Is Bitcoin the S&P 500 on steroids?

Over the last five days, Bitcoin behaved like the S&P 500 on steroids. Maybe the fact that there are a limited number of Bitcoin that can be issued provides some comfort when investors are facing growing inflation. However, when faced with mounting geopolitical and economic risks, the Crypto cannot compete with safety of good old gold.

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Light at the end of the tunnel

Is the light at the end of the tunnel a sun or a train? Today the S&P 500 entered correction territory as it broke through the magic 4,300 level, or 10% down from its peak . It remained there for the most of the day before recovering in the last hour. This was different from the few previous sessions when strength during the day was replaced by a selloff before closing (bearish sign). The volatility and fear indicator, VIX, during the day came close to 39 (with normal values below 20) pointing towards panic selling and increased pressure from margin calls, before closing around 30 (still high). As Warren Buffet once said, “be fearful when others are greedy, and greedy when others are fearful.” We believe the time to start carefully buying certain names (for a long-term) has arrived. However, catching a falling knife still a risk, as the market could continue its freefall or rebound in a short-term and fall further into a bear market territory (more than 20% down from the...

Santa and the first week of 2022

“Santa paid Wall Street a visit 57 times between 1950 and 2020, according to The Stock Trader’s Almanac, delivering an average gain of 1.3% to the S&P 500 around Christmas. People generally consider the Santa market period to be the last five trading days of the year and first two of the following,” writes Bloomberg's Denitsa Tsekova. If the S&P falls over the first five days, it will be a warning that the markets should expect a turbulent year. Despite its issues, this is a guideline worth monitoring. At the same time, gains in the first week usually indicate future continuous growth during the rest of the year. 2022 is obviously going to be abnormal. It will bring an increase in interest rates, high inflation, problems with supply chains and possibly new ‘surprises’ from Covid-19. However, most of this bad news is already priced in, while the occurrence of marginally better events among many negatives will be perceived as good news. Could 2022 under-promise and overd...

Reopening names are flying

Our high conviction call to invest in reopening names through Travel and Leisure stocks received a huge boost from the Delta Air Lines quarterly results and the company's CEO comments. The positive news improved the long-term outlook not only for airlines, but also for cruises and other companies in the sector. Below is the list of the top 10 holdings of the Defiance Hotel, Airline, & Cruise ETF. On Thursday, Delta Air Lines CEO Ed Bastian said that he believes that "the worst of Omicron is behind us" as the company's operations have stabilized after a challenging holiday season. He added that bookings look "really robust" starting President's Day weekend in February and moving on through the year. However, he expects a difficult time over the next 4-6 weeks amid seasonal slowness and the lingering impact of Omicron. "People are ready to travel. They are ready to book their spring plans. They know Omicron isn't going to be a threat to the...

ATVI: Votes of Confidence From Buffet and Gates

Bill and Warren like Call of Duty .. . "Warren Buffett’s Berkshire Hathaway purchased about $1 billion worth of shares in Activision Blizzard in the fourth quarter, according to a regulatory filing, jumping in before Microsoft agreed to buy the video game publisher for $68.7 billion", wrote Jordan Novet from CNBC. The fact that Buffet, a long-term investor who does the best due-diligence before buying companies, bought a huge stake in ATVI is like a stamp of high quality. Here is the story of ATVI. - The company's stock went down after lawsuits for "numerous complaints about unlawful harassment, discrimination, and retaliation". It was filed on July 20th, 2021, by California's Department of Fair Employment and Housing. As a result, some top managers resigned. - On November 7, the company announced that it will delay two of its biggest launches that were planned for 2022. Share price went down even further. - In the middle of January, Microsoft announced pla...

February: Is the bull in charge?

February bull against the January torero... January was a tough month. Santa Claus failed to deliver a rally. Omicron continued its deadly spread, and inflation went up and decided to stick around. Fed confirmed its commitment to tapering and indicated a more aggressive approach to higher rates. S&P 500 went down and broke the 4,300th level , (a drop of 10% from the highs indicates correction). This correction made safe-heaven mega caps in the Tech sector fall like old trees in a forest. However, the 10% drop was quickly bought and, by the end of the month, the S&P 500 somewhat recovered. The heavy lifting during the recovery was done mostly by retail investors, with institutional money remaining risk averse. As retail investors are momentum driven and much faster than the institutions, this trend points to more volatility ahead. We believe that the Fed's recent announcements regarding tightening and future increases in rates are priced in. We do not expect more unwelcome ...

The Reopening: Online Travel Companies

What do you mean, no direct flight to Mordor? It has become a consensus that the demand for travel is quickly recovering to pre-pandemic levels. In our previous posts, we talked about the potential recovery of Airlines and Cruises stocks. We also expect online travel companies to benefit from increased domestic and international travel activities BUT... The major players of the industry are Booking Holdings ( BKNG ) and Expedia Group ( EXPE ). These companies also belong to the currently unpopular Technology sector. We do not expect a significant upside for the shares of these companies this year. The "helicopter money" from the Fed inflated valuations of the Technology sector, especially companies with business models based on online sales. The withdrawal of liquidity already started to deflate the sector and is likely to continue for the rest of 2022. The online travel companies outperformed NASDAQ 100 year-to-date due to the future benefits of reopening. However, their ...

Ready, Set... January

Over the last 24 years, January has commonly had massive inflows of money to the stock markets through mutual funds and ETFs. On average, it saw more inflows than any other month of the year excluding November. The ' Sell in May and Go Away' approach is supported by the chart posted by Themarketear.com . In the second half of an average year, returning to investing in September seems sensible. Outflows bottom in August, providing a good entry point for capturing increasing investment activity in November – another month of massive inflows. Why does January see fund inflows? We identify two major contributing factors: Bonuses are paid and reinvested (Wall Street recently started talking about 8 digit annual compensations) Fund managers are setting up their positions for the new year Where will the money flow in 2022? We expect the following two sectors to benefit: Travel and Leisure . Omicron, though dangerous and fast spreading, is beginning to be compared to a bad flu by ...

Oil: too far too fast?

Today, the Brent crude futures exceeded $90/bbl, for the first time in the last 7 years. From the beginning of 2021, the oil price went up by about around 67%. At the end of last year JP Morgan forecasted that in 2022 oil price will reach $125 a barrel. T he rally is likely to continue in the long-term due to the limited supply and the roaring post pandemic return of global demand. At the same time, after going too far and too fast, the oil prices are likely to take a breather in the short-term. Below are some thoughts explaining why we believe this. However, only time will tell if at least some of the ideas reflect reality. According to the the agreement with the US, China is going to release some oil (quantities unknown) from its strategic reserves close to the Lunar New Year holidays between January 31 to February 6. This is part of the coordinated international plan to limit growth in oil prices. Chinese government asked its people not to travel from b...

Under the plateau

The historical data summarized by DataTrek Research indicates that the years when S&P500 gains are more than 20%, the following January is likely to be flat. Though there are high chances that the S&P will have a strong first week, it is likely that the upside will diminish by the beginning of February. At the same time, statistically, the years when the S&P gains above 20% are followed by a 12 month period that produces more than a 10% average return (based on the data collected since 1945 by the Centre for Financial Research and Analysis). However, Omicron was absent during those years, as well as its potentially devastating impact on global economies. Even thought Omicron represents a threat to economies and financial markets, its relatively light symptoms and low hospitalization rate may allow investors to look past the negative effects of the new variant. More optimistic views on Omicron, strong January inflows and the expectation of solid annual returns,...

The S&P 500: Is 3,800 the next stop?

Stay Cool... Yesterday, the S&P 500 broke the critical level of 4,300 once again. Today, it drifted further down. In our previous posts from the end of January, we wrote about buying the correction and the possibility of the S&P 500 falling further into bear market territory (more than 20% down from the peak) after a rebound in the short-term . The S&P 500 charts formed the "head and shoulders" pattern that in 93% of cases results in a bear market . It seems possible that if the S&P 500 does not recover above 4,300 soon, it could drop by another 10%. This will get it to around the 3,800 level. Similarly to the beginning of this year, major contributors to the S&P 500 fall would be formerly "safe haven" Tech stocks (Facebook, Amazon, Apple, Netflix, Microsoft, Google) and shares of the smaller growth companies with a limited visibility of cash flows. Unfortunately, if investors start running to the doors, the sell-off might bring down share...

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