Happy Tuesday!

03 SEP 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w36**: Fund Updates + Market Outlook + Question of the Week:

Carbonwolf Alpha, Fund Alpha: 

$QALM #Fund Alpha (Futures Algo Scalping) 2024 YTD Stats:

Total Portfolio Performance for 2023: +167%

Total Portfolio Performance 2024 YTD:  +57.27%

(Risk Level 3 -recently unlocked at 60%+ YTD)

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

TD = Trading Days

Winners and Losers Recent ~3 QALM Trades:

240902 /ES, LONG, LOSS: -100% (Closed, +0TD)

240901 /ES, LONG, WIN: +136.25% (Closed, +2TD)

240830 /ES, LONG, LOSS: -100% (Closed, +0TD)

$Amarok #Amarok II: 2024 YTD Stats:

2023 Closed Trade Win Rate: 2/2, 100%

Total Portfolio Performance for 2024:

Reopening Soon under Amarok II

Observations:

Tailwinds:

+NVIDIA Earnings Reaction. NVDA achieved a double beat on earnings and revenue as well as raising Q3 revenue guidance. Nvidia data center revenue is up +154% Year-over-Year. See Chart1. The Semiconductor giant also authorized $50 Billion in share buybacks.

NVDA Beats Q2 Expectations

Nvidia is so massive that it dwarfs some entire sectors of the S&P 500.

NVDA's S&P 500 Weighting versus entire S&P Sectors:

NVDA Analyst Reactions

+AI Enterprise Growth Continues. Strong momentum continues for enterprise clients in generative AI and cybersecurity. ~45% of Google and Accenture client projects have moved from gen AI proof-of-concepts to product. Accenture is increasing adoption of Google Cloud's gen AI into its platform. Computer Giant Dell beats estimates as AI server sales jump ~80%, fueled by AI wave.

OpenAI and others garner attention and investment from megatech companies -driving the valuations of these AI companies ever higher. See Chart2. Over the past year, AI companies have vastly expanded their office space lease footprints, respectively:

Headwinds:

-Higher Neutral Fed Rate? Many are hoping for the 0% Fed interest rates of Pandemic and before. However, in a new analysis by the Federal Reserve Bank of Richmond Senior Economist, Felipe Schwartzman states, "the Goldilocks rate that is neither too hot nor too cool -may be 1.2% to 1.4% higher than it was before the pandemic.

Even when the Fed finally gets to its publicly stated 2% target, "evidence suggests that, even as inflation returns to trend and monetary policy normalizes, policy rates may remain above their prepandemic level," Schwartzmann continued. Some of the reasons he cited: Private citizens are saving less than before the pandemic, while the U.S. Government is spending a lot more.

If he's somewhat accurate, the 10-year Treasury yield, which ranged between 2% and 3% for most of the past decade, will likely soon be in the low 3% to 4.5%+ range. Ultimately, this results in Businesses and Consumer paying more for loans, credit cards and other financed debts.

-Pending Home Sales. July Pending Home Sales missed expectations by a lot. July estimates were hoping for +0.1%, but fell to -5.5% month-over-month. And, dropped by 8.5% year-over-year. Despite mortgage rates dropping to ~6.35% on a 30-year fixed.

According to National Association of Realtors Chief Economist, Lawrence Yun: "A sales recovery did not occur in midsummer. The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election."

Pending Home Sales Index, seasonally adjusted ties All-Time Low in Pandemic. See Chart4.

Sentiment. Investor Sentiment ending 28 AUG 24: Bullish: ~51.2%, Neutral: ~21.9%, Bearish: ~27.0%. FOMC July Minutes: "…several observed that the recent progress on inflation and increases in the unemployment rate had provided plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision." Both the Chicago and New York Fed Governors advocated for cutting discount rate in July.

SPX Technicals. Close: 5,528.93. VIX: +15.41 = “Neutral.” Fear/Greed Index: 65, "Greed." Key Long support level to hold above this week is ~5,501. Warren Buffett's Berkshire Hathaway achieves $1 Trillion Market Cap. Tech stock see worst day in ~2 years. SPX price action sputtering at July high-levels. Key numbers this Friday: Nonfarm Payrolls and Unemployment Rate to guide Institutions on how to prepare for next FOMC decision. The Street is hoping for a  50bps cut vs 25bps opening salvo.

SPX Historical September Returns:

Question of the Week:

Will the NASDAQ close higher in September than it did in August?

Disciplined Alpha,

MFA

**These two CLOSED proprietary Hedge Fund Updates are for informational purposes only. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.

Happy Tuesday!

27 AUG 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w35**: Fund Updates + Market Outlook + Question of the Week:

Carbonwolf Alpha, Fund Alpha: 

$QALM #Fund Alpha (Futures Algo Scalping) 2024 YTD Stats:

Total Portfolio Performance for 2023: +167%

Total Portfolio Performance 2024 YTD:  +60.25%

(Risk Level 3 -recently unlocked at 60%+ YTD)

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

TD = Trading Days

Winners and Losers Recent ~3 QALM Trades:

240828 /ES, LONG, LOSS: -100% (Closed, +2TD)

240827 /NQ, LONG, LOSS: -100% (Closed, +3TD)

240826 /ES, SHORT, WIN: +150% (Closed, +0TD)

$Amarok #Amarok II: 2024 YTD Stats:

2023 Closed Trade Win Rate: 2/2, 100%

Total Portfolio Performance for 2024:

Reopening Soon under Amarok II

Observations:

Tailwinds:

+Jackson Hole Positivity. Fed Chief Powell greenlit the strong likelihood of a rate cut at the September FOMC, last Friday. "The time has come for policy to adjust; direction of travel clear… Timing, pace of rate cuts will depend on incoming data, evolving outlook, balance of risks." The Fed Chair continued: "My confidence has grown [that inflation is on a path back to 2%]… We will do everything we can to support a strong labor market… Inflation has declined significantly, much closer to objective… Economy continues to grow at solid pace."

The Fed Chair's dovish commentary showcased their belief that there are less upside risks to inflation and more downside risks to employment -reinforcing that a soft landing, where inflation reaches 2% and keeping a strong job market is likely to occur. Street expectations see a minimum of 100bps cuts in 2024, starting in September. See Chart1.

Jackson Hole Symposium Stats:

• Positive Performance Years (1995, 2007)

• 1995: +0.5% during speech, +3.1% until next meeting

• 2007: +0.7% during speech, +3.1% until next meeting

S&P500 Earnings Expectations

+NVIDIA Bullishness. Semiconductor Leader and Megatech reports on Wednesday after the closing bell. Given its oversized weighting in at least two major Indices (ex: S&P 500, SMH, etc.), the market reaction post-earnings results will likely heavily influence Thursday and Friday trading sessions.

NVDA recovered ~$600 Billion in market value since the Yen Carry Trade punished the World Markets on 05 August. Its momo on Wednesday will likely be necessary to return the broader markets to All-Time Highs once again. See Chart2.

Wedbush's Dan Ives: It's "potentially the most important week for the stock market in years" -because NVDA has "the best perch and vantage point to discuss overall enterprise AI demand and the appetite for Nvidia's AI chips looking forward."

Wedbush Analyst, Matt Bryson:

Headwinds:

-Market Volatility (Seasonal and otherwise). Market volatility has swung in both directions. Changing sentiment around the economy will likely bring more short-term volatility in the weeks ahead. U.S. Payrolls revised down by 818,000 pressuring markets lower last Wednesday. Housing will be a key determinant for Fed Pause. Fed likely to start a steady stream of cuts in September.

Chart3 shows the S&P 500's returns in one week and four weeks following outsized (Top ~1%, +1 standard deviations or greater) surges in the VIX. Volatility in the stock market is not unidirectional, since the market's best and worst days tend to cluster together -often creating "V-shaped" recoveries during recession or bear markets.

According to FactSet data, "This pattern also appeared in the most recent period of volatility, when the S&P 500 logged its worst and best days since 2022 on 05 August and 08 August, respectively.

Market Seasonality: End of August has traditionally light volume. September to October are rougher months with higher volatility. Since overall valuations are high, the margin of error is increasingly narrow.

-Weakening Energy. Energy Markets are under pressure from the volatile Middle East conflicts, deteriorating demand outlook and further economic weakness in China. See Chart4.

Energy Prices (as of 20 AUG 24):

As rates go down, consumers have more cash in their hands, driving up demand for oil. However, oil benchmarks have been weighed down by persistent demand-side woes, along with hopes that geopolitical tensions will not see immediate flare-up.

Exinity Chief Market Analyst, Han Tan: "Oil bulls are set to keep struggling until more demand-supporting measures are rolled out across major economies, especially China." China is currently the world's largest importer of crude.

Sentiment. Investor Sentiment ending 21 AUG 24: Bullish: ~51.6%, Neutral: ~24.7%, Bearish: ~23.7%. Federal Reserve Chair Powell: "We do not seek or welcome further cooling in labor market conditions… Task of restoring price stability not complete, but made good progress."

Retail Giant, Target CFO: "The consumer is resilient in the face of significant inflation pressure and expanding costs. They're seeking out value… We're pleased to see normalization in inflation. That's what's helping strength return to discretionary categories."

Goldman Sachs', Kostin: "We maintain our 2025 EPS estimate of $256 (+6% growth), which is below top-down ($269, +12%) and bottom-up ($279, +15%) consensus. Our 2025 sales growth estimate of +4% is slightly below the bottom-up consensus (+5%), but our forecast for margins to expand by 24 basis points to 11.7% is well below consensus (+128 bp to 12.8%)…"

SPX Technicals. Close: 5,625.80. VIX: +15.41 = “Neutral.” Fear/Greed Index: 53, "Neutral." Key Long support level to hold above this week is ~5,501. U.S. Dollar Index continues to trade near the lower end of its bullish trading range, suggesting a break lower is possible over the short-term. Equal-weighted Consumer Discretionary versus Staples continues to stay above the 120 handle support level -suggesting Consumers still strong overall amidst slowing economy. NVDA Market Reaction will likely set tone through Jobs report next week.

Question of the Week:

Will Nvidia outperform or underperform expectations on Wednesday?

Disciplined Alpha,

MFA

**These two CLOSED proprietary Hedge Fund Updates are for informational purposes only. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.