Revisiting our “Call of the Week”

Insider Trades

On Monday, I sent you this chart:

Insider Buying Stocks

I noted that the ORIC Pharmaceuticals (ORIC) CEO bought 350,000 shares at an average of $4.92 on March 23. On Monday, shares rallied more than 16% on the news. 

Moving On Insider Buying

We like to snap up shares when combining biotech stocks with CEO/CFO buying and event-driven catalysts.  We want to hold for 30 days… and wait to find the catalyst. On Tuesday, the stock kept climbing as I talked about why we like insider buying. Did you buy the stock? Because we found our catalyst.

Today, shares rallied 23.6% after news broke that the CFO bought shares last night, and the company made a significant announcement about its trial plans. 

We knew that the company planned to present clinical research during an upcoming investment conference. But the big news today was that it was scrapping a drug trial that helped launch its IPO. So after shares plunged from $25 to $5 in six months…

ORIC

The insiders were loading up. And this was the result after the CEO bought the stock… 

ORIC

I think it’s very critical to buy when there is CFO/CEO insider buying plus a catalyst within the next 30 days. We’ll continue to talk about these trades as they emerge. Stay patient. 

Now What for the Markets

Today was an awful day for the markets. Now – you might sign onto CNBC and see this:

It looks like the markets rallied, right? That we had a nice gain after Thursday’s selloff. I don’t see those numbers when I look at the markets. Look below…

I see this – a weight of momentum for each sector in the market: 

This array of colors signals a problematic combination. Consumer cyclical, financials, industrials, and technology stocks are experiencing an undercurrent of selling. Today, retail stores, regional banks, transportation (rail), and semiconductors looked bad. What is that? It’s the economy. 

I’m seeing institutional capital selling off stocks due to the inversion of the yield curve, an early warning of a possible recession. That combination should not be ignored. From CNBC:

The 2-year and 10-year Treasury yields inverted for the first time since 2019 on Thursday, sending a possible warning signal that a recession could be on the horizon.

The bond market phenomenon means the rate of the 2-year note is now higher than the 10-year note yield. This part of the yield curve is the most closely watched and typically given the most credence by investors that the economy could be heading for a downturn when it inverts. The 2-year to 10-year spread was last in negative territory in 2019, before pandemic lockdowns sent the global economy into a steep recession in early 2020.

Right now, broader market momentum is up. However, there is an undercurrent of profit-taking after that MASSIVE post-Fed run that we saw on March 16 until last Tuesday. 

Our Key Event This Week

The Fed releases minutes on Wednesday at 2 pm from its March 16 meeting. We should be trading that event, because there’s a lot going on here.

Remember, that We all witnessed a massive reversal on March 16 after Fed Chair Jerome Powell denied that a recession would happen in the U.S. economy in the months ahead. But this inversion of the bond curve has changed the calculus. My question – is, just how much? 

The essential news from the minutes will be the timing of the Fed’s balance sheet tapering. Will there be any updates? Will we have a timeline? The key story of the March meeting was the number of times that the central bank would raise interest rates this year to tackle inflation.

But the Fed still sits on a $9 trillion balance sheet that it needs to unwind. So the Fed will need to sell these assets back into the market, which could have a dramatic impact. The last time that the Fed tapered its balance sheet, the S&P 500 fell more than 6% in 2018. 

I won’t be thinking about it all too much this weekend. I’m taking my daughter to her first baseball game, and I’m looking forward to it. Of course, it’s Spring Training, but it will do…

Go Orioles!

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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