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imgWeekly fresh-squeezedmarket analysisand commentary.

It’s earnings season which makes the casino just that much more fun.

October 31st, 2021
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Market Update for the Week Ahead

Welcome back to The Juice, everyone!

It’s earnings season which makes the casino just that much more fun. Big tech reported earnings last week and it’s safe to say this was the last time the FAANG will ever be reporting… starting next quarter it will be MAANG after Facebook (FB) did a make-over and rebrand to their new name, Metaverse (MVRS). Much wow.

So how did the FAANG (minus Netflix) do across the board?

Facebook: beat on EPS, slight miss on revenues and shares traded lower. News of the rebrand softened the blow and FB traded + 0.90% on the week.

Apple: Something something “supply chain” and Apple shares dropped 4% on Friday.

Amazon: A rarely seen poor performance this quarter as growth was down from last quarter. A miss on EPS and revenues caused AMZN shares to trade 4% lower and back to… Monday’s levels.

Microsoft: A solid performance from MSFT this quarter. Microsoft Azure stole the show with strong growth leading shares of the company almost 7% higher for the week.

Google: Strong cloud performance and ad revenue, GOOG beat on both top and bottom line which launched shares higher this week.

 

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What else happened last Week?

Tesla made headlines this week as the company broke the 1 trillion market cap barrier (congrats Elon). Tesla saw heavy call option activity flowing in day after day, did someone say gamma squeeze? Here’s what the option’s race and cumulative option premium looked like for an all-encompassing look at total premium that exchanged hands last week. Tesla traded over $53 billion in options premium. 

Other notable names from Friday’s action was Bakkt (BKKT) that closed up 66% and traded over 650 million premium. BKKT was also the 6th most traded ticker in terms of option premium. Lucid Motors (LCID) closed up 4% to finish a strong week and also came in at 13th on the most traded premium list for Friday’s trading.

Options Races

BKKT’s market cap is 2 billion while LCID is 60 billion. To put the amount of option premium traded through these names on Friday in perspective, the only companies that were outshining these small/mid-cap stocks where the SPY indices and FAANG. That’s incredible.

TradeScape

Lastly, some bearish flow was seen through the SPY and SPX. The S&P 500 has continued it’s huge rally, mainly led by big-tech as for the most part small and mid cap stocks have been getting hammered. With some FAANG reporting lack-luster earnings I’d keep an eye on a pull back and possible (temporary) rotation into new sectors.

 

What sectors are hot?

Looking at the top sectors ETF scan from Friday has some interesting sentiment behind it.

TradeScape

The Financial sector ETF, XLF, saw some bearish flow. This sector has been very strong this year with a YTD performance of roughly 40%. It could be these hot sectors might need a breather and some cooling off before the next leg up.

SMH, VanEck Vectors Semiconductor ETF, was also quite bearish. This is coming in off the back of Apple’s supply chain struggles and the global semi-conductor shortage that has been affecting many industries from tech to the auto-industry. It could be that funds are positioning themselves for continued (short-term) hardships. Be ready to catch some of these semi plays when they are finally able to open the floodgates to more supply, there’s been a lot of pent-up demand from many industries and sectors.

The most interesting option flow from Friday came through EEM, an emerging markets ETF. Although it has “emerging markets” in the name, the largest holdings are all China and Asian stocks. Here’s what the breakdown looks like (using the search feature that is inside the VIG app):

Search

Investors are very aware of what happened to China stocks over the last several months, and the EEM ETF has also been one to experience the downside. However, the unusually bullish flow from Friday trumped even the second largest in the gold etf (GLD). Are players lining up to start buying the dip in Chinese stocks? It’s been several weeks since any more bad news has come out of China with their increased regulations. Many of these names are trading at a discount relative to earlier in the year.

 

Options Scan - Roaring Kitty Calls

Twilio Inc, a cloud communications platform, was hit with a 20% drop to the downside after they reported earnings Wednesday after market close. Interestingly enough, TWLO came up frequently on the roaring kitty calls scan on Friday. The top trades were mostly November calls as players potentially look at a short-term bounce with RSI hitting this low on the meter.

Discovery Scans

That's all for this week folks! Don't forget to signup for the weekly VIG Fantasy Stocks and Fantasy Crypto Kickoff Classic's - they start at 930 AM EST on Monday, November 1, 2021. Have a great week!

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