I hope you are well and enjoyed your long weekend. We are heading into another choppy week in the market with all eyes on big tech earnings.
The Big Picture
One of the primary things I am looking at this week is the bond market and whether or not rates have topped out. I am in the camp that rates are at least close to a top and a $TLT risk reversal trade could thus be very profitable. As you are aware, bond prices and bond yields have an inverse relationship. When bond prices go down, the yields go up. I am happy to get into further details on this in our chatroom tomorrow, but for now, just know that when bond prices go down, the yield to maturity will go up.
There are more and more signs that the economy is slowing down. Take a look at the retail sales numbers below. The trend is clearly downward.
The key leading indicator in any economy is the housing market. We have seen over the last 4 months that mortgage rates are going up and, as a result, mortgage applications have been on the way down. The same story is also unfolding with lumber prices.
Option Trades for the Week
I do not have many open trades going into this week. I am mostly waiting on tech earnings, and I plan to set up more trades as the week progresses. The only open trades I have currently are my bearish one on staples for a potential pullback as well as my relative trade from last month.
Tweet of the Week
The tweet of the week for this week goes to venture capitalist David Sacks. This may very likely also be the worst take of the year so far. In defense of Elon Musk, David took to Twitter to claim that poison pills should be illegal! It always amuses me when people who swear by the free market find themselves begging regulators when things are not going in their favor!
Here is my two cents’ worth in response to this bad take by David: No one is forcing anyone to own Twitter shares. That is the beauty of the free market system. In addition, this type of information (e.g., whether a company has poison pills) can be easily found in a company’s bylaws.
One Last Thing:
I am also now on twitter! Let’s connect there as well for more of a dialogue.
To your success,