Market Whispers - Here comes the stupid market phase...Excellent!
Markets: Beachman's portfolio tactics based on his read of the markets
We are, no doubt, in the stupid phase of this market - a speculator’s paradise. Who ever is buying stocks now is greedy as measured by the CNN Fear & Greed Index.
WOLF filed for bankruptcy and was up +30%. AAP missed earnings and was up +60%. CRWV up +50% in 4 days after their Q1 earnings report. SPACs are back…remember those puppies from 2021? Crypto was pumping while Trump hosted a secret dinner for the largest TRUMP coin holders. Reports from the dinner were that the food was sub-par, the wine was crap (only 1 glass btw) and security was lax.
Meanwhile, Congress is playing ping pong with the fiscal budget bill that is full of political pork and not enough actual solutions for US macro challenges. The original plan of reducing Federal spending, cutting the deficit and reducing the US national debt…and bring interest rates lower…is not working and has been forgotten in the land of kicking the can down the road. So, now they want to “run the economy hot” to “outrun” the growing debt issue. Meaning…they will stimulate, stimulate, stimmy businesses to push for higher GDP growth which will…apparently bring in more employment, more tax income, more investments, lower inflation etc.
Remains to be seen if this fairy-tale, pixie-dust plan works…
Remember…Trump needs to find a tariff off-ramp and declare a trade war victory soon before he starts talking up all the wonderful business-friendly stuff in the budget bill…with an eye to next year’s mid-term elections.
Meanwhile, as gamblers are FOMOing into such a risky, overbought and overvalued market, it means that we will get another chance to profit. We just have to be patient…
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Table of contents
Overall market conditions
Beachman recommends
Beachman’s portfolio stance
Important dates
Market signals
Beachman’s plan
Overall market conditions
Trend: Rolling over?
Risk level: High. Trying to hold the 200dma.
Investor sentiment: Greed.
Beachman recommends
Each week, I share a recommendation for an app, a book, a website, a podcast, a publication, a movie…anything that I find interesting and useful from an investing and financial management perspective. I don’t get paid to do this. Beachman’s Newsletter has and always will be an ad-free publication. So here goes…
Kai Media’s YT channel about options
This is a relatively new YT channel hosted by Cem Karsan, a former market maker and trader. The videos are focused on options trading and how it could be impacting US markets. They cover broad macro trends & developments and then explain how markets are moving in response. Very informational and highly educational. One downside, they seem to publish content once a month and it could get a bit stale given how dynamic and volatile things are today.
Beachman’s portfolio stance
63% long. 48% hedged.
Established most of my necessary hedges.
Done raising cash in line with my 2025 market roadmap.
3 trades in place (See current trades at Beachman’s Salty Trades).
Important dates
May 28th - NVDA’s Q1 earnings report.
May 29th - Q1 GDP report.
Jun 2nd - ISM manufacturing report.
Jun 4th - ISM services report.
Jun 6th - May jobs report.
For short term trade ideas, check out Beachman’s Salty Trades.
On the daily, you can find Beachman in four places…
Beachman’s Substack chat line here
Beachman’s Substack feed here
Beachman’s X feed here
Beachman’s Threads feed here
Please check out the must-reads listed on the About page and the Roadmap page.
Market signals
Stock market volatility
Over the past two weeks, the SP500 tried several times to get past 5,900 upside resistance and failed. It then rolled over as you can see on the chart below. The index has not seen a new high for more than 3 months now.
So far, it has held key support at the 200dma, around 5,750. Any bad news could take it lower in a hurry.
Similar action and trend for the Nasdaq, with 490 being the line in the sand on the QQQ chart.
We are not seeing many new 52-week highs for individual stocks. Daily trading volume is still tepid. Short term options trading remains dominant and speculation is rampant. Institutions and large funds are not buying. Insiders are selling to clamoring retail buyers at frothy prices. e.g. PLTR insiders have sold an estimated $1B in shares YTD!
These are not signs of a healthy, dependable, investable market.
Bond market warnings
The Japanese bond market had two consecutive days of very poor auctions, where no buyers showed up. Literally no buyers! The Central Bank of Japan had to step in to buy the bonds that were up for sale. QE in action.
Here is the US, long-term, 30-year interest rates climbed to +5%…levels we have not seen for a couple of years and in 2007 prior to that. Bond auctions are not doing well here either.
I explained these risks several times in my writings, including in mid-April here. Bond markets could be sniffing out trouble in the US economy.
When Moody’s recently downgraded the US’s debt rating they told us that interest payments on US debt was 9% in 2021 and 18% in 2024. By 2035, the US will have to spend about 33% of all tax revenue to make interest payments on its debt. These are emerging market levels! The typical AAA-rated country has less than 2% of revenue going toward interest payments.
Investors need to pay attention and manage their portfolio risk accordingly. Watch the 10-year interest rate, currently at +4.5%. As per GS, +4.7% is a pain threshold for markets.
Hedges are in demand
Even though short-term traders are “orgying” and, supposedly, retail investors are buying the dip, everyone and their uncle is also hedging for downside risk.
We want our cake and we want to eat it too. Nothing wrong with that, right?
Speculative options trading has grown significantly in recent years, driven by retail investor participation and increased accessibility through commission-free platforms. As per the CBOE, more than 50% of daily stock market volume (in notional value) is options trading related, with 0DTE trading representing as high as 56% of that volume. These traders open a position in the morning and close it before the end of the day…hopefully for a gain.
Now look at the meteoric rise of Gold in the chart below and ask yourself why is gold up almost +50% over the past 12 months and +28% YTD?
If stocks were really such great long term opportunities, why buy gold and bitcoin? Why speculate for just the day and take your chips off the table before happy hour? Why are so many portfolios hedged today? Why are hedges still expensive?
The most important earnings report - NVDA
NVDA reports their Q1 earnings this week and the entire financial world will be closely watching.
Revenues are estimated at $43B +67% yoy. Over the past four quarters, they have beat estimates by wide margins of +8-14%. So a beat is expected, perhaps already baked into the stock price.
More importantly, we will pay attention to forward looking commentary on demand for their next generation AI GPUs. How is the order pipeline looking? Who are the new buyers on the block? Is sovereign AI really taking off? Chinese sales concerns? Any signs of a slowdown? And whats next in the emerging product roadmap?
Markets are predicting a +/- 7% move in the stock price after the earnings report is released.
Beachman’s plan
So what’s my plan in all of this? How am I navigating these markets now?
Here is how I intend to move forward…