The above is a premium post at ZeroHedge, but comes on the heels of a relentless string of very bullish calls from all over finance. Not only are bulls bullish, but bears also are talking about a melt-up. This JPM headline makes me wonder if Wall Street isn't trying to dump as much as possible though.
Anything can happen in markets. Anything. Maybe bears are focusing on gold and copper instead of stocks because of the strength in stocks. Maybe bulls are focused on stocks and that's causing a divergence. Maybe bulls are right and the Fed will pivot or Powell will touch his face in a way that means stocks go up 10 percent. Sentiment is funny, that's why you have to pay attention to how stocks react on news items. The market is clearly in a very bullish and optimistic mood at the moment. I look out over the coming months and even years, and do not see how the Fed pivots or pauses. If anything, I expect the opposite. If they ease too early, they'll blow it the same way the 1970s Fed did. The risk of stagflation would climb. Bonds would eventually reject the pivot and sell off, forcing the Fed to chase the market interest rates.
In the 1970s the Fed cut rates midway through the recessions and that was the wrong move. Not repeating would mean the Fed hikes rates until a recession is evident (the recesion will likely be backdated) and then refuses any rate cuts or moves very slowly such that rates are still high at the end of the recession.
To sum it up, I don't hope for a fall. I don't see how it can rise for very long and if it rises, then it's more profit for the bears on the eventual downswing.
2022-10-31
Projection? Wall Street Says Bears Hoping for a Fall
Palladium and Nasdaq, Unhappy Together
Palladium Signals Top at $3200
Palladium Still Calling Tech & Palladium Top
2020 pre-covid panic: Palladium's Pendulum: A Third Top in Time and Price?
XME/GDX Ratio Says Bear
Update: Bulls Always Think They Can Hide
Takeaway: These 11 names have soaked up just over three quarters (3.39 points, 77 percent) of the index weighting lost by the 7 US Big Tech names this year. Energy is still just 5.2 percent of the S&P 500, less than either Apple (7.0 pct) or Microsoft (5.3 pct). Health Care is 15.0 percent of the index currently, below the 16.0 percent that represents the upper end of its historical band. We believe both sectors can continue to take index weighting “share” from Tech and, by extension, outperform going forward.This is a good article, but I don't like the short-term conclusion. Bear markets are driven by money leaving the market, not by rotation. Rotation can cause downturns and corrections, but they aren't going to cause bear markets. In 2000, the consumer staples and utilities peaked in November and December. Here is how Merck looked from its IPP until 2000 top and from its IPO until now. Does that look like the start of a new bull market? It looks like the same chart to me. Merck topped on November 30, 2000. I call this bargaining stage fro bulls where they think there is somewhere better to put their money in the market, instead of accepting their best move is probably to get out of the market. They are retreating into safe areas and coming up with the well-worn talking points about stable, consistent earnings that will hold up in a recession. Or how the stocks are relatively cheap. All can be true, but bear markets are a psychological event that leave no sectors untouched, maybe some subindustries and always a few stocks. Big managers can't buy the little stocks that are best positioned to outperform in a bear market though. Almost everyone in the financial industry has a vested interest in keeping clients invested in liquid, large-cap stocks. Most are long-only and foribidden from taking short positions. Either soon, or early in 2023, the redemptions will begin. Update: I took another look: the monthly candles for October in both years are very similar.Final thought: The only investment positive behind Big Tech’s ongoing declines (such as Amazon after hours tonight) is that they reduce these names’ impact on future S&P 500 returns. That has two benefits. First, it gives other stocks and sectors a better chance to affect overall index performance. Second, it makes the S&P 500 less leveraged to interest rates since it reduces the index’s price/earnings multiple. Bottom line: the S&P 500 doesn’t need Tech stocks to rally to show reasonable gains between now and year end. It does, however, need them to stop falling.
A Legitimately Bullish Chart
Always pay attention when something doesn't behave as expected. It might indicate you are wrong or it may indicate the stock in question has herd-breaking potential. Outside of panics, there will be rising stocks in bear markets. Even in panics, there will be bullish divergences.
2022-10-30
Chart Thoughts Heading into the FOMC Meeting
1. Bear markets are not merely 20 percent declines. A bear market is big in time and in price. The Nasdaq fell 30 percent over a couple of months in 1998 and you don't hear anyone refer to that as a bear market. You did hear people refer to the stealth bear market in value stocks from 1998 and beyond. There has been a bear market in ARKK, crypto and similar investments. There has been a bear market in gold miners and emerging markets. There has been a bear market in treasuries. There has not been a bear market in the major stock indexes if the bottom is in. Moving averages such as the 200-week moving average aka 50-month break in bear markets and once they're through, they go way lower. They do not break in bull market corrections or do peek-a-boo fakeout.
2. Bear market rallies of 25 percent are normal. There are much larger rallies in the most beaten down indexes or in very long-term bear market, such as Nasdaq in 2000, the 1929-1932 DJIA, 1970s DJIA, the 1989-??? Nikkei. A 25 percent rally from 3500 goes to 4375.
3. The DJIA is only down about 10 percent from its all-time high. The long-term chart looks like this:
4. Everyone is watching areas between 3900 and 4100. My sense is there is higher upside possibility to the degree bears are too aggressive or too skittish, but the Federal Reserve has to cooperate for a continued push. My sense is the market is moving into a binary event where the rally either has two or three days left, or it has many weeks left and people will be talking about new all-time highs come January (at least on the Dow).
Emerging Markets and Gold
2022-10-29
Crash: Real Interest Rates and Gold
Frequency: MonthlyThe Federal Reserve Bank of Cleveland estimates the expected rate of inflation over the next 30 years along with the inflation risk premium, the real risk premium, and the real interest rate.
Their estimates are calculated with a model that uses Treasury yields, inflation data, inflation swaps, and survey-based measures of inflation expectations.
2022-10-28
Almost Time to Close All Shorts...Or Is It?
My view is diesel is up 40 percent in a month, oil still high, markets are showing they are still filled with crack-addled speculators who will throw their inflated cash into stocks at the first whiff of a Fed pause, let alone a pivot. Gold is moving like it wants to crash too:
Days like today hurt, but it also makes me even more pessimistic about this bear market and its impact on the United States. The bubble in stocks wasn't as extreme as the dotcom bubble, but in my opinion, the economic situation is far worse. The 2000 market top was a big one, but it was concentrated in the technology sector. The Federal Reserve was overly aggressive and helped create conditions for a housing bubble that ultimately led to a lower stock market low in 2009. They've been insanely aggressive since 2009 and went nuts in 2020. This produced a profound sentiment shift among investors. Sentiment surveys ymay say bearish, but I don't think there are any real bears out there. Investors are valuing stocks on peak earnings, assumption of resuming earning growth, assumption of a return to low interest rates and so on. If I'm wrong, point out some examples not named Hussman or Druckenmiller. I keep coming back to charts such as corporate profit margins, which hit 16.5 percent Long story short, I shorted more. I'm out of firepower unless I close other positions now.The Bear Pill, Revisited
Here are charts of the utilities and consumer staples SPDRs in 2000, and then compared to technology. Utilities peaked in November and staples in December. Both made their all-time high 8 to 9 months after the dotcom bubble had burst. Between March 24 and December 29, 2000 (simply the slice I grabbed when highlighting the chart), the returns for XLU, XLP and XLK were +32 percent, +41 percent and -51 percent.
It's All Apple Now
Speaking of Inflation, Diesel is Up 40pc in a Month
Bulls Want to Go Back, But We Only Go Forward
2022-10-27
We've Only Just Begun
Amazon in a Precarious Spot
I sold half the Apple puts I bought yesterday because I've almost doubled my money. The rest is free ride.
Update: Amazon fell as much as 20 percent on terrible guidance. Apple wasn't great, but stock is holding up ok with either small single-digit losses or even flat at times. Tomorrow morning's PCE will be the make or break news event for the day. It should come in weak and help a little, maybe not a enough. If it comes in hot, then Cleveland Fed is probably too conservative for October too. That'll kill any talk of a pause/pivot.Epic Bear Market Unfolding and Adding to McDonald's Short
Keep It Simple
I'm guessing the market will end up pinned going into the Amazon + Apple + PCE news. Three massive pieces of information that in hindsight probably don't matter. There won't be good enough news to stop a bear market and there probably also won't be the kind of shockingly bad news that will derail a rally amid bullish sentiment. The marekt is going to do what is it going to do, but there could be major distractions in the next 24 hours that carries forward for days.
2022-10-26
Look at this Ho
Weak Knees
Apple and Amazon earnings will be huge tomorrow after the bell, followed by the PCE report for Q3 before the open on Friday. Harking back to those bull traps, the Cleveland Fed has the September PCE numbers coming in lower than expected. That will be crack for bulls if Amazon and Apple can merely avoid a “Meta” scenario with their earnings reports. Bulls will not care if October inflation numbers are worse and a weak dollar lifts the inflation rate. They'll enjoy a few days of rampage before the Federal Reserve drops the hammer on November 2.
Best case for bears who have shorted already is that Apple, Amazon or both disappoint and Cleveland Fed is wrong about the PCE. If not, one of the bullish trap scenarios is the best outcome.