We've got to talk about Retail Investors now and what the heck is going on with retail and positioning and we happen to have a report on just that from Bandit Track that's going to provide us some incredible insights on what's going on with retail. Keep in mind this comes on the back of already AMD getting downgraded and Logitech numbers not that great. Almost every segment of this Computing industry is plummeting. You're down about 20.

However, chip stocks and peripheral stocks actually off of their lows. Probably because the stock market has once again overpriced. Fear: Anytime you have uncertainty and then you get reality. Oftentimes stocks actually go up when reality comes out.

not always, especially when it's unexpectedly to the negative side. but usually when people are really, really fearful about things, it tends not to be as bad as expected. So what does Vanda Track have to tell us today? Well, let's find out the latter stages of an equity bear Market or the early stages of a pain trade rally. Either way, U.S Markets last week exhibited wild and at times inexplicable swings in this week's positioning.

Update: We'll take a look at how investors are positioned ahead of peak earnings Upcoming catalysts that we are watching number One as we enter: Peak Earnings season. The focus Equity Investors for Equity investors has shifted towards gauging the size and timing of the forthcoming U.S recession. This is true. we have seen a substantial shift away from, for example, monitoring what the Federal Reserve is going to do when it comes to rates or what's going on with inflation.

Now everybody just cares about earnings per share, which is frequently deemed to be the second half of of the cycle. Now, what's really remarkable here is that if we do, just for example, take a quick little peaky Deaky over here at uh well there. Okay that this what we find is that we actually have a now 42 percent probability ability that interest rates are not going to lift off at all from 4.25 that so much bad data has come out that the Fed's not even going to be able to forget five percent forget 4.75 they can't even get it up off 4.25 Imagine that Fed can't get it up I Don't think J-pal is going to be too happy about that characterization anyway. So uh, here's some catalysts widely anticipated: Q4 results for Microsoft Today Tesla Wednesday is Chevron and Healthcare names also.

but uh oh, do keep in mind I hope to stream Microsoft at the closing bell today though I might have to unless that live stream afterwards. If you do come and keep in mind January 30th mark your calendar for that as a catalyst for the expiration the coupon code which comes just the day before the Employment Cost Index report something the Fed's going to watch Pretty clearly Next Fortnight Okay, next 20 days here we will see U.S equities entering Peak Earnings season with BuyBacks not in play until the first half of February Now that's actually a big deal because when you get companies in a blackout period, it means they can't buy or sell stocks. and if their stocks are potentially deemed low based on the earnings they put together, the company can't actually go buy the dip before the rip because they're in a blackout period. which means we're really not going to see companies be able to buy back stocks if they are so inclined until on average of about mid-February So that actually potentially means that we're in a period of low buying pressure right now.

which is kind of remarkable because stocks have kind of been trending up, so imagine if you got buy back buying pressure as well. On top of that, Interesting to note when looking at where investors are hedged for bad news on the earnings from, we see the biggest puts taken out across Industrials and Staples in recent weeks this is the uh, call to put ratio here, and when it's negative, it means there are more puts. and right now it looks like the biggest puts and this is actually surprising to me are on Industrials and Staples now Staples and utilities keep in mind have done very well in 2022, and those are actually the ones with the biggest amount of puts on them right now relative to call options Tech Obviously also substantially more puts than calls some folks are suggesting. that's why we're potentially seeing a little bit of a squeeze led by Tech.

However, other sectors actually have more shorts against them. CarMax Nike McDonald's McDonald's by the way, has done very well year over year as a stock financially though, and fundamentally not actually that good. And I will say Red Robin as just sort of a comparison to McDonald's does not really franchise I Don't think it franchises its restaurants at all and they're losing money hand over face. I was at a Red Robin yesterday and I hate to say it because I used to work at Red Robin like 16 years ago.

Uh, it was not good. They first of all, the restaurant was like nearly empty. uh, barely people coming in around dinner time. Uh, and on top of that I think because so few people were there, you actually saw them providing less quality food like old oils for grease you know, for mozzarella sticks or french fries.

and I'm like, what are you doing? That's like the staple here should have fresh french fries. Uh, and so um, kind of disappointing. but you see that kind of stuff going into a recession. You see restaurants start seeing numbers go red and then they start cutting corners and then numbers go even more red.

But anyway CarMax Nike McDonald's Tesla Apple seeing big Hedges put on clearly fears around the US consumer. Uh, this is where we're seeing the top hedges in S P companies big ones again here. CarMax microchip Uh, we got Nike McDonald's Devon Craft uh new mod Tesla Kinder Morgan Ooh big Tesla shorts here. that'll be interesting Advanced Auto Parts Apple Halliburton Halliburton Releases so far confirmed that discretionary investors are broadly underweight.

U.S Equities. Yep, that's true. A lot of money to be sitting on the sidelines even. Goldman Told us that last week.

a lot of money waiting to be deployed on the sidelines. waiting for proof that you know the pain is over and it's time to go rally. Excuse me, firms with strong earnings seeing the highest excess returns since the second quarter of 2019 Pointing to light Equity Positioning okay in English When stonks do good, they go up real fast, implying a lot of money against sitting on the sidelines. If earnings hold up in the coming weeks, we may see Equity Bears shift their focus to debt ceiling concerns.

Okay, this is actually the most hilarious line. Shout out to the the writers Advanta Track: This is probably the most hilarious line I've ever seen somebody say about bears. Basically, as soon as the last remaining holdout for Bears to say everybody should be bearish goes away. AKA If earnings aren't that bad, they'll have to find something else to about and they'll just complain about the debt ceiling.

That's a good one. That's a good one. Uh. However, overall S P 500 Performance has been mixed ahead of uh, previous, uh, major government shutdowns and obviously we we don't actually expect anything to happen with the government shutdown run up to Prior government shutdown shop mixed a mixed S P Uh 500 performance.

Clearly a flight to safety and bonds. Fine. Who's been behind the selling of late, relatively lackluster retail buying and mutual fund outflows explain soggy markets. Now this is interesting.

mutual fund outflows basically suggesting Hey Look, a lot of people do this and I saw this with my I hate to say it but I saw this with family members in 2009 at the bottom of the market. they're taking their money out of mutual funds because they're like, man, my mutual fund manager sucks I'm taking my money out and they literally withdraw. We're deeming their money at the freaking bottom. All right.

What else? One of our two conditions for a bottom in U.S equities is a capitulation in defensives. Well, we haven't seen that yet. although there were some signs of this last week. Really cyclicals have accounted for the Lion's Share of selling.

Okay, interesting. So so defensives would be like Health Care real estate cyclicals could be things like Autos like Ford GM right? Interesting. So not actually seeing that. defensives capitulation.

They're saying uh, just yet. but you are seeing short star loading up on some of these. The other condition for an equity: Market bottom is clear retail capitulation That has not happened yet. We have not quite seen fire sales in the Mar that marked the end of the Q4 2018 sell-off This would also usually align with a volatility spike a vix.

Spike Uh, this is clearly not the same retail investor that we saw in 2020 or 2021. On the surface, an uptake in retail buying over the past week May point to A Renewed Animal Spirits amongst investors of this cohort, but retail investors always tend to buy big ahead of earning Seasons Interesting, However, purchases this month have been relatively light for this time of year. Ah, because usually you do see a lot of retail purchases in January after tax loss harvesting in December. This kind of implies a lot of people waiting on the sidelines for Uh for potential of for us to get through earnings.

and again, if those earning if these earnings come out good or at least better than expected, it could. It could kill some of the bear thesis. Anyway, retail typically buys ahead of earnings, but it's been lackluster this year. There you go.

you can see the chart right here. pretty dang low Still, retail. Other retail parts of the market have indeed been capitulating with mutual funds seeing, uh, their usual end of year outflows. That being said, there could be a lot more pain to come if these funds see a full reversal of cumulative inflows.

In other words, a lack of money coming in mutual funds likely to be behind recent selling. We talked about that already. Okay mutual fund inflow since Jan 2021. Still positive risk of further unwind though it because of recession fears that could create some more selling pressure When it comes to rebalancing, our models do not point to a massive selling of equities in the next few weeks.

Fine. Watch out for Commodities Uh, traders in the coming Seasons or sessions. rather. okay.

what else do we have here? Overall, the sellers are becoming fewer and fewer. We're potentially entering the latter stages of the bear. Market The window for a pain trade rally in stocks will be open if U.S earnings positively surprise pain trade rally would be like hey, things have been so bad, but they're just not as bad as we thought. Equity bulls look to be returning given that a Fed pivot looks to be in sight, whilst investors seem to be chasing the low-hanging fruit of positive macro surprises in Europe and Asia and Mo may only be a matter of time before sentiment spills over to the underweight U.S Equity Markets This is something we actually talked about earlier that it seems like well, first of all, we've seen the entire world stock market up 19 whereas the US is just up about five percent since October.

So you've seen more bearishness in the U.S than in Europe and Asia specifically. Uh, but also the rest of the world. This is why you have a lot of analysts right now talking up. oh, it's Emerging Markets that's where it's at at whereas I actually have a little bit of a belief that you could look at American companies that have a lot of international exposure like what I consider pricing power style stocks Taiwan semiconductors Uh, you've got Tesla You've got Apple You've got Nvidia these companies have a lot of exposure to International Global Equity positioning up over the past week, investors gaining confidence by the dip.

Okay, fine. U.S Tech amongst markets that have seen the sharpest outflows in januaries. However, with Bulls increasing risk in Europe and Asia that's interesting. look at that bearish positions.

U.S Tech down here EU Staples EU Energy Japan Bearish. U.S Industrials U.S Energy That's a surprise. Whereas, what's what's bullish right now? Bullish, you've got Taiwan Thailand EU Equity South Korea Germany Germany Talking about not going into a recession? Ooh, fascinating. Uh, this is actually really interesting and kind of aligns with some other data that we're seeing.

Let's look at some other data that we have: Retail: Let's see here: Retail Retail retail. Muted purchases by retail in ETFs which actually indicates potentially a low conviction ahead of earnings. I Can go ahead and show this chart right here. this means individual and I actually mentioned this earlier.

Here's just the chart to evidence and Retail Investor net purchases. You can see the blue line is single stock purchases. the red line is ETF purchases mostly uh, like larger index funds like S P 500 Uh, the triple leveraged S P 500 Triple leverage NASDAQ Actually seeing lower inflows than single stocks or some are saying actively managed ETFs Seeing more inflows as well because they are more maybe thematic or more single stock Focus than these sort of broader. let's just invest in the entire S P 500.

I Think what's happening is retail individuals basically are picking which stocks they think are going to do well in earnings and which stocks up potentially been oversold. Let's see here: Market Rally potentially coming from Institutional Investor Short covering ETFs Are experiencing the biggest flow divergences since Uh 2022. Oh wow, here we go. We actually have a chart kind of showing us numerically where these flows are occurring.

I'll go ahead and pull that up. now. Now, when you look at flows, some of these ETFs aren't going to be very obvious to us what those are. So if you're curious curious, just take a screenshot.

and no, I won't show you a screenshot about that 30 off coupon code that expires or sorry, it's more than 30 off the coupon code that expires on January 30th I Screwed that one up. Best coupon code will have: three month guaranteed price lifetime access A pretty pretty great pricing. You can get in lifetime access to those programs, but anyway, here you go. You have inflows going into the semi's triple leveraged Bear index.

Wow. Natural gas. Uh, treasuries. It's like cash Holdings over here.

Whereas you have outflows, look at where you have the outflows. you actually have outflows on Ark Semis long Russell won thousands. That's your value NASDAQ 3x Bear that actually has outflows too NASDAQ Bowl has outflows. This sort of reiterates that people let me show you the rest of the chart.

There we go. This kind of reiterates there you could take a screenshot like right there. Uh, you can see here that it really seems to be the broad-based indices are are getting hit and I'm surprised the bearishness on chips because I'm actually personally bullish on on chips. But anyway, upcoming weeks should give us a good understanding thanks to earnings.

Blended Earnings declined for the S P 500 Q4 is 4.6 That's the estimate. We'll see what happens. Do keep in mind that uh, retail sales are lagging right. Holiday sales grew 6.7 percent from October to December Sales lagged the average inflation rate of 7.1 percent.

So real holiday sales were actually negative. Uh, probably Q4 was also not as good. You've got the national retail. Federation Estimating that holiday sales in November December grew 5.3 percent.

That was short of the growth estimate of six to eight percent. So that would be bearish for earnings, right? Q4 Will depend on whether or not retailers had to aggressively discount to get their inventory off the shelves. Retail uh, electronic sales expected to be negative 5.6 year-over-year in December Again, we saw in with Logitech numbers. pretty bad furnishings and clothing.

Uh, we'll be Uh will be interesting as well. We'll see that from American Eagle and Abercrombie uh Macy says there was a lull of sales outside of holiday weekends. I Personally sold my steak in Lulu after their margin guide and uh, they are reiterating pressures today and getting downgrades again today. Personally I've never seen sales at Lulu and uh I I Hate to say it, but look I worked at Hollister So so maybe I have this like personal like shell shock to sales.

but as soon as Hollister started doing sales, it was downhill from there. Hate to say. but it's something to pay attention to. Who knows? Maybe it's just a sort of seasonal and they were just getting rid of some of their their excess inventory and now they've stabilized.

Who knows? something to pay attention to? So I would watch that at Lou Lucent So generally not a company that's been known for sales. real disposable income has been deeply in the negative territory. Yep, uh. job openings and wage gains have moderated from fed tightening, savings are depleted, and consumers have either cut back on spending or turned to credit cards.

Now of course, we'll see whether or not retail sales actually hold up. But the important things to pay attention to? So uh, that gives us a little bit of insight here into retail: Where the positioning is going, where buyers are going. Uh, in my opinion, this earnings season is critical and it makes sense for stocks to actually Trend down slightly before earnings. So I was a little bit surprised with that large rally we had on Monday Uh, especially since usually before the news comes out, we don't get the big rally.

who knows. But I'll never forget the early part of 2022 when we started seeing those bad Netflix earnings and it was the canary in the coal mine. For bad news coming forward this time, we've actually had better than expected earnings coming out pretty much everywhere. Expect the real estate sector and some of the discretionaries.

Uh, so real Estate, for example: DR Horton Massive Miss contracts falling 38 Huge under expected uh result of four contracts 13 382 versus 14 528 expected there, Of course, blaming mortgage rates, but it's no surprise that real estate is getting whacked and we expect to see the worst of the numbers coming up here within the next, uh, two to three months. Once the case, Shiller actually catches up to negative year-over-year numbers. Some some thoughts here on a retail Bitcoin Trying to go positive here, still sitting slightly negative so we'll see how stocks end up moving. but uh, I don't know.

Let me know in the comments. what do you think? What's your retail positioning? are? You Kind of like a lot of retail right now, where you're staying away from those broad-based indexes and you're kind of waiting to see what happens with earnings. And you've got money on the sidelines from cash stock loss harvesting and you're ready to Pile in. that's what? Vanda Track is arguing that maybe we could actually have a big bull movement and the Bears are going to have nothing left to talk about, but the debt ceiling crisis? kind of crazy.

something to pay attention to and I kind of hope Vanda Track is right. Anyway, let's go ahead and jump on over and see if we've got CNBC covering anything. entertaining? Nope, we've got an ad. Okay, well that's boring.

fine. Then we'll look at something else. So let's see here. let's see what news do we have.

Okay, we have. uh. Pmi's coming out in about 30 minutes. We'll be covering Pmis in the course member live.

We've got break evens on the five-year pretty stable right now. Two, three, one, we have, uh, future. still slightly negative. uh, industrial earnings.

disappointing. Some pullback in U.S Futures after the sizable rally the past two trading days. Unsurprising. Well, yeah, Semiconductor's got a lift Monday after a Barclays upgrades although AMD is down pre-market after Bernstein downgraded the stock chat Gbt Microsoft billions may be good for NVIDIA Hey, I made a video about that yesterday chat.

Gbt is wild. Absolutely. Wild Uh Divergence Between markets and economy cheapens Recession: Hedges Economists tend to overestimate GDP more frequently by a greater magnitude in recessions. markets therefore do not adequately reflect downside risk before a downturn hits.

Put spreads on the retail and high yield credit are among attractive recession hedges for portfolios. Wow. Okay, put spreads on the retail sector markets are implying the odds of a recession are falling. While they can influence economies in various ways such as the availability of credit and wealth effects, it is not easy for them to reverse many months of economic damage through this crazy hiking cycle we've been through.

Yeah, no kidding.