Happy Friday folks! We hope you caught our short on $BBBY yesterday as we are pleased to report that it has become our second most successful trade recommendation to date - also, we would like to announce that in lieu of a long-term investment pick on Fridays, we will now be publishing our usual short term trade recommendations + market commentary Coachmen’s Report. Read on for your daily dose of market inspiration in these choppy waters!
"It is difficult to prove yourself reliable when people are required to wait for you."
- Wes Fesler
To cap off the week and add to the now 1+ month stream of gains, the S&P 500 is finally starting to pull back a bit more as futures for the index are trading down 85 bps currently - the Dow and Nasdaq are also trading down 64 and 102 bps respectively. Today is setting up to be a largely risk-off day as many assets, from equity indices to commodities, all traded down sharply in the overnight session likely on pricing new Fed commentary alongside poor housing data. Regardless, this is a healthy pullback in what has otherwise been a 17% run for the broader market. Moreover, given the slow in housing as well as inflation, the Fed now has data to suggest that its move towards a market neutral rate has started to prove effective and the market is now pricing in an almost equal probability that Powell makes a 50-75 bp or 75-100bp rise in the target rate. Last, while the US and much of western civilizations have ‘tightened the belt’ regarding monetary policy, non-aligned nations such as Russia and China have been pursuing opposite agendas with the most recent announcement from China is a $229B fiscal stimulus package to support their ‘growth at all costs economic strategy.
Short: Vipshop Holdings Limited (VIPS-NYSE) | Timeline: 2 days
Vipshop Holdings Limited, which operates online platforms for various consumer discretionary brands in China, reported substandard earnings this morning as revenue for the second quarter was RMB24.5 billion (US$3.7 billion), compared with RMB29.6 billion in the prior year period. Moreover, the Chairman and Chief Executive Officer of Vipshop, stated, "Our second quarter results came in better than expected” (Source) - a red flag for investors as their report did not represent growth in any way, shape, or form. Turning to the chart, the stock has been beaten up after dropping 80% from mid-2021 to now, and as the world has begun to edge out of the Covid-19 pandemic the stock has trended sideways and a symmetrical triangle has formed - a popular continuation pattern among traders that represents a period of consolidation before the price is forced to breakdown due to news or high volume trades.
Chart of the Day - Chinese Yuan vs. Required Deposit Reserve Ratio
Chinese policymakers are forced to loosen monetary conditions and the yuan is yet to be impacted.