At 4:20 p.m.:

NASD Advance Decline Ratio Intraday (blue) vs SPY (green)

Closing Volume and VIX

- NYSE volume 20% below its one-month average

- NASDAQ volume 10% above its one-month average

- VIX index: up 1.96% to 18.69 

Breadth

S&P 500 Sectors

Percentage Movers

Nasdaq 100 Heat Map

Thanks for reading my Diary today.

I hope my output had value.

I have a 4 p.m. meeting with a company that I have to prepare for.

Enjoy your evening.

Be safe.

This is truly amazing. 

First tweet (and subtweet from Chanos):

Now the second tweet:

https://x.com/quantian1/status/1903486819720741110

It is all surreal.

Holy AI, Batman!

The whole industry seems to be a giant money recirculation scheme. Not sure DOGE could even figure out how the money is moving.

Nvidia NVDA to anchor CoreWeave IPO at $40/share

Breadth

S&P 500 Sectors

Nasdaq 100 Heat Map

Trump's First Pick For Attorney General Says Marijuana Rescheduling Is 'On The Horizon' - Marijuana Moment

* Hmmm... quite interesting! 

From Peter Boockvar;

Home sales in February

Pending home sales in February rose 2% m/o/m after a 4.6% drop in January and a 4.2% decline in December which took this index to a record low since it started. That was just above the estimate of up 1%. The gain was led almost entirely by the 6.2% increase in sales in the South which followed a 9.2% fall in the month before (blame the weather?). Sales fell in the West and Northeast and were up slightly in the Midwest.

The NAR said it as it is, “Despite the modest monthly increase, contract signings remain well below normal historical levels.” We all know why.

Pending Home Sales

From Charlie:

Still playing "small ball."

End of message.

I am now long MSOS calls (with no clear catalyst!).

Wolf Street howls about residential housing: Home Buyers Still on Strike, Waiting for Lower Prices, Lower Rates, and Higher Incomes | Wolf Street

Adding to TLT:

From Peter Boockvar:

Claims data/Goods deficit still reflects pull forward and what it means to shrink it

Initial jobless claims were little changed w/o/w at 224k vs 225k (revised up by 2k). That was about as expected. Continuing claims fell to 1.856mm, down from 1.881mm and below the estimate of 1.886mm.

Overall the bottom line remains pretty much the same as firing’s remain muted, as measured here, while the hiring pace has slowed evident in continuing claims still around the highest level in 3 1/2 years. The firing’s in the government sector does not show up in this data but any jobs lost with private contractor’s as result of the shrinking federal workforce would.

Reflecting the major pull forward of orders ahead of tariffs, the US goods trade deficit in February was a huge $147.9b vs $155.6b in January and compared to ‘just’ $104b in November. This also compares to about $90b in January and February in 2024. The estimate was $139b.

Keep in mind, in the attempt to shrink this deficit over time would mean making US production more cost competitive which would help to raise exports at the same time we’re making imports more expensive in an attempt to encourage us to buy more domestically. Will reshoring make us more competitive? A lot of automation will likely have to be a key influence. Domestically, will consumers be able to afford a continued rise in the cost of things made here? Hopefully.

Also, if we do cut this deficit it also means we will shrink the capital account surplus which means that foreigners will have less dollars to invest in US Treasuries, US stocks and other US assets. There is always a trade off, no pun intended. By the way, foreigners currently own about 1/3 of the US stock market, totaling about $17.5 Trillion.

Goods Trade Deficit

* Added to cannabis: GTBIF $5.47, TCNNF $3.73.

* Purchased TLT $88.96 (new position)

I have no Index positions on currently.

Some sellside reports on the pet food industry:

Petco WOOF price target lowered to $3.25 from $5.50 at UBS UBS analyst Michael Lasser lowered the firm's price target on Petco to $3.25 from $5.50 and keeps a Neutral rating on the shares. Petco, which delivered another quarter with outperformance versus its guidance, is at the stage where it seems to be "fine" letting its growth get out of the spotlight as it focuses on improving its profitability and returning to retail fundamentals, the analyst tells investors in a research note. Petco laid out a three-phase plan that takes a multi-faceted approach to address the opportunities it has to improve, though UBS doesn't think all of the steps need to work at once for it to show continued improvement.

Petco price target lowered to $4 from $6 at RBC Capital RBC Capital lowered the firm's price target on Petco to $4 from $6 and keeps an Outperform rating on the shares after its Q4 earnings miss. The company's new management has committed to sacrificing share near-term to build a more profitable business model, the analyst tells investors in a research note. The firm adds however that while the plan sounds good on paper, given that margin progress is expected to be driven by many small efforts as opposed to a few bigger and more tangible step, investors will take a wait and see approach on the stock.

Petco price target lowered to $3.50 from $5 at Baird Baird lowered the firm's price target on Petco to $3.50 from $5 and keeps a Neutral rating on the shares. The firm updated is model following Q4 results as the company appears focused on returning to profitability.

Chewy CHWY price target raised to $42 from $40 at Citi Citi analyst Steven Zaccone raised the firm's price target on Chewy to $42 from $40 and keeps a Buy rating on the shares. The company's Q4 earnings demonstrated strength again in the fundamentals of the business and Chewy issued a solid guide for 2025, the analyst tells investors in a research note. The firm says sales momentum continues with Chewy gaining market share based on its steady auto-ship business, while customer count inflected to positive low-single-digit growth. Citi views this as a "key driver for the growth story to get back on track."

Chewy price target raised to $40 from $38 at JPMorgan JPMorgan analyst Doug Anmuth raised the firm's price target on Chewy to $40 from $38 and keeps an Overweight rating on the shares. The firm is "incrementally positive" on Chewy's execution, active customer growth, and profitability ramp post the Q4 report. Strong execution is driving active customer momentum into fiscal 2025, the analyst tells investors in a research note.

Upside:

-RGLS +50% (successfully completes Phase 1b Multiple-Ascending Dose (MAD) Clinical Trial of Farabursen (RGLS8429) for Treatment of Autosomal Dominant Polycystic Kidney Disease (ADPKD))

-SLNO +37% (US FDA approves VYKAT XR to treat Hyperphagia in Prader-Willi Syndrome)

-NEOV +16% (guidance)

-SCS +10% (earnings, guidance)

-NKTX +9.5% (earnings; cutting workforce)

-ATNM +9.1% (announces ATNM-400 a Novel Non-PSMA Targeting First in Class Prostate Cancer Radiotherapy Leveraging Actinium-225)

-FUL +7.6% (earnings, guidance)

-AGRO +7.3% (Tether will commence tender offer to acquire up to 49.6M Common Shares for $12.41/shr in cash and take holding to 70%of shares outstanding)

-WOOF +6.6% (earnings, guidance)

-NFE +6.1% (confirms to divest Jamaican assets to Excelerate for $1.06B cash)

-CNXC +4.7% (earnings, guidance)

-WGO +4.4% (earnings, guidance)

-CGNT +2.7% (secures >$20M annual 3-yr agreement with a national security agency)

-RIGL +2.7% (announces Settlement Agreement resolving TAVALISSE (fostamatinib disodium hexahydrate) Patent Litigation)

Downside:

-CERO -22% (to initiate enrollment of CER-1236 Phase 1 trial in AML; to dose first patient in 1H25)

-SNX -11% (earnings, guidance)

-VRNT -11% (earnings, guidance)

-NIO -7.8% (files to sell up to 118.8M Class A shares)

-GME -7.7% (files to sell $1.3B in 0.00% Convertible Senior Notes due 2030, with an option for an additional $200M)

-GM -5.8% (President Trump signs EO on auto tariffs at 25% for all cars and light trucks not made in US)

-KAR -5.4% (JPMorgan Chase and Co Cuts KAR to Neutral from Overweight, price target: $20)

-JEF -5.1% (earnings, color)

-DDD -4.4% (earnings, guidance)

-COUR -3.7% (Tier1 firm Resumed COUR with Underperform, price target: $7)

-ALV -3.6% (President Trump signs EO on auto tariffs at 25% for all cars and light trucks not made in US)

-AMD -3.4% (Jefferies Cuts AMD to Hold from Buy, price target: $120)

-SYPR -3.0% (earnings, guidance)

-NVO -2.3% (hearing price target lowered at Morgan Stanley)

-AXL -2.0% (President Trump signs EO on auto tariffs at 25% for all cars and light trucks not made in US)

Most active premarket ETFs as of 8:14 a.m. ET:

Premarket percentage movers at 8:33 a.m.:

Some erratum that makes me say... "hmmm":

* And it is then about taking that surplus from your work and life to build capital; the houses, offices, roads, bridges, ports and vehicles that are literally the foundation of our civilization.

As I will describe in the piece, the large language model (LLM) AI ecosystem is the opposite of that. It is consuming down capital at a faster pace than almost any venture in history on a nearly worthless product. When will it end? Well, as I argued when I called for the structural downturn in China, it is all about ‘When the Monai runs out." This note covers developments in several key areas, to update investors on why I think the bear market in LLM AI compute and Big Tech has just begun: '

LLM AI training has hit the wall. 

There is no killer LLM mass market app, and there may never be one. 

Even the current best-use cases are shortcuts that destroy value over the medium term: 

When the 'Monai Runs Out' (The latest from MacroStrategy): 

Hi – I have attached my latest report: "When the Monai runs out".

In my view progress is not about tech, it is about building a foundation for society through hard work and thrift. And it is then about taking that surplus from your work and life to build capital; the houses, offices, roads, bridges, ports and vehicles that are literally the foundation of our civilization. As I will describe in the piece, the large language model (LLM) AI ecosystem is the opposite of that. It is consuming down capital at a faster pace than almost any venture in history on a near worthless product. When will it end? Well, as I argued when I called for the structural downturn in China, it is all about "When the Monai runs out."

"Open AI is not a model building company, it is a product building company," Satya Nadella. What kind of product can you build on the back of models that hallucinate "at least 35% of the time." Not very good ones.

This note covers developments in several key areas, to update investors on why I think the bear market in LLM AI compute and Big Tech has just begun;

LLM AI training has hit the wall.

There is no killer LLM mass market app, and there may never be one.

Even the current best-use cases are shortcuts that destroy value over the medium term.

Deepseek and now Ernie have put the final nails in the coffin of the LLM AI compute ecosystem.

A slowdown & liquidity tightening after the debt ceiling is raised may hit AI investment especially.

* Cowen: 

The attached paper, interesting, but technical, if you want to be even more bearish.

The entire paper says that people are buying four times more infrastructure than they need. The better the GPU, the higher the failure rates and this fragility causes significant cluster under-performance with high cost. The overall system architecture is so under performing, so fragile, so difficult to use that Nvidia NVDA wants you to buy even more. In fact, they tell you not to buy a cluster, but to buy a factory! This is what Jensen is pitching: "AI factories." 

From an industry guy: “One of the most aggressive AI players told me they are not buying into the new Nvidia architecture (it is called Multiplane) because it would require rewiring their data centers that they just purchased over the last 18 months. Those are training clusters.” 

This stuff is incredibly expensive and not working right (obviously) and NVDA is just resorting to – “BUY MORE OF WHAT AIN'T WORKING!” There is massive negative return on investment to the current architecture; how does spending more money solve that problem? Also interesting, Oklo OKLOF (mini nukes) stock also rolled over, people definitely slowly figuring out there is massive industry overcapacity and the stuff ain't doing what it was supposed to do…. My view, this will turn out to be biggest waste of money in the history of the world.

* With all the other stuff going on re the overcapacity stories, etc as well? Fascinating! 

* (Fuller story is below.) My guess is the lenders looked past this because they want this thing going public ASAP and getting the cash, which then de-risks their loans to some degree for some period of time. Bag-holders become the public as opposed to the lenders. If they get the deal done. Whole thing is nuts in my view. I don’t know the whole story to be fair, but having been around the block and understanding capital structure, that is my suspicion. Caveat emptor I guess….

Read: https://seekingalpha.com/news/4425364-coreweave-triggered-technical-defaults-on-loan-after-breaching-terms

* Interesting….good job by David Faber! 

* One more nit. The issue with the technical default keeps being described away as an administrative error and a technicality. Maybe, and I do not know all the details, but that does not seem right to me.

The term was in the loan documents for a reason.

If something is collateral, wouldn’t you want it in the U.S. where it is closer and easier to get back than in Europe, where it is harder to track down, and also subject to an entirely different set of laws?

This being excused away and makes no sense to me, but again I might be missing something. I understand why the lenders would look the other way right in front of an IPO that raises capital, but if not for that, something tells me they wouldn’t want the collateral in a place where it is tough to get back.

I dunno, seems weird.

Then again the fact that rapidly depreciating chips were viewed as collateral in the first place also seemed weird to me.

Senator John Fetterman Circulates Petition To Legalize Marijuana At The Federal Level - Marijuana Moment

Bonus — Here are some great links:

New Lows Linger 

What Does Two-Way Volatility Mean?

Bullish Canada

Two Tops to Watch

This table is a valuable resource for momentum-based short-term traders:

The S&P Short Range Oscillator is less overbought now at 1.2% and down from 1.9% on the prior day.

From JPMorgan:

US: Stocks finished lower with Mag 7 lagged. We saw the reversal of the price actions since Monday, as investors seem to be back to the recession playbook ahead of April 2 announcement. Mag 7, Cyclicals and High Short Interest are among the worst performing baskets, while Defensives outperformed. AI and data center names faced a slew of negative catalysts so far this week, including NVDA’s China environmental curbs, sell-side report on MSFT lease cancellation, BABA’s comments earlier this week: NVDA-5.7%; JPM Data Center basket (JP11DCEN) -3.0%. Commodities are higher led by oil and base metals. Outside the US, China ADRs outperformed US domestics with KWEB up 54bp today. China PBOC adviser said that China will ramp up stimulus if growth falters (BBG). At 5:18PM, Trump announced 25% auto tariffs on all cars not made in US.

and...

EQUITY AND MACRO NARRATIVE: Are we back to the de-risking playbook? Today’s price action seems to agree. Despite muted macro catalysts this morning (Leavitt’s comments on auto tariffs were announced at 1PM ET), we started to see traders rapidly take profits from the Mag 7/Cyclicals recovery this week. While part of this de-risking could be driven by a slew of negative news in AI/Tech, including NVDA’s China environmental curbs, sell-side report on MSFT lease cancellation, BABA’s comments on AI bubbles, the broad anxiety around tariffs also drove more appetite on de-risking ahead of April 2. Does this mean the end of a tradable bounce? Not necessary, particularly given the higher tolerance on tariff surprises, but the room for further rally could be limited as we will see more sectoral/country-specific announcements in the coming days. Moreover, irrespective of the length of this rebound, we remain tactically bearish since we expect April 2 as the next phase of trade war with the rest of the world preparing for retaliation.

Yesterday appeared to be a textbook reaction in the Nasdaq — failing at the resistance provided by the 200-day moving average:

Here is what I wrote late yesterday:

Minding Mr. Market

To recap, I expected a tradeable three-to seven-day rally from the recent lows and that is exactly what we got.

As posted, we went net long into the whoosh lower and sold into the strength (and on a scale) earlier this week.

Also as posted, I am now playing "small ball" — with a low gross and net and with plenty of cash reserves.

I expect the market, with a plethora of uncertainties, to be very volatile (and "newsy") — ideal for dispassionate and opportunistic traders but not so great for the buy-and-hold crowd.

By Doug Kass Mar 26, 2025 3:20 PM EDT