The Harsh Truth That You Won't Hear on Big TV
The harsh truth that big TV on Wall Street will not tell you. Today, we got lots of new charts, we got the Fed, we’ve got geopolitical, we got all kinds of stuff to talk about and I know it's not a Wall Street thing because we are here in beautiful Bethany Beach Delaware.
I am a practicing financial advisor working with both individuals and companies. I do not follow the Wall Street mantra of buy and hold so if you're looking for a fresh opinion please do consider subscribing to our mailing list.
Today's agenda: We’re going to go through the big charts, we've got lots of new stuff to look at. Treasury's, screaming, telling us something completely different than the overall market. What keeps me up at night, that ugly truth that lies below. Tweets of the week. What's on my radar. And finally our game plan.
I want to remind you, I'm not making moves on this unless I'm getting in and out of an individual stock. Why? Because it can flip flop. We saw it in our last update, it went negative and quickly we went positive. So I look at this as a guide going forward and also a couple of things. One, volatility index continues to hug that fifteen line. I'm not buying until we break below that. You see that RSI is moved up, momentum's moved up, but again, to me, when I look at this chart I am still neutral with a negative bias.
CLOSER LOOK AT A NEW CHART
What’s different here?
A couple of things. First off, last week, look at this, thirteen Fed officials spoke and look at the market. Well this week, the week before the Fed day, is called a blackout period. So look what's happened this week. The other thing is on Monday of this week we had a reverse candle, you'll see it go up high, reverse down and then close below 2891. You also see volume going down. What that shows me is exhaustion of buying. So not a surprise. So this latest #PowellPut has not done too much and another reason why I have a negative bias on the short term.
Any change? No. Why? Because we're still negative on momentum. Yes, we're above the forty-week average, but again same thing here. We're looking to form a head and shoulders, looking to, has not happened yet. So we continue to watch that year-to-date this week we're going to probably end up negative based on today's future. So right now we are still negative with the mid-term.
As you expect, negative. What if anything has changed? Nothing, this is my biggest issue. Momentum, on the long term chart, is still negative. You also have a negative divergence in RSI. So right now I do not see myself adding.
So we've got neutral, negative, negative.
Now one thing I want to show you. I always use the S&P because that's the most seen on TV and everything else. But it's 500 companies it's cap weighted. So sometimes you have to look a little bit deeper. This is the NYSE, the broader index, twenty-eight hundred companies. This really is going to show you what's happening underneath. No surprise, 2018 highs but then you get a lower high and another lower high and then we have a pause. So when you look at this we're not breaking out like we have on the S&P 500 because it's more broad. That shows you the broad weakness of the overall markets.
What's happening here. Look at this decline, 1.84 on your five year, 1.83 on your two year, both below the Fed rate. And the big thing on yield spreads, up to 2.25, but we have gone negative, we're down to minus point 0 9. Negative yield curves so that is your 10 year minus your three month, that's our first negative call there. That's a concern. Today, June 14,2019 we opened up about 2.06 on Treasuries. Again, the Treasury market is screaming something different.
WHAT KEEPS ME UP AT NIGHT AND THE UGLY TRUTH
ISM manufacturing is at 52.1. You can see that trend line, not good. Global PMI is in negative, is in contraction, which is below 50. That's an issue. This week, this is what you're not hearing on big TV. Why are we positioned where we are right now? Slow growth, slow earnings and deflation. This is what we're seeing and the fed’s looking for inflation.
PPI and CPI
Came in negative this week.
So here they are, our doves.
They are constantly pushing up this market, but are they dovish enough. Interesting right? So the Fed comes out last week and says “we'll do what it takes.” Of course the market gets Gaga because you get an ugly unemployment and bad news is now good news. Stupid right? But the bottom line is after that there is an eighty-nine percent chance of a rate cut next week. So when you look at this, at eight-nine percent chance, personally, I'm going to be surprised if they raise them. The government recently released a press video of Larry Kudlow stating the following “Wow! Low unemployment, high jobs, high wages, big consumer confidence, major productivity, and no inflation! It’s totally awesome, we’re killing it on the economy.” Yes, the president has his cheerleaders, doesn’t he? So you’ll look at all that excitement of what’s going on in the market and ask “why would they cut rates right now”?
OK, it’s a little bit busy, so follow me here. The black line is your S&P, the Fed rate in purple. Let's go back to 2000. We were at six percent on the Fed rate and they paused just like today, they started cutting and what happened? Well the market followed down. We go into the last crash, 5.25%. They pause, just like today, and then of course the market came down. Now let's also look at unemployment. We're at 3.60%, the lowest since the 1960’s, 4.75% and 4%. Why would we cut rates when things are looking this good, except what the president’s look looking for. And on the ten year I have 2.13% but as of Friday morning, June 14, 2019 we’re going to open up at 2.06%. I look at this and go, “why would they raise rates right now”? They have 2.39% versus 5.25% and six percent. They need that ammunition when they're really going to need it.
S&P WEEKLY with Rate Cuts
So what does the Fed do? From 2000-2003 there were thirteen rate cuts, as the market goes down. How effective were they? Not very much. How about 2007-2008? There were 10 rate cuts, and what happened? They started and the market continues to go. This shows that the Fed is always behind the eight ball and this is what concerns me.
Last up, classic, a rollover market goes down, rollover and look where we are now. Another thing that concerns me. We are slowing.
Another thing that keeps me up at night the debt clock, $22,384,586,812,428! (For more statistics go to www.usdebtclock.org)
TWEETS OF THE WEEK
WHAT’S ON MY RADAR
We got out of oil right about there, not at the top. Had we gotten out at the top, it would be down about twenty-four percent but it's down about twenty right here. Oil had a bounce today because of the tanker explosion but we don't like oil in this part of this cycle. The other thing you look at volatility for oil 41 above 30, we're not near it.
I added this about a month. We bottomed out and have seen a real nice push up. These are the kind of sectors that are working, late cycle sectors.
We’re seeing a lot of people right now that are saying that gold is a big position. H ere's the thing. We've got about five percent in gold, not ready to add Look for 1350, that's going to be a long term breakout. 1350, we're setting up perfectly. Looks good. Up one percent this morning with rates low, gold loves low rates. We are here looking to probably add five percent if we turn in this market. Let's wrap things up with fear and greed
FEAR AND GREED
Calculations are below thirty-nine this week up from twenty-four. Again indicators neutral with a negative bias on the short-term and mid and long-term are negative. Be careful out there folks.