VIP Post-Market Wrap: 11/16/22 - $TLT Price Action Signals Shift in Market Concern

Today was a key turning point in the market. As of 2:50pm EST we are seeing $TLT up sharply 1.6% trying to break it's 50DMA while risk assets in including ARKK are down 5.3%. This departures in recent behavior where stronger bond prices indicated lower interest rates and a risk-on environment for stocks - particularly risk assets. We've seen this dynamic much of the year as bonds dove along with stocks in record fashion destroying balanced portfolios where bonds usually act as a hedge against stocks. In 2022, with a rare cycle of quantitative tightening, inflation, and interest rate concerns the correlation stopped working. Instead, $TLT became an indicator of risk and an excellent clue when trading markets intraday.

However, after better than expected CPI and PPI numbers followed by a continuation of tech layoffs, and this morning, very bearish commentary on the consumer by Target, market concern is shifting away from inflation and towards recession. This means despite expectations of lower terminal rates, $ARKK $QQQ continue to decline as markets now are looking forward to pricing in an earnings recession as the fed is hurtling down the path of overshooting. Going forward, we can no longer rely on $TLT as a cheat code to assess the likelihood of markets perking up intraday. The excess liquidity of the market from the COVID liquidity injection has now been taken out of the market. We are back to where we should have been all along. Now it's all about earnings. However, there will be winners and losers as consumers shift their spend as we enter this new phase.

Nothing much changes with our process of finding winners... but we should beware of the possibility of an extended bear market and we should forget about that $TLT cheat code. It might work from time to time depending on the story-line of the day, but it's no longer a reliable indicator for the reasons enumerated above.

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Timestamp:
00:21 Ben summarizes the day
01:10 $TLT, $UUP, $ARKK, $SPY & $QQQ
02:15 $TLT again
04:17 $CLFD & $AEHR
06:20 $DRIO & $QUIK
08:10 $ADM & $CELH
09:40 $NVDA & $ZIM
10:42 $DWAC & $PHUN
11:23 $RUM & $CTLP
12:55 $GOEV & $XXII
13:43 $NVDA again

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