Grab a Coffee... We’re Trading All Night

Can old-school traders survive a 24/7 market? [Morning Reckoning] April 23, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Grab a Coffee… We’re Trading All Night Baltimore, Maryland April 23, 2024 [Greg Guenthner] GREG GUENTHNER Good Morning Reader, The New York Stock Exchange is considering moving to 24/7 trading, the Financial Times reports. At the risk of sounding like an old crank, I must admit that I absolutely hate this idea. Sure, the younger generation might love to trade meme stocks and manage their crypto holdings at 3 A.M. But I need what precious sleep I can get. The last thing I want is my brokerage account pinging me with price alerts at all hours… A market that never closes would kill the excitement and anticipation of the opening bell – and the great FOMO buying sprees that have accompanied so many power hours between 3 P.M. and the close. A 24/7 market would lose much of the drama and personality that make the day-to-day grind so captivating. Perhaps I’m overreacting. After all, I’m probably not the only one concerned about trading a market that’s always open for business. In fact, I’d venture to guess that your local technology bull has been pacing the floor most afternoons this month, praying for that closing bell to ring… Yes, the tech trade is taking its licks following a historic Q1 performance. And while I wouldn’t consider the recent downside action panic-inducing, I doubt anyone who recently bought shares of their favorite semiconductor or Magnificent Seven marvel is too pleased with the April drawdown. The Wall Street Journal laid out the ugly numbers in black and white early Monday morning… [Stocks Crash Whenever This Happens]( Ever since 1955, there is ONE indicator that has been 100% right about stocks. Jim Rickards calls it “ [The Black Pattern]( Because it is quite literally an Angel of Death for the stock market. And this Black Pattern is telling us that 2024 could be the worst year for stocks we’ve seen yet. [Get the full breakdown here.]( [LEARN MORE]( The Magnificent Seven mega-caps shed a combined $950 billion in market cap last week. Following this year’s incredible melt-up rally to new highs, this routine pullback now claims the honor of being the largest drop in value ever from this esteemed group. And while there’s no reason to get long-term bearish on the prospects of many of these tech darlings, you can probably figure out why more than half of respondents in a BofA Securities survey claim owning these stocks was the “most crowded” trade on Wall Street, again via WSJ. But the Magnificent Seven names got off easy compared to some less fortunate groups out there. Tech-growth stocks tumbled (many of these plays have been losing ground since early March as rate-cut expectations fell). Consumer Discretionary names dropped nearly 4% on the week, logging their third straight weekly decline Then we have our poor semiconductors… The VakEck Semiconductor ETF (SMH) tumbled almost 10% last week, breaking below a wide consolidation range to levels we haven’t seen since late February. Again, it’s no secret that we’re dealing with some crowded trades here. But any way you slice it, NVIDIA’s 13% drop and Super Micro’s 20% beatdown created some serious psychological pain for the bulls even though both these stocks are up significantly year-to-date. To be clear, I’m not attempting to throw salt in the wounds of any investors taking a hit during this semiconductor downturn. But I do think it’s important to learn to identify when trends like these become overextended — and what you should do when they lose momentum and begin to show signs of a potential breakdown. What’s (Not) Working in This Market… We’ve been talking about some of these bubbly groups since January — and the party was bound to stop eventually. Now, gravity is taking over. I was admittedly early (aka wrong) when I first mentioned a few signs of market froth way back in January. We were entering a seasonally weak stretch for the stock market and I was prepping for choppy, sideways conditions to appear in February, which is usually a tough month for the Nasdaq. Yet as I look back on my concerns from late January, many remain obvious pain points following last week’s tech pullback. First, small-caps were lagging earlier this year following a strong Q4 performance. The Russell began the year in the red and did not break out above its December highs until late February — failing to keep up with the Nasdaq Composite and S&P 500. Select growth names were also noticeably absent from the top movers lists. Tesla Inc. (TSLA) is the most high-profile example. It broke from the Magnificent Seven outperformers after reporting disappointing earnings, losing 25% of its value in January alone. Tech-growth bellwether ARK Innovation ETF (ARKK) was also underperforming by a wide margin in January, no doubt affected by its large TSLA stake and other flagging positions. Fast forward to this week and we have a potential false breakout in small-caps as the Russell 2000 tumbles as much as 9% from its April 1 highs. Meanwhile, TSLA is down a staggering 43% year-to-date and is scheduled to report earnings tonight after the closing bell. Now, the semis are joining the downside party. I think it’s safe to say that we should expect additional weakness to creep in across the market as one of the year’s biggest winners settles into correction territory. Choppier for Longer The melt-up rally that began in early November lasted a lot longer than we initially thought. Now that the momentum has subsided, we should prepare for choppier conditions. That probably means more false breakouts and fewer stocks pushing new highs for the time being… Back when SMCI was ripping higher every day, I laid out your choices: sit on your hands and sulk because you didn’t grab shares, or get to work searching for the next opportunity. For the record, I don’t think a semiconductor correction is the end of the world. But I do think stocks need to go down/sideways for a while. A little pain going into the summer is just what the doctor ordered to bleed off some of the excess enthusiasm. A busy earnings season is already upon us. TSLA and MSFT are coming in hot this week. These reports could set the tone, and align with some other big names that are set to announce numbers soon. That should add to the volatility. The easy weeks are behind us. Time to prep for a little pain as indecision creeps into to an overheated market… Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Are you worried about “Biden Bucks”?]( [Click here to learn more]( All you need to protect yourself and your money is this secret gold investment you see here. This new alternative gold currency is the perfect way for you to sidestep “Biden Bucks” while preserving your wealth at the same time. Just watch this [quick 2-minute video]( for all of the details… [LEARN MORE]( In Case You Missed It… Why Gold Is Just Getting Started Sean Ring, Editor [Sean Ring] SEAN RING Good morning Reader, I hope you’ve been having as much fun as I have watching gold go up, which has been our sole consolation in this mad world. The Powers That Be (TPTB) want a war, and they shall have it, by God! So, the best we mere mortals can do is position ourselves correctly for the inevitable market moves. After all, it’s silly to sit idly by when we can profit from government-induced volatility—of course, that includes upside volatility. Between Jim Rickards, Dan Amoss, Byron King, me, and the rest of our ace Paradigm Press team, we were practically one voice when it came to seeing a big upmove in gold coming. Gold hit its head on the $2,000 ceiling three times (Summer 2020, Winter 2022, Spring 2023) before finally breaking through in late 2023. From there, we had a four-month consolidation where that $2,000 resistance became support. And we’ve been off to the races ever since. After this nearly parabolic rally cools off, we may go into another consolidation pattern. But we could hit $3,000 before the end of the year. As you know, gold is a precious metal used for centuries as currency, jewelry, and investment. Its value is influenced by various factors, like supply and demand, economic conditions, and, especially in this case, geopolitical events (unleashed by incompetent political actors). Many people may be asking themselves, “Is this it? Is the gold move over for now? Will gold fall off a cliff like in late 2011?” Let’s discuss five reasons why the gold price will continue to rise over the next few years. Rampant Inflation Ok, the toothpaste is out of the tube. It’s not Jay Powell’s fault. He relentlessly hiked rates. This is a case of fiscal dominance, which means that Congress is spending like a bunch of drunken sailors. Our national debt is out of control. With the deficits Joke Biden has been running, there’s no telling when things will return to normal. Inflation is one of the most significant factors affecting gold's price. When inflation rises, the value of paper currency decreases, and investors tend to turn to gold as a hedge against inflation. Gold is often seen as a haven during economic uncertainty, and its price tends to rise during periods of high inflation. Since this inflation isn’t going anywhere, count on it to exert upward pressure on gold’s price for years. Growing Central Bank Reserves I know it. You know it. The Fed knows it. Every other damn central bank knows it. Credit: World Gold Council; Sean Ring Since 2009, central bank gold holdings have gone straight up. Central banks around the world hold gold as part of their reserves. According to the World Gold Council, central banks added 673 tons of gold to their reserves in 2021, the most significant increase since 1967. This trend has continued as central banks seek to diversify their reserves and protect themselves against economic uncertainty. The increase in central bank gold reserves will drive up demand for the metal, leading to higher prices. Increasing Emerging Markets Demand Emerging markets, particularly China and India, are significant drivers of gold demand. These countries have a cultural affinity for gold, and it is often used in jewelry, religious ceremonies, and investments. According to the World Gold Council, China and India accounted for 50% of global gold demand in 2021. As these economies continue to grow, demand for gold is expected to increase, leading to higher prices. Heightened Geopolitical Tensions Here we get into the “No shit, Sherlock” stuff. Geopolitical tensions, such as wars, political instability, and trade disputes, significantly impact the price of gold. During times of uncertainty, investors turn to gold as a safe haven, leading to increased demand and higher prices. Joke Biden let his unhinged and unleashed neocons at State start a needless war in Ukraine, which, in all likelihood, will cost America its hegemonic crown. Bibi Netanyahu let the Qataris finance Hamas and had that explode in his face last October. Israel’s IDF isn’t nearly the force the world thought it was. China will never let go of Taiwan. Everyone except the USG gets this. The Global South has had enough of the West. Niger, Burkina Faso, and Mali have thrown out the French. Africom is next. All this makes investors think a new Bretton Woods agreement is likely soon, which is bullish for gold. Market Volatility During economic uncertainty or market volatility, investors tend to turn to gold, increasing its demand and price. If the Treasury’s “fiscal dominance” breaks something in the real estate, money, stock, or bond markets and Chairman Powell can’t clean up the mess, investors will flock to gold. The probability of this happening is higher than any other time I remember. Wrap Up The gold price will continue rising over the next five years due to various factors, including inflation, central bank reserves, demand from emerging markets, geopolitical tensions, and market volatility. While there are always risks and uncertainties in the commodity markets, the long-term outlook for gold remains more than positive. It’s as close to a no-brainer as we’ll likely see in our lifetimes. Investors who want to diversify their portfolios and protect themselves against economic uncertainty must add gold to their investment strategies. All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@dailyreckoning.com. This address is for feedback only. 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