Mission 51.24 Target

Macro Minute: Are We Really on “Go”?

Market-wise, it feels like we’re stuck on “GO!”—everything is up! But is it really? As we approach the end of the year, the S&P 500 ($SPY) and Nasdaq 100 ($QQQ) are up an impressive 28% and 30%, respectively. Even Gold is having a stellar year, posting 27% YTD growth. In this landscape of gains, the one glaring exception is long-dated Treasuries ($TLT), which remain under pressure.

What’s striking is how consistent gains have been for those who bought the dips and exercised a bit of patience—often needing just 3-4 days to see results. This rally doesn’t show signs of losing steam. The dollar is strong, inflation seems tamed, and the broader market is roaring. Or is it?

The reality is, much of this rally has been driven by the Megacap top 5 names, which have now outperformed 407 other stocks in the S&P 500. This level of concentration raises questions: is this a sign of strength, or a potential weakness?

It reminds me of the parable of the Chinese farmer: what seems “good” or “bad” might just depend on the perspective. The winners continuing to win can be both a powerful driver and a potential vulnerability for the market. As we move forward, this dynamic is worth watching closely.

Debrief: Revisiting Past Intel

Over the course of several Agent Reports, I’ve touched on $SQ (Block, Inc.) as a cornerstone of my “Spend Narrative.” With last week’s inflation data and this week’s Fed decision, now feels like the right time to revisit this name.

Since initiating coverage in June when $SQ was trading around $62, I’ve been steadily accumulating a sizable position. While it required patience, my initial price target of $90 has been exceeded, with the stock recently pushing to highs of $99. This breakout from a 2+ year range is significant, signaling the potential for the upward leg to become parabolic as market participants begin piling into what many view as the all-in-one personal finance app, best known for its peer-to-peer money transfer business.

That said, I’ve trimmed my position slightly, awaiting a potential market digestion phase before the next leg higher, which I believe could target the $120 price range in the near future.

Here’s why $SQ remains compelling:

• 5-Year Customer CAGR of 26%: Compound Annual Growth Rate (CAGR) measures the average annual growth rate over a specified period, assuming reinvestment at the same rate. In simple terms, it’s a way to track consistent, compounding growth—essential for evaluating the scalability of a business like $SQ.

• Bitcoin Exposure: $SQ’s new corporate balance sheet DCA program, which allocates 10% of Block’s monthly gross profit into Bitcoin, has also contributed to the upward appreciation of the stock, aligning it with the ongoing crypto narrative.

While I’m not “done” with this idea, I’m watching carefully for the next move, particularly as the market continues to digest $SQ’s breakout and its strategic positioning in both traditional finance and Bitcoin adoption. This one is still a long-term winner in my book.

Novum Cognitio: Micron ($MU) – The AI Storage Play on the Verge of a Breakout 

Micron Technology ($MU) is a name worth watching closely as it sits on the cusp of what could be a significant move. For months, $MU has been consolidating within a range of $95-$115, recently tightening into a $10 delta—a classic coiling pattern signaling potential volatility ahead. With earnings on the horizon, Micron could emerge as a key AI story, much like what we saw with $AVGO (Broadcom) last week. Broadcom’s explosive single-day 24% gain catapulted it into the $1T market cap club, showcasing the immense market appetite for AI-related plays.

Currently, $MU finds itself in a “breakout and retest” setup, transitioning into the follow-through phase after its early price appreciation. The upcoming earnings call will be pivotal, as it offers an opportunity for Micron to assert its relevance in the AI-driven market narrative.

Why Micron Could Shine:

1. AI Storage Demand: Micron is uniquely positioned to benefit from surging AI adoption through its cutting-edge storage solutions. If the company highlights this strategic leverage, even a fractional AI boost could shift market sentiment dramatically.

2. Cyclical Recovery & Fundamentals: Micron has a history of resilience. Even in the low points of the cycle, it has maintained a net income margin of 26%. With a 50% QoQ increase in CapEx last quarter, the company is clearly preparing for a robust upturn in demand.

3. Options Market Bullishness: A 3.0 call-to-put ratio for options expiring this Friday reflects growing bullish sentiment among traders, suggesting confidence in a potential move higher.

4. Macro Tailwinds: A potential Fed rate cut could act as a catalyst, adding “early fuel” to the stock and accelerating its trajectory.

Key Catalysts to Watch:

Guidance on pricing, AI demand, and technology roadmaps will be the drivers shaping $MU’s trajectory into 2024 and beyond. The stock’s position as a critical supplier to the AI ecosystem means that even modest AI-related guidance could trigger outsized gains.

Micron’s tight consolidation phase suggests that the market is waiting for a spark—and with earnings just ahead, that moment may be near. If the company delivers, $MU could very well break out of its range and begin its ascent toward higher valuations. Stay tuned—this could be a defining chapter for the stock.

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