S&P Breaks 7,000 - Fed Speaks

Key Concepts

• InterB Event: An annual exchange for ski racing, networking, and business among financial professionals.
• CME Tool: A tool used to gauge market expectations regarding Federal Reserve (Fed) policy, specifically interest rate cuts. Currently indicates a high probability of no cuts in the near term, with potential for cuts by June.
• VIX (Volatility Index): Measures market expectations of near-term volatility. Currently showing a slight increase due to uncertainty surrounding the Fed meeting.
• Poly Markets: Predictive markets allowing speculation on the outcome of future events, like the market cap of a token (Moonbirds).
• Unusual Options Activity: Monitoring large-scale options trading (e.g., GLD, SLV) as an indicator of potential market movements.
• FDV (Fully Diluted Valuation): A metric used to assess the total value of a cryptocurrency or token.

Market Overview & Fed Expectations

The discussion began with a review of recent market performance, noting the S&P 500 surpassing 7,000 for the first time and gold reaching $2,300. The primary focus, however, was the upcoming Federal Reserve meeting (scheduled for 2:00 PM Eastern Time). The CME tool indicates a 97% probability of no interest rate cuts at this meeting, with a growing expectation of potential cuts by June. Pete expressed a belief that cuts might come before June, though acknowledged the CME tool is the current standard for measuring market sentiment. The uncertainty surrounding Jerome Powell’s statements is driving a slight increase in the VIX. The dynamic between the Fed’s actions and potential reactions from the President was also highlighted as a factor influencing market volatility. The current trading range for the VIX is between 15.50 and 16.50, with potential for a boost if Powell’s statements are unfavorable to the President.

Precious Metals & Unusual Options Activity

Significant attention was given to the performance of gold and silver. Pete noted continued strong buying activity in gold options (GLD), with purchases in the six-digit range (137,000 and 110,000 contracts cited as examples). This activity suggests continued bullish sentiment towards gold. Silver (SLV) is also experiencing a strong rally, with miners also showing positive movement. Pete referenced conversations with Oliver Renick at CBOE Global, emphasizing that the rally is not over. He highlighted the six to eight-month duration of this activity, indicating sustained momentum.

Stock Specific Analysis

Several individual stocks were discussed, with a focus on unusual activity and recent earnings reports:

• Starbucks (SBUX): Reported net revenues of almost $10 billion in fiscal Q1. The stock experienced a significant jump to $151.60 (from $85-$86 prior to earnings), despite a slight earnings miss. The stock has since pulled back to the upper $90s. The appointment of Brian Nickel as CEO was cited as a positive development.
• Amphanol: A cable and sensor manufacturer that reported stronger-than-expected Q4 results and positive guidance. Morgan Stanley raised its price target from $160 to $185. Despite positive results, the stock fell over 14% after the open, potentially due to a recent strong run-up. Pete suggested a potential buying opportunity for those holding put options.
• Seagate Technology: Experienced a 20% surge, reaching a new 52-week high. Stronger-than-expected results and positive guidance fueled the rally. Revenue increased 22% year-over-year. Pete emphasized the strong demand for storage solutions and Seagate’s position as a leader in the industry.
• NextPower: A solar equipment company that saw a 14-15% gain. The company beat earnings expectations, raised guidance, and reported a record backlog. Pete highlighted the increasing demand for solar energy and the role of silver in solar panel production.

Predictive Markets & Digital Assets

The discussion touched upon the growing popularity of predictive markets (Poly Markets) and their use in speculating on digital assets. The Moonbirds token was used as an example, with predictions indicating a high probability of exceeding a $100 million market cap, and a 67% chance of surpassing $200 million on its first day of trade (estimated market cap of $220 million). Pete emphasized the educational value of these markets and their potential as another trading opportunity.

NFL & Draft Analysis

The conversation shifted to the upcoming Super Bowl, featuring the New England Patriots and the Seattle Seahawks. Pete raised concerns about the performance of New England’s quarterback, Drake May, noting a significant drop in his completion percentage and an increase in sacks during the playoffs (completion percentage dropped from 72% to 56% and sacks increased to an average of 5 per game). He contrasted this with the strong performance of Seattle’s quarterback, Sam Darnold, who has seen his completion percentage increase during the playoffs and is leading the league in scoring.

Pete also highlighted a potential “sleeper” prospect in the upcoming NFL draft: Cole Payton, a quarterback from North Dakota State. He drew parallels to Josh Allen, noting Payton’s size, arm strength, and the potential for him to be undervalued due to playing at an FCS school. He pointed out that North Dakota State is providing an offensive lineman for Seattle, suggesting a strong pipeline of talent.

Upcoming Events & Conclusion

The Rebels Edge will be unavailable tomorrow due to Pete’s participation in live trading events in Miami (February 29th and 30th) including eye connections, uncorrelated event and a live trading event at the Ritz in South Beach. The show will resume on Monday at 1:00 PM Eastern Time.

Notable Quotes:

• “It ain't over. If the buyers of all these options that we see keep on coming in… we're talking like 137,000 of these and 110,000 of those… we’re talking about a lot.” – Pete on the continued bullishness in gold.
• “Sometimes you don't want to rest too long.” – Pete, advising on managing put options on Amphanol.
• “Seagate is one of the kings [of storage].” – Pete, emphasizing Seagate’s market position.
• “These guys [North Dakota State] basically consent. Google me.” – Pete, playfully describing the winning tradition of North Dakota State football.

This summary provides a detailed account of the topics discussed, including specific data points, examples, and perspectives. It aims to capture the nuances of the conversation and provide actionable insights for viewers.