Minerva Market View for Feb 14, 2024
CPI data coming in hot puts the rally on pause. Here's how we're positioning.
Good evening! CPI came in hotter than expected. The major indices sold off drastically, although the megacaps did recover somewhat before the market closed. No such luck for the small caps and high-beta corners of the market such as ARKK 0.00%↑. We will see over the next couple of days whether this sparks off a broader decline.
In any case, the consolidation period that many were waiting for may finally be here. We still have the PPI number to digest on Friday, and that may be the more important number for the Fed and the rates complex. But the markets are no longer going into it as confident as they were a day back.
We have reduced our long exposure significantly today and added a lot of hedges to balance out the longs. We flipped from long to short on ARKK 0.00%↑ in size and that helped in offsetting the losses somewhat.
In addition to all the divergences and weak seasonality, today we saw a 90% downside volume day. When such days closely follow record highs they don’t bode well for the market:
Portfolio and Performance
Today was a red day for our portfolio but the shorts and hedges helped somewhat. We might see an oversold bounce/relief rally in the next couple of days, which we will use to hedge further for Friday’s PPI number. Just to be clear, the long-term trend is still likely to remain intact, but we may see a dip of 5-10% from highs. As a trader, we’d like to sidestep such dips and benefit from them if we can.
Here’s our current portfolio. We’re 23% net-long:
Watchlist
For tomorrow these are the names we’re looking at shorting based on their price and volume action:
Rising Rates: XBI 0.00%↑ ARKG 0.00%↑ IWM 0.00%↑ TAN 0.00%↑ ARKF 0.00%↑
Short scan: SDGR 0.00%↑ ADM 0.00%↑ HUM 0.00%↑
Overvalued: MDXG 0.00%↑ IAS 0.00%↑ BECN 0.00%↑ MU 0.00%↑ QTRX 0.00%↑ RBLX 0.00%↑ STX 0.00%↑
Big drops: NPWR 0.00%↑ GH 0.00%↑ MQ 0.00%↑ LASR 0.00%↑ IRTC 0.00%↑ EVLV 0.00%↑ INTA 0.00%↑ HCP 0.00%↑ AA 0.00%↑
Insurers: FNF 0.00%↑ FAF 0.00%↑ JRVR 0.00%↑ LNC 0.00%↑ STC 0.00%↑
Boat/RV makers: THO 0.00%↑ WGO 0.00%↑ LCII 0.00%↑ PATK 0.00%↑ BC 0.00%↑ MBUU 0.00%↑ HZO 0.00%↑ ONEW 0.00%↑
On Watch: SMCI 0.00%↑ TSLA 0.00%↑ AMD 0.00%↑
Worth checking out
That’s all for now. Happy Trading! Make sure to follow @MinervaCap on Twitter for real-time updates.