March Madness
What else can we say about some of the latest Wall Street antics?
How’s your bracket doing? That’s the popular question following the biggest couch potato week of the year for many, as the NCAA Men’s and Women’s basketball tournaments got underway. Even our cat Phoebe got into it, as you can see if you click on the picture above.
As for the markets, I’ll put it this way: there are weeks where I feel compelled to fill this weekly letter with lots of trends, comments on news and the usual Sungarden risk management-oriented fare. This is not one of those weeks. It is currently flat out…well, flat. I have been watching for signs that the stock market leaders are leveling off, and it continues to look like they are.
The key questions I see in the equity market for the second quarter are these:
If the leaders (FAANG, etc.) falter, will there be a group of undervalued, high-quality stocks that will fill that gap, a la year 2000, when the S&P 500 appeared to barely blink for the first phase of the Nasdaq meltdown?
Will non-US stocks finally catch a bid for more than a moment?
Or, will it be business as usual, with QQQ and SPY being buyable in droves on every dang dip?
I am an equal-opportunity profiteer and risk-manager, so it doesn’t matter to me. But I’ll admit to feeling some optimism that the first one above could occur, as well as the second. And the driver? Probably interest rates and inflation. That is, they are threatening to break out to the upside again, and that would really surprise a lot of folks. This is especially the case for those ignorant enough to have assumed last year that TLT (which owns 20-30 year US Treasuries, the ones the gyrate in price like stocks) was some sort of “buy and hold” portfolio because inflation was licked. I’m not so sure about that.
Here’s the S&P 500, and to show just how “orderly” this upward march has been (no capital in “march” in that instance), I had to pull up a chart of 1-hour prices just to show clearly how tight a range this has been in. A tight range horizontally usually means something wild is about to happen (more wild than that double OT game in the NCAA tourney late Sunday). But a tight range that keeps moving up and to the right like that is a powerful pattern. So it is harder to break, but when it does, look out below. Thus, the intriguing market we find ourselves in as Q1 finishes up.
Meme stocks and Nasdaq and SPACS, oh my!
Then there’s the real “March Madness.” I’ll admit to having absolutely no clue as to how to consistently use charts to analyze the movement of bitcoin. And it seems like meme stocks are multiplying in number, thus making a comeback and causing “animal spirits” to return as in 2021.
That, of course, made a lot of folks overconfident going into 2022, and that was the end of that party. Speaking of parties, the leader of one of the US’s political parties has a newly converted SPAC (Special Purpose Acquisition Company) which is flopping around like it thinks it is Gamestop and AMC from 3 years ago. And don’t get me started on Super Micro Computer (SMCI), which joined the S&P 500 after eating its way through the small cap index food chain. I’ll admit to having bought a single share (not cheap!) simply to see how it trades.
Madness in March. Not just on the court, but in the equity market as well.
The ROAR Score stays at 40 this week, sitting at that still-defensive-leaning mark for the third week in a row. So my 2-ETF portfolio remains at 40% SPY, 60% BIL.
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