The financial markets –
I remain bearish stocks!! Rallies are failing.
Inflation continues higher. Costs rising. Supply chains not improving (Shanghai lockdowns, now Beijing).
FED are tightening financial conditions. Economic slowdown threatens (retails sales less inflation are weak)
WAS WHAT I WROTE LAST WEEK!!
While there will be rallies, the financial environment is not conducive to the maintenance of the Bull Market.
The early in the week rally up to 4500 was quickly sold off -giving lower lows on the S&P500 daily chart.
I am not calling for a crash but the indices and individual stocks can go much lower!!!!
Don’t sell the support levels but do sell the bounces.
The $ continues its strong trend and its unlikely to reverse.
Bonds may be close to peak yields at the moment, they may become a safe haven in the event of a stock market rout!!!
Our Bonds two session course will show how to invest in the correct ones.
https://iift.ie/bond-market-trading-investing/ enrol online or call me.
Fed watch
At the IMF meeting last week Jay Powell indicated that the Fed Funds rate would rise by .5% at the May Fed meeting. Christine Lagarde was more sanguine, stating that Europe had different issues from the US. The Euro continues to fall.
FED’S POWELL: MY GOAL IS TO GET INFLATION DOWN WITHOUT A RECESSION.
China
Makes most of the world’s goods!!! Production cuts because of Covid lockdowns are inflationary and recessionary.
Bonds
Yields have gone much higher with the US 30 year over 5%.
This is very significant for the housing market.
Generally, the higher interest rates are going to cause repayment problems for corporations and citizens. There will be less disposable income hence a likely slowdown in economic activity with the knock-on effect on corporate profitability.
People are not used to having to pay more for their car loans or mortgages etc
Bonds Will be discussed at length in the new course https://iift.ie/bond-market-trading-investing/
Nice to see some old friends have enrolled already.
I have split the course into Trading and Investing. A seasoned stockbroker friend of mine, who is presently with Cantor Fitzgerald, will deliver the Investing Module. He is a subject matter expert on Bonds.
This is the 30Y TSY sold in May 2020 and which trades at 66 today. That’s a loss of a third of your investment in the “safest paper” in the world.
Geopolitics
As mentioned, many times, the further in time we move from a major incident the less effect it has on markets. Ukraine is not affecting stock markets.
Of course, there would be a rebound in confidence if peace broke out!!!
Stock markets
4385 to 4500 crushing bears, then 4500 back to 4250 crushing bulls.
Since 5 April the S&P has been green only 3 days.
Tech stocks look so poor.
See list below
But here is something for the Bull (not however to encourage not using risk management
Stock market crashed in,
2020 -34%
2008 -56%
2000 – 49%
1990 – 20%
1987 – 34%
1980 – 27%
1973 – 48%
… and recovered to all time highs each and every time!
Liquidity is evaporating. Reserve balances at Fed banks fell by $172bn by 20 April. 2nd biggest weekly fall. And reserves will be down to $3trn by year-end.
But My Chart guy says
4250 is the magnet now & likely get there by mid next week – Oct 2021 & Jan 2022 saw 300+ point rallies off that lvl
Got there sooner obvs…..
He also said on Saturday
Only 1 pattern matters now in #ES_F: A 10 month triangle with ~4200 support, 4570 resistance. This determines what next few months look like Plan Next Week: Relief bounce to 4320, 4350-65. Unless bulls can clear 4365 though, 4035 then 3940 incoming $SPX
Support abounds in the growth stocks…..will it hold is the big Q
However sentiment indicators are very bearish, this tends to be a contrarian indicator.
Put/Call ratio now 1.30. Haven’t seen anything that high since March 2020. ie people are looking for protection and are buying Puts.
U.S. equity funds have recorded $30 billion of outflows over past two weeks, the largest since March 2020 market crash -Deutsche Bank
The recent survey of Investment managers showed 8% of them bullish
All contrarian indicators but WHAT IF THEY ARE RIGHT??
HUGE WEEK FOR EARNINGS. WATCH THE BIG TECH.
30% of S&P500 report this week
https://www.investing.com/earnings-calendar/
EARNINGS SEASON watch for THREATS from earnings!!!
Conclusion
I have a line about Bottom Picking which I will keep to my self!!!!!!
Markets are v tricky so whatever you do PUT ON A STOP.
Colin 01-6644034 0851722729