Market Update: China, NVDA, Yields, Oil
So lets get all the China stuff out of the way. Another leg lower across China indices in the opening hours of Sunday. CSI1000 was down almost 8% — marking one of the worst decline in years.
I’ve been largely avoiding buying anything China and at this point it seems very likely the markets are pricing in a considerable slow down / deflationary event that is rooted in this specific starting point. It was hard to put one reason for why oil was down so much over the last week given the tensions in the middle east and airstrikes that occurred. IMO — the ceasefire headline was a convenient headline for a critical technical point which solidified weaker demand > war headlines especially once we found the ceasefire headline was withdrawn and the market held lower.
Nevertheless, I’m on my last leg for finding some support here in crude. 72.25 is my closing line in the sand.
Luckily, I’ve been focused on energy names which have held up fine this week. I will find a graceful exit out of my XLE basket on Monday if we don’t see crude reverse meaningfully as this might be a dead weight trade.
So lets say we stop out of the energy basket for a scratch or small loss on Monday, what am I going to focus on next?
Well, not sure. I do think the influx of capital into semiconducters and names like NVDA are a natural target for any kind of slowdown. NVDA is going to get a 13 TD Combo on Monday.
SOXL shouldn’t get back above 34.82
I hate boredom trades but I might do some puts expiring Friday for SOXL and NVDA for a 25-50bps of premium at risk.
I think we nailed the rates move on both the swing highs here and taking off the bonds as yields came into 4.2% on the 30yr. I expect us to not get above 4.3% in the short-term.
This also happens to the “death cross” zone on the 30-year yield.
Besides that, I do really like KRE from a technical perspective. I saw that an analyst upgraded the biggest component, CFG recently. I think KRE could trade up to 60 all things being equal.
So the gist is:
Stop out of energy basket names if crude is still weak on Monday
Punt on some kind of semi short
Try a regional bank long.