After- Hours % Gainers

After-Hours % Losers

Closing Breadth

S&P 500 Sectors

% Movers

Nasdaq 100 Heat Map

* Can you pass the acid tests?

Sometimes the light's all shinin' on me

Other times I can barely see

Lately it occurs to me

What a long, strange trip it's been

- The Grateful Dead, Truckin'

Thanks for reading my Diary on this, the anniversary of the Grateful Dead's first official show.

On this day in 1965 The Warlocks played under a new name, The Grateful Dead, at Ken Kesey's San Jose Acid Test. 

According to Ken Babbs, a key collaborator in The Acid Tests, he and Kesey had purchased a Sony tape recorder and a 16 mm Arriflex camera for documenting their travels from New York City to the World's Fair, later using their equipment to capture footage of the Acid Tests.

Here are two explanations of the Acid Tests Acid Tests - Wikipedia and here is Neal Cassady discussing them further! 

Enjoy this tape of The Merry Pranksters! 

In other news The Grateful Dead has officially claimed the Guinness World Records title for the most Top 40 albums charted on the U.S. Billboard 200. After previously making history with their 59th Top 40 entry in February 2024, severing a shortly-held tie with Frank Sinatra and Elvis Presley, the Dead has since extended their own record to 66 Top 40 albums, up to and including the #25 debut of DAVE’S PICKS VOL. 56: RAINBOW THEATRE, LONDON, ENGLAND - 3/20/81 & 3/21/81 this past November.

Enjoy the evening.

Be safe and hey, be careful of the brown acid — but it's your own trip!

What a long, strange trip it's been.

With S&P cash +8 handles with a minute to go in the trading day, I moved from very small to small sized in short index calls.

With S&P cash moving swiftly from -20 handles to +1 handle, I am back shorting Index calls.

But I am very small as I scale into more on strength.

With S&P cash -20 handles (and -30 handles from my last short), I am taking in all of my index short calls.

When our newest overlord Jensen Huang says this... well, I call BS: 

This is what really happens and is part of why Gen AI/LLMs are very limited. They can regurgitate what humans have created, but that is where it ends and it is not scaling and is a pure commodity and it costs an enormous amount of capital and operating expense (including power), to regurgitate, with hallucinations: 

"Model collapse is not unique to digital systems. Rather it’s the most straight-forward form of a much more fundamental underlying principle that effects all systems that train on raw data sets and then output similar data-sets. Training with regurgitated data leads to a loss in fidelity, and an inability to interact effectively with the real world…..The more “poisoned” the data is with artificial content, the more quickly an AI model collapses as minority data is forgotten or lost. The majority of data becomes corrupted, and long-tail statistical data distributions are either ignored or replaced with nonsense."

- Urban Bugmen and AI Model Collapse: A Unified Theory

With S&P cash +10 handles, I am selling more index calls.

But still small-sized.

Here are today's "things":

* I traded numerous times in the indices (common and calls) — all profitably. I am short index calls currently.

* I covered my  (AAPL)  short at $280.88.

* I added to  (AMZN)  long at $227.64.

* I sold my  (META)  long at $682.

* I shorted  (JPM)  at $317.28 and  (MS)  at $175.04.

* I shorted  (GRNY)  at $25.19 and  (JOET)  at $42.54.

* I added to  (PEP)  at $146.26 and  (KMB)  at $105.24 longs.

Breadth

Sectors

Nasdaq 100 Heat Map

I'm adding very small to my Amazon  (AMZN)  long (my only long in the Mag 7) now at $227.66 (-$4.72).

I am a scale buyer lower.

Shorting  (GRNY)  at $25.18,  (JOET)  at $42.53,  (JPM)  at $317.28 and  (MS)  at $175.05.

I am taking a small trading rental short in several financials.

Shorting on a scale, with a wide berth, given the sector's strength. I did the same with Apple  (AAPL) , successfully, as that stock ripped to new highs — and has now settled back.

See my comments about JPMorgan Chase  (JPM)  in my opener.

Not for everyone!

My "educated" guess is that Berkshire Hathaway  (BRK.A)   (BRK.B)  has been selling some Apple  (AAPL)  on the recent ramp.

* Trading aggressively like Little Eva sings... "Locomotion"

* It even makes you happy when you are feeling blue

Now that you can do it, let's make a chain, now

(Come on, baby, do the Loco-Motion)

A chugga-chugga motion like a railroad train, now

(Come on, baby, do the Loco-Motion)

Do it nice and easy, now, don't lose control

A little bit of rhythm and a lot of soul

Come on, come on

Do the Loco-Motion with me

- Little Eva, Loco-motion (1962)

With S&P cash reversing back higher (+7 handles) I have begun shorting index calls (again) on a scale.

dbpdavid

There's a long list of bullshit artists to pick from. But if I had to guess, I'd say Jensen's messiah complex is reminiscent of Elizabeth Theranos, Sam Bankman-Fried, and Adam Neumann.

Housekeeping item.

I covered my Apple  (AAPL)  short at $280.88 for a gain.

I plan to re-short strength.

With S&P cash down by over -10 handles and on the 30-handle reversal in the S&P index (from the day's highs), I have taken off my short  (SPY)  calls.

I plan to re-short strength.

From Peter Boockvar:

Some jobs data from the Labor Dept and Challenger

Distorted by the Thanksgiving holiday, initial jobless claims totaled just 191k, well below the estimate of 220k but again, major seasonal issues this time of the year. This compares with 218k in the prior week and smoothing this out puts the 4 week average at 215k vs 224k last week and including next week will help to smooth out this week. Continuing claims, delayed by a week, were 1.939mm vs 1.943mm in the week before (revised down from 1.96mm).

While next week’s claims figure will be more seasonally relevant, the overall level of claims remains low but the pace of hiring’s certainly remains muted. Squaring this with Challenger below we have to understand that some in the private sector receive severance when let go and others that don’t might do some gig work and the like and thus might not file for unemployment benefits.

Challenger said that in November job cuts rose 24% y/o/y but about half the pace seen in October. At 71,321 of cuts, Challenger said “jobs cuts in November have risen above 70,000 only twice since 2008: in 2022 and in 2008.” Telecom was the biggest industry driven by the Verizon news and followed by technology.

With respect to the influence of AI, it “was cited for 6,280 cuts in November. So far this year, AI is responsible for 54,694 layoff plans.” Maybe I’m being naïve but I’m sticking to the belief that this time is not different and that GenAI will create more new jobs we can’t imagine right now, acknowledging of course the current and future disruptions.

With regards to hiring plans, there is always the seasonal pickup but seen this November, it’s “the lowest number of announced seasonal hires since Challenger began tracking them in 2012.” Overall this year thru November with hiring, “It is the lowest year-to-date total since 2010.”

I shorted more Apple  (AAPL) .

At 9:38 AM:

From Peter Boockvar:

'All consumers are seeking value’

With the negative ADP November jobs print seen yesterday of 32k, it brings the monthly average private sector job gain to just 19k since April.

Well, it seems that the Takaichi administration in Japan has blessed the BoJ rate hike on December 19th. Bloomberg News is reporting that “Key members of Prime Minister Sanae Takaichi’s government wouldn’t try to stop the Bank of Japan if it decides to raise interest rates in December, according to people familiar with the matter.” But the article also said, “Still, there are some senior officials who oppose that timing, the people added.”

The JGB 2 yr yield rose for the 7^th day in 8 and the 10 yr yield was higher by another 5 bps to 1.94%. It’s up 25 over the past 3 weeks which is a big move for JGBs. Positively though, the best 30 yr bond auction since 2019 in terms of the bid to cover led to a 2.6 bps drop in the 30 yr yield to 3.40%. The yen is higher for the 5^th day in 6 to a 3 week high and finally getting some relief from the persistent pressure as the BoJ might finally react again to persistent inflation. The euro/yen heavy DXY is down for a 9^thstraight day.

Yen

DXY

You’ve read me making the case for oil prices, and last night on CNBC’s Fast Money, with the risk/reward particularly compelling too. This is a chart I found on Bloomberg that homes in on the breakeven price points for 13 specific US shale oil basins and you can see that more than half loses money at a price much below $50, particularly the Bakken at $58. The price of natural gas by the way in case you didn’t see is back at $5, the highest since late June.

Natural Gas

On to the slew of earnings calls.

From Five Below, trading up after a good quarter:

“We are seeing clear proof points that our customer centric strategy is working” as comps rose 14%, “driven by both transactions and tickets...Our comparable sales growth was widespread across most departments, new and retained customers, and all household income cohorts.”

“Today, value is not just about $5 and below, but ensuring we pack value into $7, $10, and $15 plus items.” Value works for sure in this environment.

“We increased our investment in social media, moving spend away from traditional channels, resulting in traffic growth both online and in our stores.”

“We also saw a solid improvement in shrink results from our August counts, reflecting the initial benefits from our broader mitigation initiatives.”

From Dollar Tree:

“First, I’d like to highlight the strength of our discretionary business, which showed its first positive y/o/y mix shift since Q1 of 2022. We believe this strength illustrates how our exceptional value proposition, including our growing multi-price assortment is resonating with our shoppers by helping them meet their needs and desires in the budget constrained environment that many consumers find themselves today.”

“While the consumer landscape remains uneven, the underlying story remains consistent. All consumers are seeking value...And the evidence is clear, Dollar Tree continues to gain share and attract new shoppers while continuing to serve its large and loyal base of core customers. Today, we serve an increasingly broad spectrum of shoppers, from core value focused households to middle and higher income shoppers who are making deliberate choices about how and where they spend.”

And we keep hearing this from a variety of consumer touching value based retailers/restaurants, “We had 3 million more households shop with us in Q3 this year compared to Q3 last year. Approximately 60% of these incremental shoppers came from higher income households, those earning over $100,000, 30% for middle income households, those earning between $60,000 to $100,000, with the rest from lower income households, those earning under $60,000. Importantly, Q3 spending growth was broad based across all income sub-cohorts, including households earnings below $20,000.”

From Macy’s:

“Looking at the evolving retail landscape, consumers are more discerning about how and where they spend their dollars. They want curated product assortments, consistent service and a seamless omnichannel shopping experience and that’s exactly what we’re striving to deliver.” Namesake Macy’s and Bloomingdales both reported positive comps.

“Now let’s discuss our thoughts on the consumer and the early read on holiday. Starting with the consumer health, our customer base, which is predominantly middle to upper income, remained resilient and engaged in the third quarter...We’re pleased with the start of the fourth quarter. However, the majority of the sales volume is still ahead of us and we believe it’s prudent to continue to incorporate a more choiceful consumer into our guidance for the remainder of the quarter. The assumption is consistent with our prior view.”

From the PVH earnings release, the owner of Tommy Hilfiger and Calvin Klein to name a few:

“In Europe, we saw a tougher backdrop entering the fall, while in the Americas, our digital channels continued to outperform, and in APAC we again exceeded expectations, driven by strong DTC performance with a notable improvement in China. Despite the continued uneven global consumer environment, we delivered an on-plan start to the Holiday season and Black Friday week in both Europe and North America.”

From the Delta 8k released yesterday ahead of a conference presentation:

“Delta is disclosing that demand remains healthy for the December quarter and trends are strong for early 2026. Growth in travel bookings has returned to initial expectations following a temporary softening in November related to the government shutdown, which is expected to impact the Company’s December quarter pre-tax profitability by approximately $200 million, equating to approximately 25 cents of earnings per share.”

From Thor Industries, the RV maker and whose stock fell 9.5% because of muted guidance:

“While the fiscal year has gotten off to a strong start, we are not going to get overly excited about offseason sell-in during such an uncertain time.”

“There is no doubt that the government shutdown and constant tariff headlines have weighed on consumer confidence, but our products are dialed in and if we can get a modicum of macro stability, then I expect to see a strong show season.”

After much discussion on Agentic AI and AgentForce, this was from Salesforce:

“From a geographic perspective, we saw strong business growth in North America and EMEA, led by France and the UK, while Asia-Pacific was more constrained, particularly in Australia and India. From a segment perspective, we continue to see strong performance in our small and mid-market business and enterprise growth accelerated this past quarter. From an industry perspective, business services and consultancy, healthcare and life sciences and retail and consumer goods performed well, while comms and media and manufacturing, automotive and energy were more measured.”

I sold the balance of my  (META)  long.

The Answer: At the end of the dot-com bubble:

Break in!

Meta  (META)  in a big headcount reduction.

Shares +$45. I remain long but have sold half of my position at $685.

Upside:

-CBIO +18% (Kelun-Biotech and Crescent Biopharma announce oncology partnership)

-GWRE +12% (earnings, guidance)

-PATH +9.5% (earnings, guidance)

-AXGN +8.7% (US FDA Approves AXGN's Nerve Scaffold for Treatment of Sensory Nerve Discontinuity)

-TIGR +8.0% (earnings)

-NCNO +6.6% (earnings, guidance)

-SAIC +5.5% (earnings, guidance)

-HQY +5.4% (earnings, guidance)

-HRL +5.2% (earnings, guidance)

-TLYS +4.9% (earnings, guidance)

-DG +3.5% (earnings, guidance)

-REX +3.0% (earnings, color)

-FIVE +2.7% (earnings, guidance)

Downside:

-GCO -26% (earnings, guidance)

-CCRN -19% (announces Merger Agreement with Aya Healthcare terminated)

-QURE -19% (US FDA conveyed that data submitted from the Phase I/II studies of AMT-130 are currently unlikely to provide the primary evidence to support a BLA submission)

-CURV -15% (earnings, guidance)

-SLMT -13% (announces Term Sheet to Acquire RockawayX)

-SNOW -8.8% (earnings, guidance)

-MEI -7.8% (earnings, guidance)

-BBW -6.1% (earnings, guidance)

-CARR -3.0% (bearish conference comments)

-KR -3.0% (earnings, guidance)

-WLY -2.4% (earnings, guidance)

-BF.B -2.0% (earnings, guidance)

-PVH -2.0% (earnings, guidance)

As of 8:14 AM:

Bond prices went up yesterday on the jobs data and bond prices are moving lower after the jobless claims report this morning.

This means the equity risk premium will move to a greater discount — negative for equities (IN THEORY!) as discussed in my market review this morning.

I plan to raise my short exposure further on any strength. 

At 8:04 AM:

Treasury Auctions:

11:00AM: Treasury announces a 6-Week 3 and 6 month bill auction;

11:00AM: Treasury Announces Note Auction;

11:30AM; Treasury hosts a $90B 4 and $80B 8 Week Bill Auction;

2:00PM: Treasury buyback (liquidity support)

Fed Speakers:

12:00PM: Fed Vice Chair for Supervision Bowman (Voter) speaks virtually on "Bank Supervision and Regulation" before the Florida Bankers Association Leadership Luncheon

Economic Calendar for Remainder of Week: 

* A rapid rotation characterized Wednesday's action (beneficiaries were the Russell and financials)

* As the AI trade (representing over 40% of the S&P Index) looks like it could be unravelling

On Wednesday market breadth improved as technology gave way in favor of the Russell Index and financials:

Though the move in financials was massive, I believe the move in financials will be restricted by historically high valuations. (JPMorgan  (JPM)  now trades at nearly 3x tangible book value).

With the Japanese bond market (still weakening, above) and providing a "floor" to U.S. interest rates — the equity risk premium (as I noted in my recent market update) has become an equity risk discount. This ERP status, virtually at the lowest level in three decades, is not a good launching point for future investment returns.

Moreover, the AI trade (which comprises about 42% of the S&P index) seems to be growing frayed at the edges and may be growing older with age as some of my fundamental concerns ("More Tales From Nvidia") may be emerging.

Finally, with equities now in a deeper overbought (S&P Oscillator is over 4.00%), I think the up move this year may be at the beginning of the end and not the end of the beginning.

As I also mentioned yesterday, rising volatility may be an important market feature going forward:

Does Higher Stock Market Volatility Lie Ahead?

I raised my net short exposure yesterday. 

* "Everyone Loves Raymond"... and now, everyone loves copper!

Bonus — Here are some great links:

What 8 Charts Reveal About the S&P Index

Historic Health Care Relative Strength

Primary Uptrends Stay Intact

December's Seasonality

Sector Flows

* More AI/NVDA warning signs...

When is the last time a company CEO was all over the place like Jensen Huang?

I will tell you later today!

The S&P Short Range Oscillator is at 4.06% vs. 3.02% — that's a much deeper overbought.