In this solo morning‑market commentary, Kenny Polcari opens with a vivid Cape Cod backdrop before delivering a detailed market wrap for July 21, 2022. He notes that after a day of heavy selling, sellers exhausted themselves, allowing buyers—especially short‑coverers—to push the Dow, S&P, Nasdaq and other indices higher. He breaks down sector performance, highlighting tech’s 2.9% gain and a sharp 5.25% rebound in semiconductors after a prolonged sell‑off. Polcari explains the mechanics of a seller‑exhaustion rally versus a conviction‑buy rally and stresses that the durability of the bounce hinges on upcoming mega‑cap tech earnings (Tesla, Google, IBM, ServiceNow, Texas Instruments) and AI‑related capex guidance. He shifts to the bond market, noting rising yields (2‑year at 4.25%, 10‑year at 4.62%) and an increased probability of a September Fed rate hike, warning that higher yields could pressure equities. Oil’s climb toward $90 amid escalating Middle‑East conflict and gold’s modest advance toward $4,200 are also covered. Polcari spotlights SpaceX’s first public earnings report (Aug 4) and a massive 911 million‑share lockup expiration (Aug 6), outlining the supply‑demand dynamics that could drive volatility. He ends the market segment with a brief futures outlook, a reminder to stick to long‑term plans, and an invitation for a complimentary portfolio review. The video concludes with a step‑by‑step porcini‑rubbed ribeye tagliata recipe, complete with ingredient list, preparation, cooking, and plating instructions.
Chapters
Well, good morning. Yes, it's me, Kenny Polcari, coming to you live once again from Cape Cod. It is going to be a glorious day today. The sun is just breaking out, the clouds are clearing up behind me, tide's on its way up, the sky is blue. What could be better? It is Wednesday, July 22nd, 2022, and here are the things that you need to know to get your day started. Well, sellers finally became exhausted yesterday, and the buyers, well, they took advantage. Stocks rallied, bonds got hit, and yields rose. That's conflicting signal. Oil trading at $87, and it's about to kiss $90. Big tech earnings begin tonight. Tesla, Google, IBM, ServiceNow, and Texas Instruments. SpaceX, their earnings are due out on August 4th. And then on August 6th, 911 million shares become unlocked. And what do we have at dinner tonight? We're gonna have the porcini rubbed riba italiana style. And we'll talk about that in a moment. So stocks surged yesterday. The Dow up 380 points. The S&P gained 66. The Nasdaq rode 330 points. The Russell added 45 points. The transports up 210 points. The equal-weight S&P up 16 points, which is a little bit of a disappointment, while the Mag 7 added 43 points. 8 of the 11 S&P sectors ended the day higher. Tech naturally up 2.9% by far the leader of the pack. The next best performer was energy, up just 1%. Healthcare rose by 0.7%, and industrials, consumer discretionary, financials, and basic materials all added less than 0.3%. Consumer staples gave back 1%, communications lost 0.7%, and the utilities, well, they ended the day flat. Semis, which have been under pressure for the— from the onslaught of aggressive selling by the Momo guys, down 25% off the June 8th high. Found a reprieve and rallied by a whopping 5.25% yesterday. So let's revisit that because that tells an important story. Yesterday, remember, we talked about Goldman Sachs said the hedge fund community, the mobile guys who were mostly responsible for taking the whole sector up 110% into June 8th, suddenly decided that the move was overdone. Talk of stocks being priced to perfection were the headlines as we headed into the start of second quarter earnings season. Causing some unrest. And so they started taking money off the table, locking in profits as they say, before the earnings actually begin to hit the tape. For 5 weeks now, they hammered it day after day, refusing to let up. Every bounce met with another wave of selling. And as individual names broke technical levels, the algos jumped on, forcing even more selling. And selling, well, it begets more selling, causing an uncomfortable dislocation in the sector, pushing individual names deeper and deeper into bear market territory. And while that sounds ominous, keep this in mind: the sector is still up 80% year to date. Hardly a reason to light your hair on fire at all. UBS, though, now not to be outdone by Goldman, wasted no time Kenny Polcari joining the conversation yesterday, telling us that their data shows that the hedge fund community have cut their long positions by a whopping 5% of gross market value— gross market value on their books— one of the largest reductions on record. Translation: the hedgies have finally exhausted themselves. And it was this exhaustion that we saw yesterday. The Momo guys ran out of stock to sell, so the pressure was off. And that's the key. When the sellers finally exhaust themselves and the pressure is off, something very interesting begins to happen. Prices move sharply higher. And that's exactly what we saw yesterday. The absence of aggressive sellers left buyers scrambling to buy stock. And guess what? Up we go. And sometimes that's exactly how important market bottoms begin. Now, in this case, some of the buying was in fact short covering, which is a more aggressive buyer than just a regular buyer, right? A regular buyer, sometimes they tend to be a little bit more patient, but short covers, they, they get more aggressive, and that only amplified the move higher as they tripped over each other trying to cover their short positions. Now, Adam Turnquist of LPL telling Bloomberg what I have been saying for weeks now on air and in this note. And I quote, the recent correction appears more consistent with a healthy reset following a parabolic advance rather than a fundamental breakdown in the AI investment theme. And so there you have it. And here, well, here's the next lesson for you. Seller exhaustion rallies and conviction buyer rallies don't behave the same way. A conviction buy rally builds on itself. New longs, new money, breath-expanding day after day. A seller exhaustion rally can run hard and fast right out of the gate, which is what it did yesterday. The buyer focused on just the beaten-up names, which is exactly what we saw. Now, a conviction buy rally needs to be reconfirmed by actual new demand in the days that follow— so today, tomorrow, next week— otherwise it fades, right? The bounce tells you that the selling pressure is spent, that they're done. It doesn't tell you though that the buyers are back in any real size. Now, that's exactly why Tesla, Google, ServiceNow, Texas Instruments, and even IBM, all reporting after the closing bell tonight, matter more than usual. If mega-cap tech earnings back up the exhaustion-driven bounce with real guidance and real cap, uh, AI CapEx commentary and proof that maybe the latest Chinese open-weight model is not the threat that the media made it out to be, then yesterday's rally could become more durable. If they don't, then the selling is going to resume. So grab the popcorn and make sure you get a front row seat before this is over. Now, while that's all very exciting, the bond market, though, is much more cautious. Bond prices fell, causing yields to rise yesterday as investors are— continue to weigh the possibility that higher energy prices could eventually find their way into inflation data and complicate the Fed's path forward. The 2-year is now yielding 4.25%. The 10-year ended the day at 4.62%, while the 30-year is now yielding 4.13%, reminding investors that while stocks were celebrating AI yesterday, the bond market remains focused on just inflation. Because watch out, if the 10-year pierces 4.75%, the momentum buys are, uh, uh, the momentum sells are gonna take it. So bond prices lower and yields higher, and that's going to prove to be a bigger problem for Kevvy Warsh and for stocks. Now, the odds of a September rate hike have now gone from 40% to 58% over just the past week, suggesting that, well, trouble might just be brewing. Oil, that's not going to help the narrative. Brent is now trading at $94 and West Texas Intermediate is trading at $87 as fighting in the Middle East intensifies with the Houthis now joining the fight, including closing the Red Sea, forcing the Saudis to get involved in this, in this conflict. 10 straight days of U.S. strikes and continued attacks on military targets have kept the geopolitical premium firmly embedded in oil prices. That, that will become more of an issue next month and the month after and the month after that if it continues. Gold has now found its footing and is advancing after doing nothing for almost 3 weeks. Yesterday it was up $68. This morning it's up $45 at $4,125, still within that trading range that we identified, the $4,000, $4,200, but inching closer to breaking out. And if the Middle East conflict drags on, expect gold to advance. There's no real eco data today to drive the action, so all eyes are going to be focused on the announcements after the bell. Just for your information, this morning before— in the pre-market, Tesla and Texas Instruments are down Google, IBM, and ServiceNow are higher in the pre-market. SpaceX, guess what? They announced that they're going to report their first earnings report as a public company on Tuesday, August 4th, after the closing bell, naturally. Then on August 6th, guess what? 911 million insider shares become eligible for sale. Doesn't mean that they will, it just means that they can. That represents a 145% increase in the number of shares available to the market That's a massive increase in potential supply, and it's one of the reasons investors are paying very close attention. SpaceX closed yesterday at $123.54 and has indicated up about a buck this morning. The stock now faces two significant catalysts back to back: its first earnings report and its lockup expiration. That's a combination that could create plenty of volatility. In fact, some analysts on Wall Street believe that the stock could ultimately trade down into the mid-$80s before this process runs its course, particularly if insider selling is heavier than expected and/or the earnings report fails to impress. Others are going to argue that strong results and solid guidance are going to suck up much of the additional supply. But remember, this is really Econ 101, because when supply suddenly increases, demand has to increase just as fast, or prices will adjust lower until the buyers are willing to step in. That's the risk that investors will be weighing over the next couple of weeks. Just something for you to think about and consider as you think about what you want to do with SpaceX, or maybe not. I for one am continuing to wait. European markets are all up between half a percent, 1%. US futures are cautious this morning ahead of, ahead of all these reports that are going on today. Dow futures down 10, the S&P is down 15, NASDAQ's down 175, and the Russell is down 5 points. Nothing really so dramatic, but they are, uh, uh, looking a bit lower. The S&P closed at 7,509, up 66 points or 9/10, dragged higher by a handful of those tech names. Note that the equal-weight S&P only advanced by 2/10, right? So there's the disconnect, confirming the fact that all the excitement was focused on tech and really the semis. Now we're just north of the S&P trend line at 7,469. Any disappointment today will raise the temperature again and cause stocks to move lower. Any further increase in the price of oil will continue also to unsettle the markets. Now remember, don't let the headlines force you into making an emotional decision. Focus on the plan, your timeline, your long-term objectives, not the noise of the day. As always, if you'd like to discuss your goals or evaluate the plan, the risk in your portfolio, or your plan, simply get a second opinion, feel free to give me a call at 561-931-0190. I'm always happy to provide, you know, that conversation as well as a complimentary portfolio review and risk assessment. Okay, so now what do we have for dinner? Well, here we are on the beach, tide's on its way up. Uh, we're gonna go out and get some, uh, some ribeyes and some, uh, dried porcini, and we're gonna make a porcini-rubbed ribeye, and then we're gonna serve it tagliata style, which is just the way you slice it and fan it out on the plate. Now for this, you need the dried porcini mushrooms, You need sugar, salt, pepper, garlic, olive oil, and balsamic vinegar. You need the boneless ribeye. You need arugula, red onion, and shaved Parmigiano cheese. And you need the juice of 1 lemon. You're gonna grind about an ounce of the dried porcini mushrooms until fine. Then you're gonna use a mortar and pestle or a food processor. You're gonna combine the mushroom powder with 2 tablespoons of sugar, 1 tablespoon of salt and pepper, 4 garlic cloves that you're gonna chop up, and about a quarter cup of olive oil. You're gonna, you're gonna pound it, make it into like a paste. You're gonna set it aside. You can, you can make, you can make a whole container of this and put it, uh, put it, you know, in a— seal it and then put it in the fridge, um, in a sealed jar and keep it because it'll stay for a while. Now when you get ready to use it, take it out of the fridge, mix it, and then massage it into the meat of your choice. And today we're using the ribeye. Season the meat with the salt and pepper and the Porcini Rub. Massage it really well. Now preheat your oven to 400 degrees. Now you need a cast iron skillet for this, right? You want to, you want to add about a tablespoon of olive oil and you're going to heat it up in the cast iron skillet on the stove. You're going to add the steak, you're going to listen to it sizzle on one side, then you're going to flip it so it sizzles on the other side. Now take the whole thing, skillet and all, put it right in the oven and let it cook for 5 to 8 minutes depending on the thickness. But the temperature has to be at 400 degrees. If you have an instant read thermometer, it should read 135 degrees when you insert it in the center. If it does, then remove it, let it stand for 10 minutes, uh, on top of the soap, but cover it to keep it warm. Now slice the steak at an angle so that you can fan it out on the plate. You're going to lay down some fresh arugula and red onion. You're going to place the steak right on top, and then you're going to drizzle a little bit of a very good olive oil on top and a squirt of the fresh lemon juice. Then you're going to top it with the shaved parmesana cheese. It is not any more complicated than that. It is a delicious steak. You are going to enjoy it. Until tomorrow, take good care.
