Money Making Charts for August

China always dumps bad news in August. The worst performing month for Chinese ETFs and emerging market funds is August. The EPS of the MSCI Emerging Markets Index tracks China's 10-year yield. The PBoC cut interest rates today because the Chinese economy is going down the tubes.

I'm not saying EEM is going to plummet right now, but it has no support. If this is all a bear market rally, the whoosh is coming.

Crude oil and copper are down. The crude ETF USO has busted support from the 2020 low (I moved it to coincide with the top). There's always a risk of a fakeout at this point, but bears should press their luck because the analogs are with them. If crude is going down, it's going down big.

The major indexes are all lower, with Nasdaq outperforming thanks to oil down, bonds up. Nothing significant there with the final leg of the rally still intact until it isn't. Finally, BTC and ETH both look like bear flags to me. They may be helpful signals for a market reversal.

Finally, two things to keep in mind. First, bull and bear patterns fail when they are contrary to the primary trend. Many a bear setup failed from 2009 to 2021. Short-term bullish patterns completed in June and July and delivered nice pops, but larger bullish patterns will not deliver if this is a bear market. If you see a bull setup that gets trashed early, you have an information advantage.

Second, sentiment becomes bearish in a bear market. I remember 2008 well. Many investors thought Bear Stearns was it. They were buying the dips. China was deteriorating with bad news rolling out as soon as the Olympics finished. There was a Barron's cover piece on Fannie and Freddie's troubles in late August 2008 and that's when I knew "the moment of recognition" was upon us. All along, there were bears like myself looking for much more and our numbers were growing. "Everyone" is bearish at the low, but we are a long, long way from the low. As I posted earlier, real selling hasn't kicked in yet. The herd is right most of the time. If the herd is turning bearish...

I believe this is a bear market rally, but the stock market could go higher because crude is down and long-bonds up. My thesis has been that markets will transition from, "Crude down, bonds up! Yay!" to "Why is crude still falling? Why do bonds keep rallying? WTF is going on???? GET ME OUT OF STOCKS NOW!!!" If I'm wrong, but it's a bear market, then a resumption of Jan-Jun 2022 kicks in. Bonds sell-off as inflation goes higher again. If I'm really wrong and there is no bear market, stocks will be the first to tell.