As it seems over the last year or so when the markets are at extremes, or what many deem “moments of indecision” I get asked by readers and more, “What do you think of the current “market?”
As older readers have come to know I’ve been posting and annotating the following chart with my thoughts and/or observations. As always: before hand, and before any subsequent moves that may or, may not occur. Then letting the chips fall where they may. The results of those subsequent calls speak for themselves. However, I feel the market is on far more tremulous ground today than previous posts. For as I implied in earlier notes – “This last move back to the highs was based more on Wall Street shenanigans dealing with Qtr. ending and more, than anything which resembles a healthy economy.” So with that said…
Below is the chart of the SPX as we stand today before the U.S. “markets” open. As you can see we are right back into the same area (marked as #10) that we were when I first annotated it. I have moved the #10 annotation over to the right to make the current price action clearer since it was under the text. Yet, it doesn’t affect the call contained within. It still stands today as I typed it then: “Lose this area with conviction and a return to the Bullard Bottom Quickly is well on the table.”
If you look at the chart one thing is evident. As I implied earlier, once the Qtr. end shenanigans were over the markets did what? Hint: absolutely nothing.
As a matter of fact we’ve not only drifted back lower, any recent attempt to go higher, or at least maintain, has been met with selling down back to the lows of the day. And currently, we are once again not above, but below in what I construe as a first level warning sign of support that needed to hold when tested. Rather, than close below it.
If the “markets” continue to sell down, even in a “drifting lower” type fashion closing back below, or under that lower line (and it’s only a single digit move)I feel that’s your first “warning shot” that something is afoot and one should take very special care, and notice, of everything as it pertains to not only one’s investing side of the ledger, but business and more. Remember: Not knowing or understanding the ways in which your business and personal life can be effected by a sudden, if not violent swing, out of the blue in the financial markets is no longer an option for anyone who’s serious about business or their economic well-being. Period.
So, some might be asking “Why is today’s call more troubling than previous?” Here’s my reasoning…
As I stated in earlier notes of this chart the reasons (in my opinion of course) for the “markets” to race off the extreme lows were out of the now commonplace shenanigans by either Fed. officials jawboning they’ll do this, that, or the other thing as to rescue the “markets” if needed (hence the now moniker’d Bullard Bottom.) Or, another punt on rate hikes, etc., etc.
However, this last move off the lows came (or was fueled by) three distinct events that can’t be duplicated in the very near future i.e., next few weeks.
First, was the latest inaction over action rate hike announcement. Second, was Fed. Chair Yellen’s now deemed as making an uber-dove look militaristic speech at the Economic Cub of New York™. And finally – Quarter end window dressing combined with re-positioning for both the new month, Qtr., and the beginning of earnings season.
To my mind – that’s not only like throwing another log on the fire to increase the heat. It’s more like continuing with the furniture, and anything else combustible. And with all that “fuel” where are we? Hint: smack dab in the middle of a very (and I do deem these as very!) important inflection points.
So the question now becomes: “What do you throw into the “fire” now with all the “big wood” is already burned?”
Usually it would be earnings season that would supply and deliver the reasonable expectations of not only wood for more heat into the markets, but also some coal, gas, and other more BTU producing resources.
Yet, today? How does one feel this earnings season will play out? Retail going to surprise to the upside? How about tech? Or, energy? Or, banking? Or, _________(fill in the blank.) As I’ve stated previously, ” This earnings season may be one that fits that other well-worn moniker – “It’s different this time.”
With no fuel except for the near certainty of relentless jawboning from central bankers globally when the markets show any signs of weakeness during this current season, will only be matched by the near criminal Non-GAAP reporting that will be fudged, manipulated, prattled and more by the C-suite executives that report them. And let’s not forget the next in rotation fund managers throughout the media that want you to buy it. Literally.
Again, the question remains: Will it be enough? For “hot air” during a possible abysmal earnings season might not near be enough. In actuality, it may work in reverse and “blow it out.” For if one needs, or wants to see just how far a company needs to go this earnings cycle into the bizarre world of Non-GAAP to show “We’re killing it!” Just look at Alcoa™ and it’s latest earnings report for clues. It speaks for itself.
And as always: nobody knows, it’s anyone’s guess.
© 2016 Mark St.Cyr