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Morning Blow-off Top

Morning Report for January 18th, 2024

Market summary:

Unlike the past few days when the futures tanked at the open, today is starting off with a rally to continue yesterday's late day recovery off the lows.

The sector driving this rally is once again the semiconductor sector led this time by Taiwan Semiconductor. TSM is a bellwether stock so what they say is important to the entire sector. However, yet again one must look past the bullish hopium to understand the facts behind this "story":

"The world’s largest contract chipmaker Taiwan Semiconductor Manufacturing Company on Thursday posted better-than-expected profit and revenue on the back of weaker macroeconomic conditions"

TSMC reported revenue slipped 1.5% from a year ago, while net income dropped 19.3% from a year ago"

"TSMC counts Apple and Nvidia among its biggest clients. TSMC produces the most advanced processors found in Apple’s iPhones"

FR: The fact that Apple sales in China are slipping was barely even mentioned in the article. This week we learned that Apple is offering rare discounts on Iphones in China.

The TSM article goes on to say that 2023 was a challenging year, but 2024 will be a better year. However, recall that we've heard this story before and this time around there is an active semiconductor trade war taking place globally. Which is having the effect of suppressing global trade in semiconductors.

Market summary (Cont.):

Morning breadth is mildly positive on both the Nasdaq and the NYSE

Sector breadth is mixed with Tech/Semis leading, followed by Consumer Cyclicals. Healthcare and Consumer Staples lagging the most, the opposite of yesterday.

Bond yields up modestly.

Commodities mixed.

Finally, I pointed out on Twitter this morning that when this single sector rally ends, then the downside rush to the exits is highly unlikely to be contained. The reason I say that is because compared with January 2022, this time around there has been zero hedging AND the dependence on Tech is far greater.

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