Happy Tuesday!

05 NOV 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w45**: 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:  +76.90%

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

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

$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:

+Apple and Amazon Advance. Megacap Titans AAPL and AMZN topped estimates with a double-beat on Revenue and EPS, respectively.

AAPL Q4 2024 Revenues

Apple CEO, Tim Cook: "Today Apple is reporting a new September quarter revenue record of $94.9 Billion, up to 6% from a year ago… During the quarter, we were excited to announce our best products yet, with the all-new iPhone 16 lineup, Apple Watch Series 10, AirPods 4, and remarkable features for hearing health and sleep apnea detection. And this week, we released our first set of features for Apple Intelligence, which sets a new standard for privacy in AI and supercharges our lineup heading into the holiday season."

Forward P/E Ratio Comparison

Top Seven Market Capitalization Comparison as of 01 November:

AMZN Q3 Highlights

AMZN Q4 Guidance

Amazon CEO, Andy Jassy: "AWS AI business is a multi-billion dollar revenue, run-rate business that continues to grow at a triple digit YoY percentage, and is growing more than 3x faster at this stage of its evolution as AWS itself grew…

It is a really unusually large, maybe once in a lifetime type of opportunity. And I think our customers, the business and our shareholders will feel good about this long term that we're aggressively pursuing it… We're aggressively pursuing AI as a once-in-a-lifetime type of opportunity."

+Strong Macro Backdrop. Pending Home Sales (September) hits highest levels since March. SEP Pending Home Sales increased regionally -nationwide. See Chart1. Although it's difficult to tabulate how much of a downside surprise in jobs was due to strikes and storms, this week's FOMC decision is very likely to be an easy call with an expectation of a 25 basis point cut on Thursday.

Strategas House View: "The total profit for S&P 500 Q3 is expected to be $20.8 Billion and of that amount, tech and comms are expected to contribute $20.2 Billion."

UBS House View: "With tech valuations having recovered more than 15% from their August lows, the bar is high for the sector to strongly "beat and raise." But early results from key semi names pointed to healthy and sustainable AI demand."

Goldman Sachs Global Head of Hedge Fund Coverage, Tony Pasquariello: "The opportunity set in macro trading is opening back up… Equity risk/reward will be iffy until the election outcome is clear… After which the technicals to year-end should be very favorable.. Longs in U.S. equities are married with steepeners in U.S. rates… Risk setting should be 5-of-10 (or less) from here to November 5th."

Headwinds:

-Election Peaking Volatility. Election volatility is ramping to a fever-pitch as the next President of the United States will be decided. According to CNBC's All-America Economic Survey the Voters' Top Issues are starkly divided amongst voters. See Chart2.

Tax Policy Focus

Former PIMCO Managing Director, Paul McCulley: "[Under Trump] More likely to boost the fiscal deficit over the longer turn… Trump's threat to massively hike tariffs is decidedly stagflationary."

Wells Fargo Securities Managing Director and Head of U.S. Large Cap Bank Research, Mike Mayo: Banks under Harris and Divided Government: "Neutral to slight positive for the banks… Higher capital requirements and perhaps reduction in regulatory costs… less government spending and lower inflation, rates and GDP."

-Jobs Report Larger Miss. The U.S. Economy added only 12,000 jobs versus and estimated 100,000 jobs in the most recent Jobs report. Despite the downside surprise miss, the Broader Markets showed remarkable resilience and closed higher last Friday.

October Jobs Report

Sources of Jobs

Likely potential causes of the weak report:

• Hurricanes / Storms (See Chart3)

• Large-scale Strikes (Eastern Ports, Boeing, etc.)

• Low survey response rate

Sentiment. Investor Sentiment ending 30 OCT 24:

Truist Wealth Co-Chief Investment Officer, Keith Lerner: "The bull market trend is more likely to continue than reverse… positive market trend is supported by the most aggressive global monetary easing cycle underway… Elections matter but the business cycle, monetary policy, future of AI matter more to the markets."

CFRA Research Chief Investment Strategist, Sam Stovall: "Investors see the resiliency of the economy and employment forcing the Fed to be slower to lower on rates… Markets driven by Q3 earnings reporting period, the U.S. presidential election and bond market and future monetary actions."

SPX Technicals.

Megacap Companies continue to outperform the broader markets and small caps YTD. See Chart4.

Global X Uranium ETF ("URA") continues trade above its 13-Week, 26-Week and 40-Week Moving Averages, signaling continued strength in the nuclear energy and power space as well as a continuance of its bullish trading cycle. However, it needs to overcome its ~$30-$31 trading level for an even stronger rally.

Question of the Week:

Will the FOMC raise or hold interest rates this week?

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!

29 OCT 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w44**: 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:  +87.09%

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

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

$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:

+Tenacious Tech Strength. Nasdaq Composite hits fresh All-Time Highs before pulling back on Friday's close. Nasdaq notched its 7th weekly gain. Many Wall Street Houses positioning for a year-end rally. Even though stocks are overvalued, momentum continues net higher. If forward EPS estimates are largely correct then it imputes a SPX of $7,000 by 2026.

First Megatech to report was Tesla. TSLA surged on its Q3 profit beat and forecasting that its vehicle sales growth should be up 30% next year. TSLA ended last week up over ~20%

TSLA EPS Beat:

$0.72 adjusted vs. $0.58 estimated

TSLA Revenues Miss:

$25.18 Billion vs. $25.37 Billion estimated

RBC Capital Lead Equity Analyst, Tom Narayan: "Focus on higher value-add attributes: regulatory credits, energy storage and autonomy… Increasing our price target to $249 from $236"

Canaccord Genuity Bullishness

Megacap week. The majority of the Magnificent 7 Megacap stocks report this week. TSLA reported last week. NVDA reports on 20 November.

Canaccord Genuity House view: "…the current two-year-old Bull Market remains below the median in both percent gain and duration, suggesting the upside has further room to run…"

+Strong Statistical Macro Seasonality. The S&P 500 forward returns have a slight statistical edge to the upside looking through the next 3 months starting in October since 1928. See Chart1. Gold reached another record high level last week. Silver also reached its largest high since 2012.

International Monetary Fund Growth Forecasts, Read GDP Growth, Annual % Change

Macro Data

Renaissance Macro Founder, Jeff deGraaf: "Breakout in Russell 3000 breadth… Seasonality is in the best spot [last] week for forward returns… Investors can be a little more patient about getting positions on…"

PIMCO Managing Director, Richard Clarida: "Data has been quite resilient… Fed still has room to gradually normalize rates… Rates markets repricing reflects reassessment on downside risks… Expect 25bps cut in November…"

Headwinds:

-Musk Secret Conversations with Putin. Despite TSLA recently posting its best day performance-wise since ~2013, performance remains very closely related to its chief Elon Musk versus the company on a standalone basis. This, of course applies to SpaceX and Starlink. Through SpaceX, Elon Musk has U.S. Top Secret Clearance that gives him access to classified information. A Wall Street Journal ("WSJ") recent report raised National Security concerns about Elon Musk's relationship with Russian President Putin. If these investigations expand into something more serious, it would likely adversely impact Tesla, SpaceX, Starlink and other Musk-related ventures.

According to the Wall Street Journal, Musk has been in contact with Putin since 2022 and, "Putin asked Musk to not activate Starlink over Taiwan as a favor to Chinese leader Xi Jinping…" The WSJ continues, "NASA head says WSJ report of Musk's talks with Putin should be investigated."

Former NSA General Counsel and Senior Adviser, Center for Strategic and International Studies, Glenn Gerstell: "Unclear if Musk disclosed Putin contacts to U.S. government… Failure to report could result in security clearance suspension… Deliberate failure to report could lead to criminal charges."

Former U.S. National Security Council Senior Director for Russian and Eurasian Affairs, Michael McFaul: "Putin is an enemy of the United States and an International War Criminal… Imagine American business people calling Hitler during World War II, or Stalin during Cold War…"

-Election Nervosa. VIX closed over 20 handle signifying higher volatility over the short-term, however much less than its recent 05 August peak close of ~38. See Chart2.

Federal Reserve Bank of Cleveland, Beige Book: "Several [contacts] also noted some producers were holding off on orders because of uncertainty related to the coming presidential election."

Federal Reserve Bank of Boston: "Contacts saw risks to the overall business climate from uncertainty surrounding the Presidential Election."

Federal Reserve Bank of New York: "Many contacts reported hesitancy in decision-making due to heightened uncertainty surrounding the Presidential Election."

In a joint letter, 23 Nobel Prize-winning economists endorsed Vice President Harris over former President Trump. They cited Trump's economic agenda, which includes hardline tariff proposals and aggressive tax cuts, would "lead to higher prices, larger deficits and greater inequality… Simply put Harris's policies will result in a stronger economic performance, with economic growth that is more robust, more sustainable and more equitable…"

The Nobel Laureates included: Sir Angus Deaton, George Akerlof, Daron Acemoglu, Peter Diamond, Abhijit Banerjee, Esther Duflo, Robert Engle III, Claudia Goldin, Sir Oliver Hart, Guido Imbens, Simon Johnson, Eric Maskin, Daniel McFadden, Robert Merton, Roger Myerson, William Nordhaus, Edmund Phelps, Paul Romer, Alvin Roth, Joseph Stiglitz, Robert Shiller and Richard Thaler.

Overall, experts estimate that Trump's budget plan would expand the federal deficit by 5x more than Harris' proposals, according to the nonpartisan Penn Wharton Budget Model.

According to the University of Pennsylvania, Penn Wharton: They "estimate that the Trump Campaign tax and spending proposals would increase primary [U.S.] deficits by $5.8 Trillion over the next 10 years…" See Chart3.

Sentiment. Investor Sentiment ending 23 OCT 24:

HSBC House View: "Our bull case goldilocks scenario for the S&P 500 is playing out -above trend GDP growth, easing inflation, lower rates. We move our year-end target up to 5,900, above our original bull case on more visibility on earnings, growth and rates."

Goldman Sachs Chief U.S. Equity Strategist, David Kostin: "Our S&P 500 baseline 10-year return forecast is lower than the estimates of other market participants. Buy- and sell-side projections of the long-term return of U.S. stocks averages 6%."

SPX Technicals.

Nasdaq 100 relative to the Equal-Weight S&P 500 remains over 120 handle.  The Forward P/E of the Nasdaq 100 remains much higher than its 10-year historical average. See Chart4. U.S. 2YR/10YR spread continues to steepen, with a YTD gain of ~+135%. Vaneck Semiconductor Index ("SMH") continues to chop above its 50-DMA and 200-DMA showing continued net strength.

It's Megacap week, once again. Respective guidance will be critiqued significantly for macroeconomic weakness. The Megacaps will likely need to overperform to overcome any Election Volatility over the near-term through just after post-election finality.

Market Valuations

Forward P/E Ratios -source: Factset Estimates

Question of the Week:

Will the Megas Earnings Week kickoff the year-end rally?

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!

22 OCT 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w43**: 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:  +79.37%

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

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

$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:

+Semis Steady Strength. Taiwan Semi ("TSM") galvanizes semiconductor and AI growth optimism by beating street estimates. TSM Performance ~+101% YTD -with many large-scale semiconductor companies in the triple-digit performance range Year-over-Year. See Chart1.

Taiwan Semi 2024 Q3 Earnings

• Net profit beat of 54% versus 41% est.

• Growth attributed to strong AI and smartphone demand

• TSM expects AI server revenues "to more than triple."

Taiwan Semi CEO, C.C. Wei: "Expect AI demand to grow… Yet to see peak demand from hyperscalers… Echoed Nvidia CEO Jensen Huang: Demand is insane… Most advanced chips made up 70% of quarterly sales… Expecting Arizona production to ramp in 2025."

Commensurate Nvidia implications. Goldman Sachs raises NVDA Price Target to $135. Melius reiterates buy and Price Target of $165. Citi: "Nvidia still king of hyperscalers" AI accelerators.

NVDA around All-Time Highs

Market Cap Comparison

+MegaBank Dominance and Two-Years of Bull Performance. MegaBanks largely outperformed. Financial sector hits record high. See Chart2.

MegaBank Earnings Reports

Financial Sector outperformed the rest of its SPX sector peers YTD. See Chart3.

Megacap Bull Run (since October 2022)

Top 10 SPX Stocks (since 12 October 2022)

Headwinds:

-China Slow Stimulus. Even if the National People's Congress comes up with significant stimulus measures, it doesn't fix China's underlying structural problems. Largely because of state intervention, they are opting for control over growth and that adversely affects investment inflows.

BCA Research Chief Strategist, Marko Papic: "Investors should expect each and every stimulus announcement to essentially be a disappointment… However, the Politburo meeting on 26 September was a game changer… When we look back at disappointing announcements in six to twelve months' time we'll realize they were all piecemeal stimulus."

China Oil Demand Forecast. OPEC's Outlook for 2024 -as of 14 OCT 2024

China Housing Minister Briefing Top Takeaways:

• To expand on financing to complete unfinished homes on "white list" to $562 Billion by year-end.

• To renovate ~1 Million homes in depressed urban areas

• Declares sector "bottomed out"

China Central Bank Governor Market Moves

• Re-lending facility to boost share buybacks

• Program for institution investors to purchase stocks

• Flags more monetary easing

China September Data

International Monetary Fund Managing Director, Kristalina Georgieva: "China's at the fork in the road. If they continue with their current model, which is export-led growth, there would be trouble. Why? Because the Chinese economy has grown to a point where China's exports are no more a minor factor in global trade."

-U.S. National and Maxed Out Consumer Debt. U.S. Budget Deficit for fiscal year 2024 rises +8% to $1.8 Trillion from 2023.

U.S. Deficit Update Fiscal Year 2024:

Top U.S. Treasury Budget Line Items

Former PIMCO Managing Director, Paul McCulley: "The capital markets are already pricing to a very plausible and sensible terminal policy rate, near 3.5%, thereby bringing forward the supportive effect of a neutral policy rate to large business… The still-restrictive policy rate continues to choke small business and the lower half of the household income/wealth distribution."

Maxed Out Consumers.

Caregiver Credit Crunch

Maxed Out Credit Cards by Generation

According to Affirm trends, Buy Now Pay Later ("BNPL") may set a holiday record for usage. See Chart4.

Affirm Consumers by Income Bracket (as of: June 2024)

Affirm Consumers by Age Group

Sentiment. Investor Sentiment ending 16 OCT 24:

Goldman Sachs, House View: "We remain pro-risk for 12 months and shift to overweight equities and underweight credit for 3 months (from Neutral)… Better U.S. data and supportive policy have helped lower downside risks near-term."

Piper Sandler, House View: "S&P 500 is overvalued, so what? An 8% over-valuation is no reason to get bearish. Stocks can remain at rich valuations as long as a 'fear' catalyst doesn't arise from the usual suspects: interest rates, employment or inflation."

J.P. Morgan, House View: "Given this tight race, the Presidential Election will be the largest source of uncertainty remaining this month and we may see some choppiness into Election. Overall, given the supportive macro set-up, we are inclined to buy the dip."

SPX Technicals.

Wall Street S&P 500 Targets Year-End 2024

Regional Banks Index ("BKX") continues above 50-DMA and 200-DMA. Semi Stock leadership continues to hold strong. All 11 SPX sectors are positive YTD. Every sector except Energy is up double-digits YTD. Five sectors are up +20% or more in 2024. Increase caution as broader market chops higher with elevated multiples and all-time highs.

The median SPX return from 15 October to 31 December in election years is +7.04% since 1928… This imputes a possible year-end level of $6,270 -barring any aforementioned negative 'usual suspect' catalysts. See Sentiment Section above.

Question of the Week:

Will the Magnificent 7 companies continue to outperform the rest of the 493 S&P 500 companies performance-wise for the rest of 2024?

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!

15 OCT 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w42**: 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:  +69.40%

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

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

$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:

+Happy 2nd Birthday. Major Indexes (S&P 500, Dow Jones) hit All-Time Highs once again -inline with the 2-year anniversary of the current Bull Market started on 12 OCT 2022. SPX breaks above 5800 level for first time.

2-Year Anniversary of Bull Market Gains Since 12 OCT 2022

BTIG Chief Market Technician, Jonathan Krinsky: "…until and unless bears are able to break SPX back under 5670, it's difficult to maintain any sort of meaningful bearish posture."

Raymond James House View: "Economy on track for a soft landing… Equity Bull Market is still intact… Fed's easing cycle is just beginning, expect two more cuts in 2024."

Chicago Fed President, Austan Goolsbee: "Majority of Fed sees conditions continuing to improve over next 12-18 months… Overall trend is what's important, not day-to-day fluctuations."

Market Valuations -Source: FactSet

Within the last Fed Minutes release: The FOMC did agree it was "appropriate to ease policy in September… continue easing in the future," implying that it is appropriate to move to a more neutral policy stance."

Noteworthy: Puts are increasing as QQQ index nears All-Time High levels again. See Chart1.

+Strong Start for Banks. Financial Sector up ~21% YTD. SPDR S&P Bank Index ("KBE") up ~+14% YTD. According to Wells Fargo, Consumer Spending continues to be inline with debit card purchase volume and transactions versus 3Q 2023. See Chart2.

RBC Capital Markets Head of US Bank Equity, Gerard Cassidy: "Look for additional color surrounding share repurchase programs… Focus on loan growth, especially commercial and industrial loans… Sharp eye on commercial real estate, especially in the office category, low FICO score consumer and commercial and industrial credit trends."

Barclays House View: "…market may tread water or look for an excuse to consolidate short term. But without a catalyst to materially alter the Goldilocks narrative, the direction of travel still feels to the upside to us."

New York Fed President, John Williams: "The current stance of monetary policy is really well positioned to both hopefully keep maintaining the strength that we have in the economy and the labour market, but also continuing to see that inflation comes back to 2 percent."

Headwinds:

-CPI Resistance. Consumer Price Index increased slightly month-over-month.

Biggest CPI Gainers Month-over-Month

Yardeni Research Chief, Ed Yardeni: "Still expect inflation to fall to Fed's 2% target by 2024-25… Be mindful of potential risks for higher inflation if Fed overheats economy."

Expectations for earnings growth estimates are falling slightly…

Year-over-Year Earnings Growth Estimates

Dallas Fed President, Lorie Logan: "FOMC should not rush to reduce funds rate to normal or neutral… Sees meaningful risk inflation could get stuck above 2%... Labor market appears to close to balance… Fed could best balance labor market risks by reducing policy gradually."

St. Louis Fed President, Alberto Musalem: "…Patience has served the FOMC well in its pursuit of price stability and remains appropriate now, but I will not prejudge the size or timing of future adjustments to policy."

Pepsico CEO, Ramon Lagurarta: The U.S. Consumer is "very challenged… Especially households that make less than $100k or $70k… Impacts consumption frequency, traffic down at convenience stores… Back to buying essentials and we (Pepsico) are discretionary."

-Hurricane Damage and Implications. Hurricane Milton is the third one to hit Florida this year. Statistically, this is rare with only five other hurricane seasons since 1871 sharing this confluence of events. Interestingly, no season on record has had more than three hurricanes strike Florida. Statewide, there were more than 30 tornadoes reported.

At least 2,200 gas stations in Florida had or continue to have zero fuel -roughly 29% of gas stations statewide. See Chart3. Further at peak, over 3 million residents lost power. Commensurately, over 50,000 electricity grid workers were deployed to restore power.

Costliest Hurricanes in U.S. History

Insurance Market Share in Florida

Piper Sandler Senior Research Analyst, Paul Newsome: "The most costly hurricane that primarily struck Florida was Ian, which cause ~$56 Billion in insured losses… Wind damage is mostly covered by private insurers versus flood damage is mostly covered by U.S. Government… Insurance stocks tend to rebound when size of losses become better known."

According to AccuWeather, preliminary estimates the total damage and economic loss from Hurricane Milton could be between $160 Billion and $180 Billion. Hurricane Helene's estimated total damage and economic loss is estimated to be $225 Billion and $250 Billion. Making the one-two punch of the Helene and Milton Hurricanes to be amongst the most costliest in U.S. history.

Elementum Advisors, Jeffrey Davis: "Estimated losses between $25 Billion and $70 Billion… The bid/ask spreads wide in secondary market… Evidence of the uncertainty, but more clarity should come." See Chart4.

Although there is approximately $20 Billion allocated by FEMA for the Hurricane Milton disaster, the SBA has only about $100 Million in SBA Funds remaining.

Sentiment. Investor Sentiment ending 09 OCT 24:

New York Fed President, John Williams: "I personally expect that it will be appropriate again to bring interest rates down over time… if you look at the [Fed economic] projections that capture the totality of the views, that is a pretty reasonable representation of a base case."

National Federation of Independent Business ("NFIB") September Survey

• 23% see inflation as single most important problem in operation

• 23% plan to raise compensation in next three months

• 15% plan to increase hiring

Chicago Fed Chief, Austan Goolsbee: "It's been a series of close-call type meetings, probably will be more…"

Atlanta Fed President, Bostic: "I've been saying we should expect the data to be -what I've been using is, 'janky' -to bounce around a bit… this chopiness to me is along the lines of maybe we should take a pause in November…"

SPX Technicals.

Consumer Sentiment 68.9 versus 71.0 estimated. Berkshire Hathaway ("BRK/B") sells another ~9.5 Million Bank of America shares -Berkshire's stake is now below the 10% reporting threshold. Consumer Spending falls in September. See Below. Nasdaq 100 versus Equal-Weight S&P 500 remains strong above the 130 handle.

National Retail Foundation ("NRF") Retail Monitor

Question of the Week:

Will the technical Bull Market make it to a 3rd Anniversary? Or, will a downturn stop it in its tracks?

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!

08 OCT 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w41**: 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:  +61.80%

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

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

$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:

+September Jobs. The most recent nonfarm payrolls report released last Friday drove the broader markets higher. Wall Street estimates were +150,000 versus +254,000 actual. See Chart1.

September Jobs Report

Where the Jobs Are

Wage inflation not dead. Multi-year wage contracts are far better indicators of inflation dynamics and expectations than surveys or even market-calculated premiums. The Lindsey Group's Lawrence Lindsey, "Scale of wage demands at the ports, at Boeing and from autoworkers, refute the claims that the labor market is soft and that wage inflation is dead."

+OpenAI's and Cerebras' IPO Trajectory. AI darling, OpenAI takes a step closer to IPO. OpenAI announces a $4 Billion revolving credit line -raising their total liquidity to over ~$10 Billion. This is the largest-ever raised by a pre-EBITDA private company. OpenAI's Weekly Active Users continues to skyrocket -gaining over 150 Million Users in less than a year. See Chart2.

OpenAI Facts:

• ~11 Million ChatGPT Subscribers

• ~1 Million Paying Business Users

AI Peer Group Valuations

Cerebras files for IPO. The nascent AI chipmaker seeks to challenge behemoth Nvidia by filing for IPO -taking advantage of AI popularity and recent growth.

Cerebras Facts:

• >200% Sales growth in 2023

• Backed by Benchmark and Altimeter

• Valued at ~$4 Billion

• Targeting ~$7 to $10 Billion Public

• ~87% of Cerebras' 1H 2024 revenue came from their G42 chip

Cerebras Caveat: "A reduction in demand from, or a material adverse development in our relationship with, G42 or any of our other significant customers may harm our business, financial condition, results of operations, and prospects."

Headwinds:

-Israel/Iran Incrementing. Israel pledges retaliation after the nearly ~200-volley missile-strike from Iran. Although the damage was less than intended, some missiles got through. This was, "nearly twice the scope" of what happened in April -when Iran sent ~300 suicide drones to Israel. No Israeli casualties and less damage to intended targets were incurred -due to Israeli air defenses operating "impressively, with high rates of interception," according to the Israeli Defense Forces.

Analysts are expecting more attacks on proxies as well as cyberattacks. Expect Israeli strikes on Iran energy and defense infrastructure. Iran is a top-5 oil producer within OPEC. Oil prices spiked on Biden comments "discussing" supporting Israel attacking Iran's oil facilities.

In a White House Statement prior to the Iran Missile Strike, "The United States has indications that Iran is preparing to imminently launch a ballistic missile attack against Israel. We are actively supporting defensive preparations to defend Israel against this attack. A direct military attack from Iran against Israel will carry severe consequences for Iran."

Israel could target Iran energy infrastructure, however targeting their nuclear is risky. Oil has risen in response, Chevron briefly shut down applicable gas fields. Likely to see significant volatility ahead.

Top OPEC Oil Producers

What's keeping Oil Prices from taking off? Oil Price Stabilizers:

• Record U.S. production

• Saudi Arabia's spare capacity

• OPEC+ to boost production

-East/Gulf Port Strike Economic Impact. East/Gulf Port workers strike for the first time in nearly 50 years. Even though the East/Gulf Port Strike was successfully resolved, albeit temporarily, well before the estimated strike timeline via White House officials involved in the USMX-ILA negotiations -the temporary damage is not insignificant. The daily economic impact of the East/Gulf Port Strike is estimated to be ~$4 Billion per day of the strike. The strike lasted 3 days, when the ILA and USMX announced a contract extension until 15 JAN 2025.

A significant amount of imports and exports were/would have been affected. See Chart3. For every day of the strike, an estimated 6-8 days of congestion is to be expected.

East and Gulf Coast Ports by the numbers:

Drill Down on Imports

Sentiment. Investor Sentiment ending 02 OCT 24:

Nvidia CEO, Jensen Huang: "Industrial AI is the next wave after Enterprise AI… We're seeing extraordinary enthusiasm all over the world… Blackwell [Next-Gen AI Chip] demand is insane…"

Raymond James CIO, Larry Adam: The Fed, "will cut two times for 50bps in total this year… four cuts totaling 100 bps more in 2025… Cuts are insurance policy to preserve economic expansion."

Legendary Billionaire Trader, Stanley Druckenmiller: Even if Chinese equities go up a significant amount he would "have no interest in it unless there's a change of power at the top and a shift in the communist policies."

SPX Technicals.

Consumer Discretionary vs. Consumer Staples remains strong keeping above their 50-DMA and 200-DMA -a strong indicator of overall health of the U.S. Consumer. See Chart4. Chinese stocks surge ~+8.5% in best day since 2008 roughly a week ago. CPI and PPI this week. And, the start of earnings season kicked off by the financials this Friday.

NVDA surpasses Microsoft as the 2nd most valuable company by Market Cap at a ~$3.26 Trillion valuation versus ~$3.08 Trillion, respectively as of today's close. As the Megas collectively push higher, the grind higher trend will remain intact. Elevated short term volatility likely to increase as Election Day nears.

Question of the Week:

Will Israel/Iran conflict escalate large enough to involve U.S. directly?

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!

01 OCT 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w40**: 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:  +61.80%

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

Major Indices:

2024 YTD Performance:

QALM = Quantitative Algorithmic Leveraged Momentum

Winners and Losers Random ~3 QALM Trades

$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:

+Fed Put + China Stimulus. The Fed's renewed commitment to support the broader economy via interest rates in the face of stabilizing inflation rates is effectively a massive Put -in the event of a recession or economic downturn. Given this easing cycle, with currently no recessionary data in sight, investors underweight in stocks will likely underperform substantively. Market is appearing to set up for a year-end rally -post election clarity.

Softer global economy could hold inflation in check into 2025. The historical correlation between Fed Rate Cuts and  the Broader Markets at All-Time Highs is strong (also See Chart1):

S&P 500 Returns One-Year After a Rate Cut

U.S. Treasury Secretary, Janet Yellen, "Banking system is well capitalized… Data suggests we're on a path to soft landing, but there are risks."

China's central bank releases plans for most aggressive stimulus since pandemic. The People's Bank of China ("PBOC") will cut rates and the Reserve Requirement Ratio ("RRR") to provide more property market support. China is currently facing deflationary pressures -a huge risk to growth. Analysts say even more stimulus is needed to restore confidence.

Governor Pan Gongsheng announced plans to lower borrowing costs and inject more funds into the economy, as well as households' mortgage repayment burden. As a result, Chinese stocks and bonds rallied reaching ~2.5 year highs. Pan told a news conference, "…the central bank will in the near future cut the amount of cash that banks must hold as reserves… -by 50 basis points, freeing up about 1 Trillion Yuan ($142 Billion) for new lending. See Chart2.

Bleakley Financial Group CIO, Peter Boockvar: "If China is successful in putting a floor under their economy, inflation for goods will resume higher again… What happens there will have a big influence on rates and what the Fed does here."

+The AI Opportunity Eyes $1 Trillion. According to Bain & Company's 5th Annual Global Technology Report, "Market for AI products and services could reach up to $990 Billion by 2027" See Chart3.

Generative AI Benefits

AI-related hardware and software could grow between ~40-50% annually for the next three years. Look for more innovation from software-as-a-service ("SAAS") providers to fuel the next wave of growth.

China seeks American Chips. China is now smuggling U.S. chips or using cloud providers for GPUs. Domestic Chinese company Huawei attempts to build AI Chip. Nvidia working on chip that's compliant with export controls.

Headwinds:

-Volatility Season. Statistically, August, September, October tend to be the most volatile months of the year performance-wise.

Forward P/E Ratios -source: Factset

Federal Reserve Governor, Michelle Bowman, "I continue to see greater risks to price stability, especially while the labor market continues to be near estimates of full employment. Although the labor market data have been showing signs of cooling in recent months, still-elevated growth, solid consumer spending, and resilient GDP growth are not consistent with a material economic weakening or fragility. My contacts also continue to mention that they are not planning layoffs…"

-Consumer Confidence and Sentiment. According to S&P Global Ratings Economic Outlook:

• Expect real GDP growth to slow, further rise in unemployment and lower inflation

• Policy rates to reach terminal rate of 3.00%-3.25% by end of 2025

• Recession probability over the next 12 months remain unchanged at 25%

Macroeconomic Data

Sentiment. Investor Sentiment ending 25 SEP 24:

Blackrock CIO, Rick Rieder (oversees ~$3 Trillion in fixed income assets), "Extraordinary market move pricing in a recession was too much… Markets are already pricing in solid numbers for tech… Cost of debt is still elevated, and given multiples, equities are not that interesting… Seeing pretty impressive inflows into fixed income… Don't love the valuation of equities, but there's a lot of cash on the sidelines."

Atlanta Fed President, Raphael Bostic: "…progress on inflation and the cooling of the labor market have emerged much more quickly…"

Minneapolis Fed President, Neil Kashkari: "…want to keep it a strong, healthy labor market…"

Chicago Fed President, Austan Goolsbee: "…many more rate cuts over the next year…"

SPX Technicals.

Japan NIKKEI 225 now above 50-DMA, 100-DMA and 200-DMA. U.S. 10-Year largely unchanged this week. See Chart4. Margin Debt levels remain at or below pre-pandemic levels. Current S&P 500 levels slightly higher than 2024 seasonal composite levels -hinting at higher likelihood of profit taking and volatility versus smoother melt-up market scenarios.

Small Caps: Since 1950, after the first rate cut small caps returned ~27% versus ~15% for large caps. Names with some leverage that have underperformed can lead over the next 12 months. S&P 500 tends to lean expensive due to technology stocks, but much of the market is relatively cheap.

Potential Swan Harbinger: Iran launches missiles into Israel authorized by Supreme Leader Seyyed Ali Hosseni Khamenei earlier today. After a brief Broader Market downturn, the markets did rebound off the bottom. Dependent on the amount and damage of the missiles that got through the Israeli "Iron Dome" defenses, this expanded conflict could affect U.S. Markets if the U.S. becomes directly involved. Oil Futures spike nearly ~5% briefly just prior to today's missile strikes.

Question of the Week:

Will the S&P 500 close lower than its current level by year-end? Or, will it close higher?

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!

24 SEP 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w39**: 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:  +62.85%

(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:

---

$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:

+Fed 50bps Cut. The Federal Reserve Board cut interest rates by 1/2% -marking the first rate adjustment since the last increase of 25 basis points in July 2023. Eleven Fed votes were in favor of the 50 basis point cut. Only Governor Bowman dissented, preferring a 25 basis point cut. Fed Projections show an additional estimated 50 basis points of cuts this year and another 100 basis points of cuts in 2025. Historically, the S&P 500 ("SPX") tends to move higher after a rate cut -if the economy is not already in a recession. See Chart1.

Fed Chief Powell: The Fed will "remain squarely focused on achieving [its] dual mandate… Growth of consumer spending has remained resilient… The economy is strong overall… [the] labor market has cooled from formerly overheated state… Recent indicators suggest economic activity has continued to expand at a solid pace… Our patient approach over the past year has paid dividends."

Fed Chief Powell (continued): "Unemployment rate has moved up but remains low… Labor market is in solid condition, and our intention is to keep it there… We're recalibrating our policy over time to a stance that will be more neutral." Powell said during the meeting, "You can take this as a sign of our commitment not to get behind." See Chart2.

+Record Highs and Positive Sentiment. According to the Bank of America Fund Manager Survey, there's a big rotation to bond sensitives from cyclicals. Global sentiment improves for first time since June on "Fed cuts = soft landing" optimism. Most utilities since December 2008, most banks since February 2023 and smallest tech since April 2023.

Also according to Bank of America:

• Corporate client buybacks accelerated to their highest weekly level since late June

• Trailing 52-week buybacks as a percent of S&P 500 market cap hit a record high (above 2019) levels

Elevated Wall Street House Targets

Headwinds:

-The Fall of 23andMe. 23andMe, the DNA genetic testing for health as well as Ancestry service faces NASDAQ delisting. NASDAQ delisting occurs when any of their listed companies are below $1.00 per share for 30 consecutive trading days. If that happens, then the company is removed from the NASDAQ.

Since 23andMe's ("ME") SPAC merger (June 17,2021) it has lost ~96.88% of its value. See Chart3. Representing a peak valuation of ~$6 Billion in 2021 to its current diminished value of $171 Million in market cap. Adding insult to injury, high-profile board members have also left 23andMe's Board of Directors.

23andMe Board of Directors Leaving

Letter to 23andMe CEO from independent directors of the Board: "…We differ on the strategic direction for the Company going forward. Because of that difference and because of your concentrated voting power, we believe that it is in the best interests of the Company's shareholders that we resign from the Board…"

-Possible Growth Scare? A significant slowdown in consumer spending or further deterioration of the labor market could spook investors to react negatively. Sage Advisory's Co-Chief Investment Officer, Thomas Urano, "I think everyone was under the impression that inflation is softening and unemployment is going up, and the Fed is fully engaged in trying to prevent unemployment from getting out of hand… I think the market would have to reconsider that if inflation prints tick a bit higher."

Urano continues, "…if it does come to fruition that's a scenario where [the market] has to correct, because this current state of a supportive Fed, falling inflation and rising unemployment -that goes out the window with stagflation. I think the Fed would revert to accepting a recession and rising unemployment in order to combat inflation… There's no referee on the field that's going to call the soft landing or throw the recession flag in real-time. And that’s part of the problem with central bank policy."

Sentiment. Investor Sentiment ending 18 SEP 24:

BMO's Chief Investment Strategist, Brian Belski: "Much like our last target increase in May, we continue to be surprised by the strength of market gains and decided yet again that something more than an incremental adjustment was warranted."

J.P. Morgan Chief, Jamie Dimon: "…skeptical that inflation is going to go away so easily."

Legendary Bond Trader and DoubleLine Capital Founder, Jeff Gundlach: "Powell admitted there is something artificial about jobs numbers… Widening credit spreads are a sign that things aren't all that copacetic… the Fed easing strikes the long end of the bond market as being inflationary… I don't see anything in the economy that suggests the likelihood of a downturn is elevated."

SPX Technicals. Close: 5,732.93. VIX: +15.38 = “Neutral.” Fear/Greed Index: 65, "Greed." Key Long support level to hold above this week is ~5,665. Historically, looking back at the starts of the last six Fed easing cycles, the highest one-year sector returns were in Information Technology (all industry groups), Discretionary (esp. Distribution/Retail) and Healthcare. NVDA gains nearly ~4% today.

Yield curve is normalizing. Rate of steepening will determine "soft or hard landing." Long-term rates will likely move higher even as the Fed cuts short-term rates. Expect profit-taking on 20-year bonds, and renewed sentiment on long-term rates after they move higher. Gold versus Silver ("GLD"/"SLV") Silver likely in an overbought state. See Chart4.

Question of the Week:

Will the first Fed Rate Cut of 50 basis points a short-lived sugar-high? Or, the start of a lasting trend higher?

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!

17 SEP 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w38**: 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:  +62.85%

(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:

240918 /ES, LONG, OPEN: -31.25% (OPEN, +0TD)

240918 /ES, SHORT, WIN: +137.50% (Closed, +0TD)

240912 /ES, LONG, WIN: +331.50% (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:

+Fed Anticipation. Investors and Traders are gearing up for this Wednesday's FOMC decision. Will the Fed go big with a 50bps cut? Or, start slow and steady with a 25bps cut with promises of continued action? Fed Chief Powell: "It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon. We do not seek or welcome further cooling in labor market conditions."

Former Cleveland Fed President Mester: "…can make a case for 50…"

Former New York Fed President Dudley: "…there's a strong case for 50…"

When there is not a recession, Goldman Sachs predicts a grind higher type of market. See Chart1.

Fed-funds Traders on Friday afternoon priced in a 47% probability of a 50 basis point cut, up from 28% on Thursday. They saw a 53% probability of a 25 basis point cut, according to the CME FedWatch Tool. They have priced in 100 basis points by year-end. With the Fed set to meet only three more times this year, including Wednesday, that implies at least one of those meetings will feature a cut of 50 bps or more. August Consumer Price Index came in relatively tame last week. See Chart2.

+Falling Interest Rate Environment and Gold. The days of the ~5% high-yield savings accounts are numbered. According to the Investment Company Institute, "There's over $6.3 Trillion sitting in money-market funds right now and roughly $2.6 Trillion comes from retail investors." As rates decline, retail investors will likely slow their pace of investment in money-market funds as they decide where to redeploy their assets to find more growth.

Gold rallied Thursday even when stocks were down and the dollar was up, and pushed higher even as stocks recovered and the Dollar Index DXY fell. Gold is now likely becoming the "all-seasons" hedge against market uncertainty, once again, after battling the crown with cryptocurrencies.

On Friday, December Gold Futures hit $2,610.70 an ounce, after touching an intraday record high of $2,614.60 on Comex -marking the 34th time the shiny metal achieved an All-Time-High Price during 2024.

Central Banks acquiring Gold continue to be a major demand driver. These actions may be underscoring concerns about dollar-based assets and inflation. According to BullionVault, Director of Research Adrian Ash: "Any disappointment on Wednesday, the last day of the Fed's two-day policy meeting, whether that's from the central bank's decision or its new dot-plot forecasts, could very likely give longer-term investors hoping for a dip [in] the pullback, if not correction, they're waiting for…"

Headwinds:

-Softening Consumer. Consumer Spending is cooling. According to the National Retail Foundation, "The sectoral trends show continued softness in consumer durables (due to housing softness from still elevated interest rates) but shows consumer spending trending in consumables (food, clothing, eating out)."

According to Bank of America:

• Money market balances are at new highs

• US Growth stocks saw the biggest outflows since June

• Technology stocks also saw the biggest outflows since June

• Financial Stocks experienced the largest outflows since November 2023

Kroger CEO, W. Rodney McMullen: "Budget conscious customers are buying more at the beginning of the month to stock up on essential items and groceries, and then as the month progresses, they are more cautious with their spending."

Notable August CPI Report Increases:

-Dr. Doom Warning and Boeing's Credit Rating. Investment Manager Marc Faber aka "Dr. Doom" earned that moniker after advising his clients to get out of the stock market prior to the October 1987 crash. "I am relatively negative about the U.S. Market. Most stocks haven't done well. However, the market has been driven higher by a handful of stocks -semiconductors and anything to do with high-tech, especially with artificial intelligence. In my view these stocks are grossly overvalued and have substantial downside. When there is a change in leadership, these stocks will go down as the market moves away from these favorite stocks to more value-oriented stocks."

He continued: "Housing affordability in the U.S. is at its lowest level ever. That reduces demand, which reduces earning potential… " Home affordability worst since 2006.

Boeing Machinists go on strike. Estimated Strike Cost: ~$1.3 Billion FCF/Month -source: Jeffries.

Historical Boeing Strike Durations:

White House Statement on Boeing Strike: "Administration officials are in touch with Boeing and the Machinists. We encourage them to negotiate in good faith -toward an agreement that gives employees the benefits they deserve and makes the company stronger."

Moody's and Fitch issue warnings on Boeing's Credit Rating. Fitch: "If the current strike lasts a week or two, it is unlikely to pressure the rating. However, an extended strike could have a meaningful operational and financial impact, increasing the risk of a downgrade." Boeing ("BA") stock down ~-24.52% over the last 3 years. See Chart4.

Sentiment. Investor Sentiment ending 11 SEP 24:

Citi: "Given the slowing in rents and house prices and lack of response of mortgage purchase applications to the drop in mortgage rates, we think the pickup represents volatility around a cooling trend rather than a shift back to faster housing inflation."

Bank of America CEO, Brian Moynihan: "The consumer is not getting worse right now, they are very stable."

Neuberger Berman Private Wealth, Holly Newman Kroft: "Expecting three rate cuts this year, 25 basis points each… Sees typical election year volatility ahead… Fed shifting policy should bolster the economy."

SPX Technicals. Close: 5,634.58. VIX: +17.63 = “Neutral.” Fear/Greed Index: 55, "Neutral." Key Long support level to hold above this week is ~5,501. VIX continues to be split in its signals. It popped up last week and then eventually generated a new "spike peak" buy signal for stocks at the 05 SEP close. That signal will likely hold for ~22 days -or until VIX closes above its most recent high-close of 23.31. The term structure of the CBOE volatility indices slopes upward, which is bullish. However, the term structure of the VIX futures continue to be pressured by the "election bump" in the October futures.

Question of the Week:

Will the Fed cut this week propel the broader markets higher? Or, lower?

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!

10 SEP 24

Headwinds or Tailwinds Update (HoT Weeklies): 24w37**: 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:  +60.90%

(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:

240910 /ES, LONG, LOSS: -100% (Closed, +0TD)

240910 /ES, LONG, WIN: +75% (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:

+August Jobs and the Fed. August Jobs report was positive, albeit slightly. August jobs growth was better than July. Average hourly earnings grew +0.4%. Unemployment rate fell to 4.2%. Job Vacancies to Unemployed Ratios have also fallen. See Chart1.

NY Fed President Williams: Now has "increased confidence inflation moving sustainably to 2% goal… With the economy now in equipoise and inflation on a path to 2 percent, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate… Two sides of the dual mandate have moved into better balance."

Initial Jobless Claims remained stable at 227,000 vs 229,000 estimated. Lowest level since July 6th. Continuing claims dropped by 22,000 to 1.84 Million. Unit Labor Costs fell to +0.4% versus +0.8% estimated.

Where the Jobs Are (ADP Jobs by Industry), -source: ADP

Consensus likely leans to methodical, steady pace of easing. Likely to see 3 rate cuts before year-end: 25bps in September, November and December. Though possible, unlikely to see 50bps rate cut at September FOMC.

+Record Credit Flows + SPX Remix. Credit Flows normally pick-up after Labor Day. Last week, a new record was set for post-holiday flows. ~33 companies issued new debt. Equally strong, Investors bought up ~$46 Billion in new bonds. These are bullish signals from the credit markets in what is seasonally one of the worst performing months of the year (September).

S&P 500 Additions:

S&P 500 Components Being Replaced by Aforementioned Additions:

Moderate/Strong economic factors: Jobless Claims, Productivity, ISM Services, Factory Orders, Payrolls, Unemployment.

Morgan Stanley: "…implies recession fears may have been overdone but confirms slowing."

PIMCO: "…consistent with an economy is slowing but not crashing."

Headwinds:

-When the Chips are Down. SMH Semi ETF down ~22% from 52-Week High, currently in Bear Market Territory. Chips Megacap Nvidia down ~-25.82% from 52-Week High, also currently in Bear Market Territory -as of last Friday. 

NVDA wipes out nearly ~$400 Billion of its own Market Cap Value last week. AI Capital Spending nearing historic highs -contexualized. See Chart2.

The Semis, often the vanguard of the broader markets, brought down the broader markets, commensurately:

Broader Markets (as of 06 SEP 24):

Dow suffers worst week in 18 months. SPX has worst week of the year.

Department of Justice sends subpoena to Nvidia. Former Assistant Attorney General -DoJ's Antitrust Division, Makan Delrahim: "The elections likely will not change the DoJ's continued focus on antitrust enforcement in tech sector, but likely will affect the process for merger reviews, allowing for quicker resolutions where remedies are available."

Nvidia's response to report of DoJ subpoena: "Nvidia wins on merit, as reflected in our benchmark results and value to our customers, who can choose whatever solution is best for them."

-September Seasonality and Increased Anxiety. September is often the most tumultuous month of the year -performance wise. Investors and Economists were looking to the August Jobs report to confirm or reject longer-held market theses -only to be stymied by inconclusive data that was neither too good or bad.

According to Dow Jones Market Data,"…remember that September is usually a bad month for stocks. September has seen the S&P 500 post an average monthly decline of 1.2% and finish higher only 44.3% of the time dating back to 1928."

Investors, writ large, have been saying that they want the market rally to broaden out. However, that is sometimes achieved when the largest, high-flying companies pullback in their extreme valuations.

Goldman Sachs' Tony Pasquariello: "It could feel like a long seven weeks from September FOMC to November FOMC, particularly if:

1. the Fed only goes 25 bps in their opening salvo;

2. the NFP print on October 4th is soft;

3. the election feels like a vol-inducing flip of the coin…"

Sentiment. Investor Sentiment ending 04 SEP 24:

Barclays Head of U.S. Equity Strategy, Venu Krishna: "Next-quarter revisions are concerning given weakening tailwinds for stocks and rising macro concerns… 3Q 2024 EPS revised down nearly ~-5% since May. Year-over-year growth expected to fall by more than half."

Wells Fargo's Head of Equity Strategy, Chris Harvey: "Longer-term rotation setup coming into focus… Cyclicals, small cap performance to get worse before better… Expect more volatility in momentum…"

SPX Technicals. Close: 5,500.75. VIX: +19.09 = “Neutral.” Fear/Greed Index: 39, "Fear." Key Long support level to hold above this week is ~5,501. Megatech NVDA now below its 50-DMA ("Daily Moving Average") and lowering towards its 200-DMA. The chips leader needs to continue to stay above its 200-DMA -as it has since late January 2023 when it started its massive uptrend. Vaneck Semiconductor ETF ("SMH") nearing pivot point of its upward trendline since ~September 2022. SOX Index versus S&P 500 Ratio Chart is peaking near ~1.0 -a level not seen since late 90's/early 2000s. Attention is now firmly fixed on next week's CPI data for signs of momentum leading up to the next FOMC.

Question of the Week:

Will a bad CPI print this week force the Fed to pause the upcoming rate cut? Or, double-down on it?

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!

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.