Damage Control

The major averages are off to a quiet start this week.

But the Federal Reserve could make plenty of noise as its interest rate committee meets behind closed doors today.

“Moving with remarkable speed, especially for a central bank, the Federal Reserve is expected this week to announce ‘how and when’ it will stop shedding assets from its balance sheet,” MarketWatch reports. “The Fed has been slowly winding down its balance sheet, which reached a peak of $4.5 trillion, at a pace of $50 billion per month.”

Fed Balance Sheet

Will more quantitative tightening jitters hit Wall Street when Jerome Powell steps up to the mic later this week?

Some big names on Wall Street — including DoubleLine CEO Jeffrey Gundlach — called out Powell during the December meltdown for tightening on “autopilot” and subsequently spooking the market.

Powell has since quelled investors’ concerns with a more dovish stance. But he’ll have to pick his words carefully this week as the averages continue to fight back toward their October highs.

Turning to the markets, Lyft’s public offering is one step closer to fruition.

Lyft Inc. (NASDAQ: LYFT) has embarked on a roadshow for its impending IPO.

The initial public offering price is expected to come in between $62 and $68 per share. I’ll keep a close eye on the news over the next couple of weeks to gauge institutional interest. Since Lyft is beating Uber to the public markets, I’m guessing this new stock could attract some serious attention when it finally debuts on the Nasdaq.

While I’m not sold on Lyft or Uber as viable, long-term successes, Lyft is a household name that could turn into a very lucrative trading vehicle. The stock is certainly worth a watch.

Meanwhile, Facebook remains in damage-control mode as bad press hounds the social media giant.

Facebook is facing “explosive new questions about when senior executives knew of Cambridge Analytica’s abuse of users’ data,” The Guardian reports.

Federal prosecutors are now accusing Zuckerberg & Co. of covering up the details of their relationship with Cambridge, the firm responsible for spreading false information during the 2016 presidential election.

Fallout from the New Zealand mosque massacre is also finding its way back to Silicon Valley. The gunman reportedly livestreamed his attack on Facebook. But the censors were nowhere to be found…

“In the hours that followed, Facebook and Google failed to stop the footage going viral with hundreds of thousands of people viewing the video,” The Guardian explains.

As I noted last week, Facebook shares have taken their licks as the bad news rolled in. While the stock has drifted lower for three straight sessions, I wouldn’t call this rout a disaster just yet. Facebook is still holding to the bottom of its post-earnings trading range. Ultimately, I’d like to see this stock hold between $158-$160.

FB

Bottom line: Price speaks louder than the sensational headlines we’ve cataloged over the past week. Nothing has materially changed for Facebook and our trade remains intact.

Switching gears to gold, now’s the time to buy before prices shoot higher, Mike Burnick declares.

“After going nowhere for the past few years, gold once again has started to rise on fears of global trade disruptions and continued pressure from the doom-and-gloomer,” Mike explains. “This makes the yellow metal THE go-to hedge against geopolitical uncertainty and market volatility again.”

But the smart money has been slow to figure out gold’s potential. Hedge funds and other big institutions were consistently net-short gold futures since last July:

Trader's Market

“Wall Street got it wrong again,” Mike concludes. “The largest short position in August and September coincided with gold bottoming.”

Indeed, gold is up 9% from those lows. As these institutions scramble to cover their positions, they could fuel the next explosive rally in gold.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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