SPACs, & Why Paypal Wants Pintrest

October 25, 2021

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Trump’s “Truth Social” and the Digital World Acquisition Corp ($DWAC) SPAC is all the rage while Paypal (PYPL) wants to buy Pinterest (PINS). Prior to Wednesday, DWAC shares traded within pennies of $10, day after day. On Wednesday, the SPAC announced plans to merge with Donald Trump’s newest social media venture. The share price rose to $45 the first day and now trades around $100 a share. After everything we have seen for the last year, chalk this up to just another example of wild speculation.

Powell took the wind out of the market’s sail. In a speech, he admitted inflation is more persistent than he prefers. If it continues, we could likely see interest rate hikes sooner than expected. While only down slightly, the S&P 500’s seven-day winning streak was snapped on

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Stocks Hit All-Time Highs As Rally Continues

October 22, 2021

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After six exciting green days, stocks hit all-time highs on Thursday as the rally continues. This morning, futures are softer following weak earnings reports from Snapchat (SNAP) and Intel (INTC).

Earnings continue to dominate the news feeds and push individual stocks and markets around. Expect those stocks with earnings announcements to have larger than normal moves. Jerome Powell speaks this morning at 11 am ET. Pay attention to whether or not he sticks with the plans for QE as the recent Fed minutes discuss.

We suspect he will.

What To Watch Today

Economy

At 9:45 ET this morning we will see:

Markit U.S. Manufacturing PMI, October preliminary (60.5 expected, 60.7 in September)Markit U.S. Services PMI, October preliminary (55.2 expected, 54.9 in

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Stocks Climb Toward Highs As Earnings Roll In

October 21, 2021

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Yesterday, stocks advanced for the 6th day heading towards previous highs as earnings roll in. With little economic news on the calendar, there was little to worry traders currently. The S&P closed inches shy of a record high, while the Dow Jones Industrial Average did set a new high. The NASDAQ fell slightly as technology got weighed down by rising interest rates.

The volatility and downward momentum of just a few weeks ago seems like a long-lost nightmare. The trend is clearly upward, although a test of the 50-dma is still in order to confirm the recent break above resistance.

What To Watch Today

Economy

8:30 a.m. ET: Initial jobless claims, week ended Oct. 16 (297,000 expected, 293,000 during prior week)8:30 a.m. ET: Continuing claims, week ended Oct.

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Bitcoin and $BITO Mania Grip the Stock Market

October 20, 2021

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$BITO, the first Bitcoin ETF was issued Tuesday morning. The ETF provides retail investors their first true access to Bitcoin without having to open up a crypto wallet account. BITO tracks bitcoin futures and is expected to track the cryptocurrency much closer than the Grayscale Trust (GBTC).

Stocks rallied alongside BITO and posted a fifth straight green day. The index is now well established above its 50dma and aiming for new record highs. However, not surprisingly, the market surge has quickly taken the index back to overbought conditions short-term. Such suggests we could see some consolidation, or a potential retest of the 50-dma, before attempting all-time highs.

What To Watch Today

Economy

7:00 a.m. ET: MBA mortgage applications, week ended Oct. 15

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China Slows As The S&P 500 Goes Into Rally Mode

October 19, 2021

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Despite China’s economic growth coming to a standstill, with only 0.2% growth in Q3, the S&P 500 was in rally mode. While stocks grind higher, bond traders are warning of slowing growth in the U.S. ahead. Treasury yields curves are flattening as the probability for the Fed to increase interest rates rises. Based on the market-implied expectations, traders now think the Fed will raise rates by 25 basis points twice next year.

U.S. stock futures ticked up as a slew of companies released earnings, which investors parsed for insight into how corporates are faring with inflation and supply-chain disruptions. Via the WSJ:

“Futures for the S&P 500 rose 0.4% Tuesday, indicating that the broad market index will rise after the New York opening bell. Contracts for the

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S&P 500 Retakes 50-dma As Bulls Swoop In

October 18, 2021

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The S&P 500 finished the week above its 50-dma after bulls sparked a mid-week rally that carried into Friday’s close. The yield curve flattened last week as 10Y Treasury yields gave up a few basis points, while 2Y yields increased due to rising inflation expectations. Earnings will be the primary focus this week as we get into the thick of reporting season.

This morning futures are slightly lower which is not surprising after a big move last week. A test of the 50-dma that holds will be a bullish indication setting the markets up for a test of all-time highs. Upside momentum is returning to the markets and in the process, the technical damage done to stocks from early September through early October is getting repaired.

The big concern in the near term remains the

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Bulls Charge As Earnings Season Gets Underway

October 15, 2021

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Yesterday, the “Bulls” gained control of the ball from the “Bears” as earnings season got underway. After a successful retest of the 100-dma, the bulls charged to the critical 50-dma resistance level. The S&P 500 remains stuck between the 50-dma and the 100-dma over the last month. However, with the “seasonally strong” period of the year underway, the bulls look like they will attempt a run to all-time highs.

There are quite a few headwinds that could still trip up the bulls, so it is worth keeping some risk controls in place. In addition, as we have noted previously, breath and participation remain weak, which historically tends to limit upside in the near term.

What To Watch Today

Economy

8:30 a.m. ET: Empire Manufacturing, October (25.0 expected,

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The Fed’s FOMC Minutes Suggests Taper Will Start In November

October 14, 2021

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The Fed’s FOMC minutes from the September meeting suggest the Fed will taper its asset purchases by $15 trillion a month starting in November. At that pace, the current $120 trillion of QE will get zeroed out by July. Currently, there was no timeline to raise interest rates, but over the last few weeks, Fed Funds futures have priced in greater odds of rate hikes in 2022.

For instance, the June 2022 contract now implies a 25% chance of a tightening by June. The odds were near zero in mid-September. The December 2022 contract suggests a 100% chance of a 25bps rate hike and a 50% chance of a second hike by the end of the year.

With more certainty around the Fed’s next steps, the markets are entering a new regime. Is your portfolio ready?

What To Watch Today

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Inflation Is On Today’s Docket As Fed Gears For Taper

October 13, 2021

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Today we will get the latest reading on inflation as the Fed tapering QE in November seems to be a foregone conclusion by the markets. At this point, today’s CPI report, tomorrow’s PPI release, and other inflation data, along with continuing improvement in the labor markets are key factors for investors to watch. It is these economic stats that will help guide the Fed’s pace of reducing QE. JOLTS information, discussed below, provides more evidence the labor market is healing nicely.

What To Watch Today

Economy

7:00 a.m. ET: MBA Mortgage Applications, week ended Oct. 8 (-6.9% during prior week)8:30 a.m. ET: Consumer price index, month-over-month, September (0.3% expected, 0.3% during prior month)8:30 a.m. ET: CPI excluding food and energy,

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Market Sell-Off Sets Up Critical Test Of Support

October 12, 2021

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The market’s sell-off yesterday sets up a critical test of support at the 100-dma. Last week, the market was able to regain the 100-dma as stocks rallied off lower support. The decline yesterday left stocks touching the running moving average. It is a critical technical juncture for stocks. If stocks can hold the 100-dma, it will provide a support level stocks can build off of for a push higher to the 50-dma. A failure of that support will lead to a retest of recent lows or potentially more. With a lot of economic news and earnings releases this week, it is hard to guess where markets will head to next.

What To Watch Today

Economy

6:00 a.m. ET: NFIB Small Business Optimism, September (99.5 expected, 100.1 during prior month)10:00 a.m. ET: JOLTS Job

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Market Futures Sink As Oil Breaks Above $80

October 11, 2021

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This morning market futures are pointing lower as oil breaks above $80 and bond yields rise. Furthermore, investors need to fasten their seat belts, for a busy week full of economic data, Fed minutes, and corporate earnings. The market gets a rest from data today due to the Columbus day holiday. Between CPI, PPI, Retail Sales, and JOLTs, all set for release this week, the Fed will have a new round of data to guide their tapering decision. Expect more tug of war in the markets as investors deal with new data.

What To Watch Today

Economy

No notable reports scheduled for releaseEarnings

No notable reports scheduled for releasePolitics

The U.S. House of Representatives and Senate are both out of session until Oct. 18.The World Bank Group and

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The Bulls Have The Ball And Are Running For The 50-dma

October 8, 2021

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After Wednesday’s impressive rebound the bulls are regaining confidence and attempted a run for the 50-dma yesterday. With control back in their hands, the first big test will be getting the ball past the 50-dma for an attempt at the “end zone” of all-time highs. The bears will likely set us a strong defensive front at the 50-dma, leading to a battle royale for market control in the coming days. Today’s BLS unemployment report may play a big role in picking the winner of this battle.

This morning futures are flattish (at the time of this writing) as we await the employment report at 7:30 am this morning. Will the report be strong enough to cement the Fed’s “taper” decision in November? Or, will a weak report potentially put a pause on the reduction of liquidity? For

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Futures Higher On Short-Term Debt Ceiling Resolution

October 7, 2021

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Futures are rising again this morning after a short-term resolution to the debt-ceiling got offered by Senate Minority Leader, Mitch McConnell. Investors have been on a roller coaster since last Friday with the market swinging between support and the 100-dma. The wild-ride on Wednesday, not only retested recent support level lows, but took out the 100-dma by the close. A follow-through rally today could put the market on track to retest the 50-dma.

If the market can muster a couple of days of a rally, and clear the 50-dma, we will likely trigger the all-important MACD “seasonal buy” signal. Such would confirm the official start of the seasonally strong period. While it is very possible we have seen the highs for this year, the markets are oversold enough now for a 3-4%

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Market Set To Drop After Rebound Over Debt Ceiling Woes

October 6, 2021

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The market is set to drop after yesterday’s rebound as debt ceiling woes continue. From a frenzied Friday to manic Monday, a rebound on Tuesday, it has been a rocky start to October. However, don’t believe the media hype that recent market gyrations are abnormal. They are not. In fact, since 2019, the S&P 500 changes by .87% a day on average. Over each of the last four days, it has moved on average by only 1.28% per day- not much more than average. Ignore the media hype and focus on the technicals. With yesterday’s gains, we are not out of the woods but there are not many signs of significant trouble ahead either.

What To Watch Today

The Debt Ceiling – It’s Bad Either Way

“With just under two weeks to go before the pivotal Oct. 18 deadline, Treasury

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