What to know today

  • It was already going to be an interesting week.
  • GME and this infinite goof.
  • Watch these IYT and TLT levels.
markets

Stop Breaking Down

There’s nothing to see here, yet.

It’s tempting to read another in a series of technical glitches to affect financial market trading in recent weeks as part of a story of impending doom.

What happened during a software update at the New York Stock Exchange to cause approximately 40 stocks to be halted and for some to be quoted at outrageous discounts to their previous closing prices is all too prosaic in the computer age.

It just so happens that it’s the third such disruption within a week. InteractiveBrokers chief strategist Steve Sosnick told Bloomberg it’s “a little weird, but almost undoubtedly coincidental.

“We’ve gotten used to huge amounts of uptimes without exchange incidents, so when a couple of glitches in a row occur it is notable.”

It’s also notable when Warren Buffett’s company is down 100 percent.

A computer glitch at the New York Stock Exchange caused a 99.97 percent drop for Berkshire Hathaway $BRKA class A shares on Monday, June 3, 2024.

Setting aside the ghosts in the machines, the major equity indexes were mixed on Monday, after all that, with the S&P 500 rallying into the close for a modest 0.11 percent gain. The Nasdaq Composite was up by 0.56 percent.

The Dow Jones Industrial Average was down 0.30 percent, and the Russell 2000 shed 0.50 percent.

Looking forward to Friday’s release of May labor market data by the Bureau of Labor Statistics, investors, traders, and speculators saw a contracting Institute for Supply Management manufacturing gauge as grounds for a rate cut.

The ISM indicator declined to 48.7 in May from 49.2 in April to its lowest level in three months and well below a consensus forecast of 49.5. Readings below 50 indicate contraction.

A steep decline for crude oil despite an announcement by OPEC+ that it would maintain production cuts reflects reduced fuel consumption as well as higher output from non-cartel countries, including the US.

Brent crossed below $80 per barrel for the first time since February, and West Texas Intermediate hit a four-month low as well. 

The Energy Information Administration recently reported thatAmericans burned an average of 120,000 barrels of gasoline per day less in March than they did a year earlier. That could be about efficiency gains and a greater share of hybrid and electric vehicles in the fleet.

It is no doubt a good thing for US consumers concerned about inflation.

Everyone expects both the Bank of Canada (Wednesday) and the European Central Bank (Thursday) to begin their rate-cutting regimes this week, setting up a divergence scenario among major monetary policymakers.

We’ll see how long the Federal Reserve holds out.

deep dive

Can’t Stop, Won’t Stop

The meme-ification of markets continues.

Monday will probably go down as one of the weirdest trading days ever.

For a brief moment early in the session Warren Buffett’s Berkshire Hathaway $BRKA was down 99.97 percent and Roaring Kitty’s GameStop $GME was up 44.16 percent.

That BRKA price was due to a computer glitch at the New York Stock Exchange, and no trades will clear at $185.

But that GME price is as real as can be, and it looks like this tale’s antihero is sitting on what could be a hundred-million-dollar profit.

Roaring Kitty was up about 48 percent, or about $85 million, on his GameStop $GME position on Monday, June 3, 2024.

According to Unusual Whales, Roaring Kitty disclosed on Superstonk on Sunday that he was the “unusual whale” who’d been accumulating $65 million in GME $20 calls expiring on June 21 during the preceding seven days.

His position value at the time was approximately $200 million.

On Monday morning, when GME peaked, Roaring Kitty’s calls alone were worth $250 million. That’s about a 300 percent return.

RoaringKitty, who has held all his shares and all his calls, posted an update to his GME position after the close on Monday.

He was up 48 percent on the day, or approximately $85 million dollars.

deep dive |
June 4, 2024

Can’t Stop, Won’t Stop

WEEKLY MARKET OUTLOOK

Where You Really Need To Look

Transports and Treasuries are sending ominous signals.

Mish Schneider makes a great point at the top of her Weekly Market Outlook: Before consumers can consume anything you gotta move it from point A to point B, with perhaps multiple stops in between.

That’s why Mish has been watching the iShares US Transportation Average ETF $IYT for weeks now.

IYT has been up and down lately, rallying through the end of last week but starting off this week in the red.

The iShares Transportation Average ETF $IYT, an important indicator of economic activity, is testing a key level of support.

Mish’s concern is that the transportation ETF is “a really accurate sign of contraction in the US economy, which could be leading to stagflation, or it could be leading to recession.”

Mish identifies a couple of key levels to monitor for IYT: “One, of course, would be last week's low at 62. That breaks down, I would be very selective about buying equities.

“If it holds over 64, that's kind of pivotal. And if it gets to 65, well, you know what, there's that summer rally. But the summer rally right now to me is a little bit suspect.”

Answers to questions about broader health can also be found in long-duration bonds, specifically through the iShares 20+ Year Treasury Bond ETF $TLT.

[The iShares 20+ Year Treasury Bond ETF $TLT has rallied well off its April lows.

“So far we haven't been too worried about it, even with these little rallies in TLT that we've seen,” Mish notes.

What we want to monitor, according to Mish, is price action should the Fed start to cut.

“You don't want the Fed to be nervous about the fact that the yield curve has been inverted for so long, most people have written off the idea of recession,” Mish explains.

But if the Fed actually starts to cut and TLT rallies “that could be a big sign of either A, stagflation coming, or B, a recession.”

Mish says the “pivotal” level to watch for TLT is 90. “And if you look at the momentum, the real motion indicator on the bottom of the chart, notice how well that is gaining in momentum since last week.

“We are well off the April lows.”

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