Well folks, the geopolitical narrative is heating up as the biggest story from yesterday came after the market closed and it was the shocking news that the US government has asked Nvidia to halt sales to Russia, China, and Hong Kong. This move, while understandable, has ratcheted up the heat and divide between the Western and Eastern nations as earlier this week Egypt also made the unprecedented move to denominate a bond sale in RMB’s (China’s currency). With the waters getting rougher and cash still being trash, now is the time more than ever to do your own due diligence and leave no stone unturned; read on for your daily dose of market inspiration.
“I want to be the best. So whatever comes with that, I have to accept it.”
- Sidney Crosby
MT & Trade Recommendation: $VIX | Timeline: 2 Days
It seemed as though every day of this pullback started the same way, with the futures market trading up before the 9:30 bell and then a gradual sell-off during the day’s trading session - today has broken that mould with the Dow, S&P and Nasdaq currently all down respectively 44, 40 and 70 bps following yesterday’s 1% sell-off of the market. This has pushed the S&P 500 to the cusp of its price channel as it continues to trade along its 200-day moving average support level.
This sustained sell-off has further fueled the volatility with the $VIX maintaining a value above 25 and supports the thesis for a long $VIX trade centred around further volatility after tomorrow’s 8:30 AM employment figures release especially given yesterday’s investor sentiment update which saw the share of bearish investors in the market jump significantly to just over 50%!
Long: Proshares UltraPro Short QQQ (SQQQ-NASDAQ) | Timeline: 1 day
The SQQQ (SQQQ) is a triple short ETF that tracks the inverse of the NASDAQ index. As we mentioned above, the US government has banned Nvidia chip sales to an assortment of hostile countries, and as a result, we believe that the tech market will react poorly to this shocking news. This move is a step up in the breakdown of normalized relations between the geopolitical blocs, those being the USA, Russia, and China. This ban will likely strike fear into the hearts and minds of many market participants especially those in the tech sector. Chinese companies already on the verge of delisting will likely be increasingly fearful as well, and we expect their price action today to match that uncertainty. Although some companies have already begun moving their production out of China, a prime example being Apple switching iPhone production to India, this move will put increased pressure on companies to accelerate that timeline. Due to the 3x leveraged nature of this product, we would implement a stop loss at -7.5%.
Short: Campbell Soup Company (CPB-NYSE) | Timeline: 2 days
Campbell Soup Company (CPB-NYSE), which manufactures and markets food and beverage products internationally has reported earnings this morning. Although they just squeaked by and were able to hit analyst expectations accordingly, the company’s earnings per share (EPS) from continuing operations still decreased to $0.32 - a 66% drop over the last quarter, creating speculation around the stock as we continue to experience rocky market conditions. Turning to the chart, CPB has experienced a hell of a year, rallying 22% as traders and investors hoped to regain their optimism through 2022. However, due to extreme market volatility and uncertainty and the price entering very overbought levels signalled by the MACD and RSI, Campbell Soup is due for a cool-off as it breaks below its rising wedge.
Chart of the Day: Changes in the Swiss Balance Sheet
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