Amazon Wrecked

I discussed how Amazon was topped and done if it tanked on earnings last week. It fell by more than 6 percent at the low today. Support is down around $65 per share.

Amazon in a Precarious Spot

Amazon and Apple report after the bell. Leaving aside extreme outcomes, even a modest miss by Amazon could break a support line that goes back to 2017. Next support below is at $65, though it rises over time. Apple has support in the $120s, but my eye is drawn to the ratio wedge. If Apple misses earnings, the might be enough to break the wedge. When that goes is when Apple is clearly in the process of being dethroned as market leader.

I sold half the Apple puts I bought yesterday because I've almost doubled my money. The rest is free ride.

Update: Amazon fell as much as 20 percent on terrible guidance. Apple wasn't great, but stock is holding up ok with either small single-digit losses or even flat at times. Tomorrow morning's PCE will be the make or break news event for the day. It should come in weak and help a little, maybe not a enough. If it comes in hot, then Cleveland Fed is probably too conservative for October too. That'll kill any talk of a pause/pivot.

Signs of the Bear: Pfizer Murder "Vaccines" and Amazon Suicide Kits

The mRNA shots I've covered plenty of times. As for the suicide kits: (Archive link)

Starting in April 2021, we began urging Amazon to stop

4/ selling suicide kits to households. Unlike other products that could be used for suicide (i.e. knives, ropes), there is no other use for Sodium Nitrite at this level of purity outside the laboratory. And Amazon was bundling SN with other products to basically create

5/ create a suicide kit -- Amazon recommends that purchasers also buy Tagamet to avoid vomiting up the poison, a personal use scale to measure the proper quantity, and the Amazon Edition of the Peaceful Pill Handbook, a suicide manual with an entire chapter on how to die by SN.

6/ Amazon also routinely removed 1-star reviews from grieving family members trying to warn about the dangers. Amazon’s own search engine helped guide people to the product through autofills.

7/ At the time, we were also taking action with Congress and DOJ and the press to stop the pro-suicide forum that directs people to buy this product from Amazon.

Amazon’s lawyers from Perkins told us Amazon would continue to sell SN because they can’t be held liable if

8/ somebody uses one of their products for suicide.

When social mood turns, former heroes turn into zeroes.

Going Short as Rubber Hits Road

Everyone has a plan until they're punched in the face, but the shorting window is opening again this week barring a bullish breakout. The window closes after the Federal Open Market Committee meeting next week.

The bear market still hasn't started yet. It's all computers, traders and derivatives. The casino games. Last week and into this week, it will be the CPI. The bulls are hyperfocused on the minutiae of macroeconomic data and missing the forest for the trees: valuations and earnings peaked. Bear markets are blamed on events, but at heart they are an internal market event driven by social mood. Extreme optimism leads to extreme pessimism.

There is a bullish scenario though: CPI peaks before economic growth weakens. In this scenario, wild speculation ignites again. I don't think this scenario is likely, but it's out there. It also wouldn't last long because speculative activity would quickly flow into housing and commodities, and suddenly we're going to be talking about a double-digit Fed funds rate.

In other words, this is the Federal Reserve's moment. Inflation is on the ropes. They have to deliver the killshot and that will be evidences by major pain in the financial markets. There is widespread disbelief in a major recession, but Europe doesn't appear ready for surrender yet. They're going to shut the lights out this winter. The world saw the effects of lockdowns and Europe is repeating, while China implements rolling lockdowns as part of zero-covid, yet people think this is going to somehow result in economic growth. In April 2020 the market had bottomed and bears were screaming, "How can the market go up when there are lockdowns?" Yet it was all priced in. Now all the economic pain is ahead as far as data goes, but even the bears think the future is some kind of stagflationary growth scenario.

Cryptos are popping. That sure looks like it could develop into a substantial basing pattern if there's any Fed capitulation:

The ES died right at my resistance area in early trading. I could go short at any moment if I see signs that this move isn't going to produce a gap-up overthrow.

Crude oil is wrecking the disingflation party, but ZB is getting constructive for bulls or bears. For myself, my focus is on crude and long-bonds until I see stocks crack because of the dance between these three. If crude rises too much, bonds and stocks tank. If bonds rally too much, it probably means crude and stocks are tanking.

The U.S. dollar is a wildcard. I cannot predict the fallout from its move. In the short-term, dollar down should lift stocks, but a large reason why inflation has died is dollar strength. If a weaker dollar translates into commodities rallies, then the Federal Reserve will be hiking rates soon. For now, dollar strength is also mainly euro weakness. The yen did rally on Friday, but it hasn't continued rallying. I see 1.036 on EURUSD as a likely resistance area.

It will take time, but when the market realizes the dropping CPI is not good news, then we will see "Wave 3" get cooking: Amazon Closes, Abandons Plans for Dozens of US Warehouses

MWPVL International Inc., which tracks Amazon’s real-estate footprint, estimates the company has either shuttered or killed plans to open 42 facilities totaling almost 25 million square feet of usable space. The company has delayed opening an additional 21 locations, totaling nearly 28 million square feet, according to MWPVL.

Friday's Bashed

These are stocks that fell on heavy volume on Friday and have good looking bearish setups. I put Google and Amazon in here and then stopped with BigTech like Adobe, Meta and Nvidia because so many of them showed up in my screen. BigTech is a bears' shooting gallery again if this market is going down. Cloud companies such as Docusign, Salesforce, etc. all look headed for new lows.

Divergences

A bunch of stocks haven't joined in today's pop. There were all doing well during the rally. There could be yet one more pop left. All these charts look like they'd produce a spike on a move up. Having said that, I think it would be a fakeout. This is the fumes stage of the rally.

Chipotle Back to March High

Bearish Looking Charts With Liquid Options

Assorted charts follow.

Hawkish Words from Fed Sinks Rally

The major indexes closed below their long-term support lines from Jan-Feb. The unemployment number for July is tomorrow morning out on Friday.

My trades for today: closed TLT. Closed AAPL and AMZN shots, then reopened AAPL higher in the day. Shorted SPY and IWM with 1 DTE puts midday, closed near close. Have XLE weekly and monthly puts. I don't discuss because they're an afterthought, but still holding all my gold mining calls. I like NEM $55 Nov as a kind of conservative trade. I did a small gamble on SBUX earnings, didn't work out so far. I also bought MPWR puts for September, way out of the money. Ended the day with a lot of cash. I'll post when I think it's all clear to short with reckless abandon, but for now I still expect two-way action in the market.

What I Shorted Today

Aside from ASHR and EWT discussed earlier, I bought puts on these three. All are short-tem positions with short-term options. I even have some weekly puts on XLE. I could exit all of these this week though, as I'm not sure the rally top is in yet. I sold out of Apple at the start of trading, then reentered later in the day. I also have a day-trade short on SPY with 0 DTE puts, which will close today.

Amazon Almost to Gap Fill

Chart includes the after-hours post earnings pop.

Update: This has to hold into regular trading hours to count.

Doomed Markets, Doomed Economy

Here are various trash indicators that, if they go, will unleash total capitulation in the markets, a waterfall crash. A link to view them updated.

The other asset to watch is BTC. Will $20,000 will hold? There's really no floor for BTC once the financial system starts blowing up because most of the DeFi will be wiped out without Fed support, and there will be no Fed support.

Last Stop for Bulls and Bears and Clueless Fed

The blips are no longer all bullish. Mexican peso and treasuries are red this morning along with stocks, while the USDJPY and crude are down too, but those moves aren't as cleanly bullish. The yen was, prior to recent history, inversely correlated with stocks. Crude oil has to fall for a sustainable stock rally, but it can also fall with stocks. Hence why my highest conviction trade has been short energy.

Note that the oil futures curve is in backwardation. The December 2022 contract is at $103 per barrel. If at any moment there is peace in Ukraine, I suspect around $20 will come off the price of oil.

All of the major stock indexes have broken to new lows in the past day. The ES and RTY contracts made new lows this morning, the NQ made a low in the 3pm hour yesterday.

Various pummeled stocks are above their lows in pre-market trading such as ARKK and biotech. Tesla and Amazon are of their lows. New lows are coming in sectors such as financials, maybe industrials if they market indexes go to a new low after the open. I will be watching stocks and ETF such as TSLA, ARKK and XBI for a tell and as the final signal to sell. If those don't make new lows, then the market is experiencing chop and could be headed for a reversal. I will remain short energy though.

Finally, the Federal Reserve delivered a 75 basis point hike as expected yesterday. There was lots of commentary on whether this was good or bad, including that the Fed took 75 bps away in May, only to do it in June. Even the Fed worshippers were asking about the Fed's credibility. If this is what makes you question Fed credibility...you're not gonna make it.

There was one big misstatement. A "subprime is contained" level of stupidity. I say misstatement because the Federal Reserve is incompetent to the point where they don't know what's going on in the economy. In his press conference, Chairman Powell said there was no sign of a recession. He said that the same day the Atlanta Fed's GDP Now model projected 0 percent growth this quarter. They have been cutting forecasts for weeks, which doesn't bode well for the GDP report in July. If the BEA reports a negative number though, then not only are there signs of recession, but we are in a recession and have been for six months. Powell didn't take the view I have which is, signs of recession are everywhere although we might escape a technical recession. No, he's saying there are no signs, and that's ludicrous. All workers who haven't received a double-digit wage increase the past two years have taken a huge pay cut and those cuts will keep hitting as the lagging impact of higher costs roll in via higher energy bills, rent resets, higher mortgage payments, etc.

How Many 60pc Drops in a Bear Market?

Amazon had multiple drops of 40-percent or more on its way to a decline of more than 90 percent.

XLY Next Stop $120

Amazon and IWM Still Linked

ROKU BTC Still On Target, Amazon Still Small Caps

China ADRs: Onwards to Zero

The most important geopolitical question is not Russia and Ukraine, rather it is whether this is a one-off Russian move to stop NATO expansion or if it is the opening move of World War III. China has been quiet thus far and that's being interpreted as China not wanting a conflict, but also note China has been hoarding natural resources and food.

Bloomberg: One Reason for Rising Food Prices? Chinese Hoarding.

By mid-2022, according to the U.S. Department of Agriculture, China will hold 69% of the world’s corn reserves, 60% of its rice and 51% of its wheat. By China’s own estimation, these reserves are at a “historically high level” and are contributing to higher global food prices. For China, such stockpiles are necessary to ensure it won’t be at the mercy of major food exporters such as the U.S. But other countries, especially in the developing world, might ask why less than 20% of the world’s population is hoarding so much of its food.

This month: Xi Says China Can’t Rely on World Markets for Food Security

China can’t rely on international markets to ensure food security, President Xi Jinping told a political meeting, the state radio broadcaster reported on Sunday.

China should focus on its domestic food markets, while making sure it has an appropriate level of import capacity, Xi said during a meeting attended by members of the Chinese People’s Political Consultative Conference.

China is far more nationalistic and controlled than Russia. They do not care about foreign investors or even their own investors. The stock market is a sideshow for China. Cheap, far-OTM puts on Chinese stocks could pay off bigtime if China joins the offensive. Note that you'd probably have to sell before it is illegal to transact in the shares, since the puts might not be exercisable at that point. Companies such as Amazon and Wal-Mart would be annihilated in this scenario and are probably the better bets. Included is an overlay of Amazon and the Russell 2000 ETF.

In war, the biggest loser loses. The relevant equation is how much is China willing to lose and can afford to lose versus the U.S. Which nation is unified and nationalistic? Which nation is fractured and diverse? Which nation has a fragile economy built on the financial markets? The winning move for China might not be kinetic war, but economic and financial war. If China did just enough to get sanctioned, it would collapse the Western financial markets. It might be great for America farmers and a long-term war would be bad for China, but how long does the Biden administration last in this scenario? Hard to say because the American public goes rah-rah for self-destructive wars. But if China gets the Baizuo to damage the U.S. economy more than China's, and there's all evidence suggesting that is a very likely outcome, that's a win for China. If it causes the Baizuo regime to be overthrown by an angry, impoverished American public, then China might win WWIII and escape blame because the Baizuo did it.

Where Amazon Failed

I had my line a little higher at $3114, I adjusted it to precisely the after hours high last night. Amazon announced a 20:1 stock split last evening.

Go Time on Tesla and XLY