ARKK $20

Going to $20 if support falls.

When the Bubble Stopped

I saw a chart of monetary data that topped out in February 2021 that made me think, "Duh!" It was so obvious that I didn't record it, but now I can't remember it. So here's an attempt at finding it again. I'll post charts that broke in February or March 2021.

Here's the yoy change in the Fed's balance sheet versus BTC.

Here is ARKK and the 10yr2yr yield ratio. The yield spread peaked about a month later.

Good Enough for a Top Call

If you're buying puts for October or later, the top is in as far as I'm concerned. Tesla was one of the few winners today among BigTech. Cryptos were down, ARKK barely up considering how the major indexes moved. You might not want to go all in on puts yet because the indexes can be funny. Apple hasn't filled its gap yet and I worry there could be a fakeout pop higher. Having said that, I also wouldn't be shocked if SPX is sub-4000 when the calendar rolls to September.

Divergences

A bunch of stocks haven't joined in today's pop. There were all doing well during the rally. There could be yet one more pop left. All these charts look like they'd produce a spike on a move up. Having said that, I think it would be a fakeout. This is the fumes stage of the rally.

ARKK Gets to Bull-Bear Line

Resistance has arrived. Now comes the test.

Bear Market Rally Failure Signals

ARKK has to stop leading. It took out its Monday high today, negating an immediate reversal in the market rally. It has its own resistance line coming up though, and it is still not at a relative new high vs SPY or QQQ.

Animal spirits: BTC and ETH have a lot of room to run.

Tech drove the market down. It drove the rally up. If things "go back to normal" for the post-2008 bull market, tech will continue leading higher. The ratio chart of QQQ to SPY is at the perfect level for a reversal.

On the prior post, I mentioned long Meta as a possible play for a market that goes up. Look at Meta from the bearish side: if this market is going down, Meta is going to implode because it barely bounced in a 20-percent-plus rally in the tech sector. It's going to at least the $115 horizontal and maybe lower. I don't think Meta is particularly important one way or another as a signal yet. It could get squeezed higher for no reason even as the market stalls. It has to break to a new low to really give a clean bear signal, but it will probably be a superfluous signal at that point.

Another is Apple, that should not get materially higher than its gap around $173 and change.

Finally, there are charts such as XLU. Utilities got back to their high in May 2021 so rise to that area wouldn't negate a bear market, but it would be anomalous for a sector to achieve a new all-time high breakout within a primary bear market.

XLU was less than 1 percent off its all-time high in May 2021:

New Bull Market

Seeing reaction to the CPI report, I am concerned the rally could go on longer than anticipated. My sense is many bears are all-in on the "inflation bad" formula. The zero print for July isn't causing a reassessment. It's only one month, but it's a significant move from 1.3 percent in June alone to 0.0 percent in July. I expect August will be negative and the 12-month CPI will start plunging.

Look at prior CPI spike peaks. They came in February 1970, November 1974, March 1980, October 1990, July 2008 and June 2022. 

Stocks bottomed in: May 1970, October 1974, March 1980, October 1990, March 2009 and June 2022. 

The only case where there wasn't a low at the CPI peak was in 2008, and only in 1970 was the low months later. Whether this proves to be a major low or merely a blip will become evident rather quickly because a continued move higher will eventually take out key resistance levels.

The bear case is something more like 2008 unfolds with an ongoing recession that doesn't bottom until 2023. If inflation doesn't crater at least several percentage points, it will break with history.

For the bulls, peace with Russia is the "free lunch." If sanctions lift and energy prices come down, there's the fuel to run much higher. Recession would probably be avoided and new all-time highs on the indexes wouldn't be out of the question.

XBI is one of the most bullish charts out there in terms of arguing for a major bottom in stocks. ARKK, XLC, META and so on are also bottoming if the market is going higher.

I'm not bullish yet. I'd be more confidently bearish if bulls picked up the argument laid out above and ran with it. I'd love to see Apple fill its gap around $173 for example.

BTC Lower High Forming, ARKK Down

BTC is forming a potentially lower high. This is highly speculative, but in line with everything else. ETH is also holding near a major breakout/breakdown level. ARKK is down hard today. None of these are major moves, but in conjunction with SMH and XBI/IBB, this is all as expected when the market rally finally ends. Of course, these are early moves and could reverse in a day, but signals such as bullish percent make me think this could be a more significant turn. Contrarily, the best move here for bears who aren't all in might be a divergent spike up in price as signals such as bullish percent turn lower

ARKK and QQQ: Time and Price Analog

Even dead cats bounce.

Doomed Markets, Doomed Economy

Here are various trash indicators that, if they go, will unleash total capitulation in the markets, a waterfall crash. A link to view them updated.

The other asset to watch is BTC. Will $20,000 will hold? There's really no floor for BTC once the financial system starts blowing up because most of the DeFi will be wiped out without Fed support, and there will be no Fed support.

Last Stop for Bulls and Bears and Clueless Fed

The blips are no longer all bullish. Mexican peso and treasuries are red this morning along with stocks, while the USDJPY and crude are down too, but those moves aren't as cleanly bullish. The yen was, prior to recent history, inversely correlated with stocks. Crude oil has to fall for a sustainable stock rally, but it can also fall with stocks. Hence why my highest conviction trade has been short energy.

Note that the oil futures curve is in backwardation. The December 2022 contract is at $103 per barrel. If at any moment there is peace in Ukraine, I suspect around $20 will come off the price of oil.

All of the major stock indexes have broken to new lows in the past day. The ES and RTY contracts made new lows this morning, the NQ made a low in the 3pm hour yesterday.

Various pummeled stocks are above their lows in pre-market trading such as ARKK and biotech. Tesla and Amazon are of their lows. New lows are coming in sectors such as financials, maybe industrials if they market indexes go to a new low after the open. I will be watching stocks and ETF such as TSLA, ARKK and XBI for a tell and as the final signal to sell. If those don't make new lows, then the market is experiencing chop and could be headed for a reversal. I will remain short energy though.

Finally, the Federal Reserve delivered a 75 basis point hike as expected yesterday. There was lots of commentary on whether this was good or bad, including that the Fed took 75 bps away in May, only to do it in June. Even the Fed worshippers were asking about the Fed's credibility. If this is what makes you question Fed credibility...you're not gonna make it.

There was one big misstatement. A "subprime is contained" level of stupidity. I say misstatement because the Federal Reserve is incompetent to the point where they don't know what's going on in the economy. In his press conference, Chairman Powell said there was no sign of a recession. He said that the same day the Atlanta Fed's GDP Now model projected 0 percent growth this quarter. They have been cutting forecasts for weeks, which doesn't bode well for the GDP report in July. If the BEA reports a negative number though, then not only are there signs of recession, but we are in a recession and have been for six months. Powell didn't take the view I have which is, signs of recession are everywhere although we might escape a technical recession. No, he's saying there are no signs, and that's ludicrous. All workers who haven't received a double-digit wage increase the past two years have taken a huge pay cut and those cuts will keep hitting as the lagging impact of higher costs roll in via higher energy bills, rent resets, higher mortgage payments, etc.

Capitulation Begins?

The major indexes rebounded from intraday lows and the Dow even went green. Meanwhile, the usual suspects imploded again. Of these, only SNAP went lower (being the cause of it all with weaker guidance), setting up a potential falied h-pattern on many of these charts.

Here are ARKK and ROKU, the former is much earlier into an h- so not sending a breakdown signal, whereas ROKU could break lower tomorrow if markets slide. Or that's a dobule bottom.

And BTC still sitting right on the line.

China Rate Cuts are Bearish

ZH: Futures Jump After China Cuts Main Lending Rate By Most On Record But $1.9 Trillion Op-Ex Looms...

Markets may bounce for whatever reason short-term, most likely no reason. Yet longer-term, Chinese rate cuts are unequivocally bearish.