June 16: Thinner edge in US equities

#CLF #LKFN #stocks #stockmarket #invest #premarket

The stock market and stocks premarket are showing Summer behaviors. Yesterday was an important day where the Federal Reserve Bank increased interest rates.

Today, June 16, 2022 we will look at stock market action. We look at the overall financial big picture. We found something that we will share with you.

We saw 5 things today:
1. Our model, and most models likely show less edge in the market as interest rates rise. Yesterday Goldman Sachs traded (or discussed) buying the lowest quality of the market yesterday after FOMC to make the largest edge. That is like betting on the slowest horse in the race, because sometimes they win and the payoffs are astronomical. We discuss this in detail.

2. There are still way too many new lows. This is not "The Man" betting against your stock. This is likely a systematic decline in the value of the companies. Once they are falling, they continue to fall because they are worth less intrinsically. Markets are rational. We need to be rational too.

3.1 I discuss Cleveland Cliffs and why it fell. $CLF
3.2: I discuss Lakeland Financial Corporation $LKFN and tease you on why we went short 100% of our portfolio on this one stock. We bought longer-term puts and went naked short the stock.

4. Bond yields, mortgage rates, and auto delinquencies are up. This not helpful for most consumers or savers. Long bond and short-term money rates are up. You can earn 1.27% by opening up a savings account and depositing $1.00 in CIBC NA or slightly less in an account at CIT (both are FDIC insured).

5. Options expire on Friday. Be careful as the larger trading houses and 'big money' teams can move stock prices to ensure their options expire as they want them. I have seen stocks move dramatically in the afternoon, or last hour of trading.

6. COVID is back. hospitalizations are up (running 4% of new cases).


They say to sell in May, and then go away. This is because we have less liquidity in the Summer and stocks tend to weaken during the hottest months when Wall Street goes on vacation.

Today we see less of an edge in the markets.

So many new 52-week lows in an otherwise flat market. The S&P 500 Index was up then down yesterday, ending around flat. However, there were many new lows. This was also true in Fixed Income, with corporate and agency bonds trading lower. Mortgages hit 6.28% on a fixed 30 year.

We also have our CQNS Model picks for today. We may share those as well. Let's see.

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Thanks for listening. This is not investment advice, although we are investment advisors.

Best regards,
Jeff