The financial markets – what’s occurring

The S&P 500 index is now below the 200 day moving average. This hasn’t happened since March 2020 (the big covid crash -down 34% from highs.

Is there a bounce in the offing? As you can see from the RSI the market is oversold. Markets can stay oversold for some time however.

Last week I called Netflix as a problem and so it was, it fell 20% on the revision of expected future new subscribers, Wednesday!!!

BIG TECH results and FED are the highlights of this week’s action

Nasdaq is leading this. If big Tech gets repriced, then this is not over.

Themes

Inflation

Takes time to get under control and the habit of raising prices is self-fulfilling. Wage inflation is dangerous for business profitability.

German PPI numbers were v high. C Lagarde does not sound like an Inflation fighter and in recent comments she said there would be no change in ECB dovish financial supports.

For the last 12 years the Fed treated 0.2% shortfalls in inflation like they were a national tragedy, but now they ignore overshooting by 5% for a year. THEY WILL NOT REVERSE THEIR RECENTLY ANNOUNCED PLANS TO FINISH QE AND INCREASE RATES – THEY MAY TRY TO SAVE THE STOCK MARKETS WITH SOOTHING WORDS.

Bitcoin

Its recent drop from 64K has been steep but this has happened before…. however our view (for some weeks) has been negative. It only has value when it is going up, it is a risk asset, and the lack of free money is bound to reduce its speculative fervour!!!!

Institutional holders of it, like ARRK will have to get out – selling begetting more selling. It could become a systemic problem with account blowing up.

“$ARKK makes me sad. She’s down 55% ish from highs. Most her investors are bleeding. Outflows accelerating. Everybody will exit. She will liquidate at massive gaps given shit liquidity of names she’s concentrated in. All she can hope for now is buying time. Game over.”

My Bitcoin call last Sunday was

“Support held last week but may not again!!!!” that was at 40k

 

Fed watch

THEY ARE CAUGHT IN A DIFFICULT SITUATION WITH THE ECONOMY SHOWING SIGNS OF SLOWING (RETAIL SALES) BUT INFLATION IS RAGING AND THEIR JOB IS TO CONTROL INFLATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

They have previously changed plan, but I feel it is unlikely this time.

The historical Fed pivot seems to be between -15% and -22% on $SPX. In 2018 it was after $SPX -20%. In 2010 -15% In 2011 -22% In 2012 -15% when stocks dropped anticipating the end of QE2 which forced the Fed straight into QE3. Using current highs the pivot may then be 3750-4100.

Results of the FED meeting will be announced Wednesday at 7 pm with Powell’s presser a must watch

 

Bonds

The selloff in price slowed last week – yields not moving much higher on fears of stock market crash- they are a safe haven.

 

 

 

 

 

 

 

 

 

CHINA POLICY MAKERS are easing interest rates slightly and warning the West not to ruin economic growth by increasing their rates.

Economic news due  US – GDP: anticipated to have more than doubled, to 5.4% from 2.3% on Thursday at 13.30.

Earnings season Banks had a bad week on results

BIG TECH out this week see times, dates here https://www.investing.com/earnings-calendar/

As usual it is all about the Guidance. What are companies seeing future sales and profitabilty. We could have Buy the Mystery, Sell the News!!!!

 

Stock market

“US equities are waking up to the fact that we are in a massive asset bubble & fantasy valuations can’t be sustained indefinitely without ever more artificial liquidity.”

Support???

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Usual warning: lines are subjective and a weaker TA tool.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaps arrowed

 

 

 

 

 

 

 

 

 

 

 

 

Big volume selling- “get me out”!!!! Can be harbinger of a bottom!!!

 

 

 

 

 

 

 

 

 

All Tech sectors getting sold.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technical Analysis

My chart guy said

Ugly week for #ES_F: 6 red days in a row & 1st 200dma loss this bull market. Daily RSI(5) though now extreme oversold most since Feb 2020. Relief bounce energy Plan Next Week: Drop to 4320-30 then bounce shot. 4430 now resistance-above we squeeze to 4530-40

 

 

 

 

 

 

 

 

 

Conclusion

I am still BEARISH (like last Sunday) however Sentiment Inciators are so Bearish – Put Call and Investment Managers (contrarian indicators)

As I have been saying sell rallies (which can be fierce in downtrends). But don’t sell in the Hole. I have been often caught doing that.  If you missed this move, don’t chase it.

Wait for resitance. Sharpen up your Risk management – sizing and stops. There will be plenty of opportunities this week with FED and Earnings.

 

Call or email for discussion.

Colin  01-6644034 0851722729