Market Notes

Market Notes – June 17/22

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For those wanting to jump in and ‘buy the dip’ be mindful of our constant warnings that ‘bear market rallies typically fail to make new highs, and instead often make new lows.’

According to Bank of America ‘The average peak to trough bear decline = 37.3%, average duration 289 days; history is no guide to future performance but if it were, today’s bear market would end on Oct 19, 2022 (35-year anniversary of Black Monday) with S&P 500 at 3000.‘

The S&P 500 has dropped through the 38% fibonacci retracement level at 3838 and is approaching the 50% retracement at 3534.

A few months ago we targeted mid-year as a potential top for commodities. We are seeing food, lumber, even gasoline and oil coming down this week. Could the top be in?

Here is the Reuter CRB Commodity Index and it has started to roll over. Watch the 296 level (green horizontal line), which was the May low; a break below that level would be bearish. Understand that long-term we are very bullish commodities, but if we are heading for a recession then commodities will be hit as well. Once the bottom is in, we will be sending out BUY signals to subscribers.

Michael Hartnett of Bank of America notes that Fed tightening ‘always breaks something’ with the US recession likely the last leg lower in this bear market. Looking at the their Bull & Bear indicator we can see that it has dropped right down to zero, which is quite extreme. This is a contrarian indicator suggesting one of those bear markets rallies should kick off next week.

Another sign a recession likely coming as manufacturing took a big hit last month.

And yet another negative piece of news. ‘Global profit expectations among money managers are tumbling, another sign that Wall Street is at a crisis point’, according to BofA Securities. In their June Fund Manager Survey of 800 panelists with $834B under management, a net 72% say corporate profits will worsen, the lowest reading since the collapse of Lehman Bros. in September 2008.

There is a term called the ‘wealth effect.’ It refers to how homeowners and investors feel when housing prices and the value of their stock portfolios go up in value; they feel wealthy and therefore are willing to spend more. Consumers account for ~70% of the GDP, so when they spend more, it is good for the economy. Of course the reverse is also true, when house prices and stocks fall in value, consumers spend less and the economy slows.

Various indicators continue to portray extreme bearishness, which in a bull market would be a solid BUY signal. But, this is not a bull market, so we need to show caution here. If you have not yet put on any hedge positions, use this next relief rally to do so. Trend Technical Trader (TTT) uses simple inverse ETFs for hedging and offers subscribers many options; there is something for every investor. Click here to subscribe to TTT at a 50% discount

Market Notes

Market Notes – June 16/22

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The S&P 500 dropped 123 points or 3.25% and is now close to testng the 50% Fibonacci retracement level from the rally from Mar’20 to Jan’22.  Remember our warning all through this year… bear market rallies tend to be sucker rallies, usually failing to reach new highs, and instead make new lows. We are neutral right now, with our insurance trade offsetting our long play.

We do have a great list of stocks on our watch list, but we are NOT buying the dip here. We will let our subscribers know when our models trigger a BUY Signal. If you want receive those BUY Signals when they are triggered, subscribe now to the Trend Letter and receive 50% off the regular rate. Click here to take advantage of this  special offer.

Yesterday Fed chair Jerome Powell stated ‘Overall, spending is very strong, the consumer’s in really good shape financially — they’re spending. There’s no sign of a broader slowdown that I can see in the economy.’ That is quite an astonishing statement and we have no idea what data he is looking at. Every consumer sentiment chart we see shows consumers are anything but confident.

Even the Atlanta Fed, Powell’s own institution, is now forecasting Q2 GDP to come in precisely at 0.0%. That’s down from a 2% forecast in May and then a 1% forecast earlier this month. Given that the consumer accounts for~70% of the economy, how can he possibly say the consumer is in ‘really good shape financially’

Inflation was caused by excess government spending, a very dovish Fed, and high energy prices caused by the Ukraine war and extremely nearsighted energy policies.. The way the Fed seems to be planning to stop inflation is to drive the economy into a recession. And then once the recession takes hold, those laid off workers will not be able to afford things like gasoline or healthy food, so the prices will finally start to fall.

Gold had been oversold and had a nice bounce today. Still trading in 1800-1975 range.

Mortgage rates for the US 30-year jumped by the most since 1987 and are now at the highest level since 2008, which coincided with the real estate crash and a recession. Sound familiar?

Stay tuned!

Market Notes

Market Notes – June 13/22

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The S&P 500 dropped back into a bear market within the first 30 minutes of trading today. The index is now down over 20% from its January high, marking the lowest level since March 2021. The Dow plummeted 2.79% while the Nasdaq fell 4.8%. Recession fears are growing amid crippling inflation and people are pulling out of their positions before the situation worsens.

For the last six months we have warned that in bear markets, relief rallies typical fail to make new highs and in fact tend to make new lows.  Our Trend Letter and especially our Trend Technical Trader (TTT) services have been using hedging strategies to protect our portfolios from these violent bear markets and even to profit from them.

Bear markets typically have three phases. The first stage is a sharp decline, followed by a rebound, and then a drawn-out fundamental downtrend. This is likely where we are now and we are likely to see some strong relief rallies, followed by deep corrections.

If you have yet to put any hedging strategies in place, we should be due for a rally very soon, which would be an opportunity to put in such a strategy.  If you need assistance on how to hedge, seriously think about subscribing to TTT at a 50% discount. Click here to subscribe.

The Nasdaq representing the tech stocks is now down over 32% since its high in November.

The S&P 500 is now officially in a bear market, having dropped over 21% since its high at the start of January.

The Canadian TSX has fared much better thanks to energy sector. The TSX is down ~10% and has not yet hit new lows.

Volatility spiked over 22% today.

The $US continues to be a safe-haven play in this bear market, testing recent high.

On Friday Gold jumped along with the $US as a safe-haven play. Today it fell off – very inconsistent and frustrating!

Stay tuned!

 

 

Market Notes

Market Notes – June 10/22

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US stocks sank Friday as investors digested two downbeat prints on the US economy.

May data on inflation showed price increases unexpectedly accelerated last month, with consumer prices rising 8.6% year-over-year in May, the most since 1981. Consumer sentiment data released Friday morning came in at a record low, as inflation weighs on American households.

The S&P 500, Dow and Nasdaq dropped sharply following the print. The S&P 500 sank by 2.9% during the session, and by more than 5% since last Friday to post its worst weekly performance since January. The index ended just a hair above 3,900, or its lowest level in about three weeks. The Dow sank by 880 points, or 2.7%, and the Nasdaq Composite dropped 3.5% by the end of Friday’s session.

The S&P 500 is back to testng its previous low and if that level does not hold, we could see a significant decline.

Note that Trend Letter subscribers were given a new BUY recommendation on an insurance play this week. These insurance plays, or hedges are critical to protecting your wealth in a bear market. Our hedging service Trend Technical Trader (TTT) has a number of hedging options and subscribers can decide which one suits their specific trading strategy.  If you do not have a hedging strategy, seriously consider subscribing to TTT at a 50% discount.  Click here to subscribe to TTT

Consumer sentiment has dropped to a record low.

A sea of red.

Cathy Wood’s ARKK ETF was the darling of the Tech sector after the Covid crash, having soared ~360%. In this bear market since the high in Feb’21, it has given up ~75%.

Stay tuned!

Market Notes

Market Notes – June 2/22

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A major reason the equity markets had such a great run over the past decade has been thanks to the loose monetary policy of the Federal Reserve. And from August 2019, the Fed has increased its balance sheet 137%, from $3.76 trillion, to $8.92 trillion. That is more than all of the prior QE periods combined.

Now the Fed is starting to shrink its balance sheet , starting a new era of Quantitative Tightening (QT). The last time we saw QT was in 2018 where the Fed shrunk its balance sheet by almost $700 billion in 15 months. The result of that QT was the equity markets declined, then the Fed quickly backed off, reversing its stance, lowering interest rates and starting a new QE program that massively added to the balance sheet.

While QE has dramatically juiced the stock markets over the past decade, QT will have the opposite effect. While many are saying that the bottom is in for the equity markets, as long as the Fed sticks to their QT plan, we suggest there is more pain to come.

The US 10-Year yield had been making lower highs for nearly a month, but recently has started moving higher again. For those who don’t watch bonds and yields closely, bonds and yields move opposite each other. We want to keep  an eye on this as if the yields start to decline again it means that bonds are rising, and bonds are typically safe-haven plays, suggesting the bond market is bearish on the equity markets.

After sinking below $1,800 in May, gold has spent the last few weeks rising to ~$1,870. And a breakout north of $1,880 would likely compound into additional gains. While we could get a nice run here, we expect the next big rally for gold will likely start in the fall.

Stay tuned!

Better on the Edge?

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 Technology trends are constantly and quickly evolving, and part of that evolution is certain technologies catching up to, or leapfrogging others. Such may be the case with Cloud Computing, with large developments already in place, such as Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform. The technology continues to grow, and is dominant at this time, but many businesses are becoming concerned with certain cloud computing shortcomings, like the latency in getting data to a data centre. Latency is caused by the time it takes for data to make the relatively long journey to the cloud and back from the cloud to where it is needed for processing. The cloud provides lots of affordable, well managed storage space and processing of non-time sensitive data. But some businesses require fast processing of time sensitive data in order to reduce decision making time in their systems, helping the business to maximize gains and minimize losses. Time is often critical in getting it right.

Edge computing relies on specialized devices located near the “edge” of the network, and these devices are designed to get the specific data they need very quickly, make a data processing decision, and deliver an immediate result. These devices may look like a PC, but their work is narrowly defined for a unique set of tasks. This quick processing by Edge computers can be a game saver in situations where speed is required, and Cloud Computing cannot match this speed. Edge computing can also be used very successfully in remote locations, where connectivity to large data centres is not feasible or is on a part time basis.

The Internet of Things (IoT) can especially benefit from Edge computing in ways that Cloud Computing cannot replicate, for instance, an IoT device may be reaching a Fail Point, and the device must be shut down immediately in order to prevent damage. An Edge device can make the shut down happen very quickly and prevent expensive damage to the IoT device. Meanwhile, the processing of IoT data and the high level management of the IoT device can continue on a cloud platform using data sent to the cloud before the shut down. Using Edge and Cloud computing together in this way can allow a business to get the best of both worlds.  Cloud and Edge computing solutions are compatible, as they do not compete for the same job – each is good at what it does, and each will continue to grow.

The goal of TREND DISRUPTORS is to discover and monitor technical developments that have the potential to DISRUPT a market sector. We look for the best ideas, and generate actionable investment recommendations for subscribers. As a general rule, these recommendations are speculative, and we advise caution, discretion, and thorough research. We strive to identify investment opportunities that can lead to success for the well-informed investor.

Stay tuned!