Last week was a mind bender for those of us who have lived though various bubble markets. Today, we’ll discuss the state of the markets, and some thoughts on the economic cycle.
To start, lets take a look at the weekend summary report from Seeking Alpha. Pay particular attention to the S&P 500 Sectors performance part. Are you ready? This is pretty complicated stuff….
My summary – an incredibly in-depth analysis paper by Keith Richards:
Everything went down except Technology (and a minor move by Telecom & Discretionary stocks). End of summary.
Thankyou.
Well, its good that these market drivers aren’t overvalued or anything…check the techs vs the SPX P/S ratio:
Bullish, but patient
I don’t want anyone jumping to the conclusion that I am bearish. I am not. The market is entrenched in a basing phase. This is great news, as it sets us up for the next phase, which is a breakout and bull trend. But that hasn’t happened yet. The SPX needs to bust past 4200 with conviction – and last for more than just a week. And it needs to do it with broad participation. You need the summary at the top to show more green in more sectors. Sectors that are not overvalued “AI” hype stocks.
The setup is there for a new bull market – per the bounce off of a longer termed trendline on the chart below…confirmed by a long termed ROC hook. Note that this is the exact chart with lines that I had shown you back in late 2021 with my circle at the 2021 peak (when I argued for a retracement). My Online TA course covers this timing strategy. Wait for a special price on that course soon. Now we must wait for a confirmation by the Advance Decline Line discussed in last weeks blog, amongst other factors. All of these factors are conveniently covered in my monthly Bear-o-meter reports. Here’s my latest report.
Thought of the day…
Nothing to do with the markets, but most of you, I am sure, have some sense of the free market philosophy. This quote applies as much to independent businesses as it does to us, as investors who are trying to invest with intelligence – by putting time and effort into improving our ability to do so. Time and effort – Such as reading this blog!
When the government runs the economy, you get rich by “taking”. When you have a free market economy, you do well by “making” Pierre Poilievre
12 Comments
Like your sarcasm about the valuation of the TITAN stocks 😂😂😂 heights of the bubble
There’s a bull market. in ChatGPT stocks. Nvidia and Microsoft, not unlike the Tulipmania in Netherlands circa 300 years ago. A flat bed truck of tulips or ChatGPT, for 10 million dollars.
Wonder how long that will last.
About as long as $70,000 highs on the NYSE Bitcoin index did, I suspect
love that last quote takers vs the makers
Keith am I interpreting that you no longer believe the “capitulation” phase will occur before we head into the next bull market start?
I read you to say we are currently basing, which is a good step prior to the start of the bull market.
So it seems like we have had 2 down phases, followed by the current “basing” phase. All this to say “be prepared” for the busting past 4200 with conviction. If it occurs then we should be legging in “with conviction” over a potential short period of time.
Me being a retired, long term horizon investor with cash waiting, sounds like I should be prepared to jump in if we do bust 4200 with broad participation. We have all been waiting for this day.
At least there were a few sectors up in the US last week. In Canada there were NONE, although BTCC.B did squeak up by 4 pennies.
A 2nd comment with a differing question.
You are awaiting the right timing for the market to bust through 4200. I accumulated cash based on your analysis, and I thankyou for that. What is the downside risk for any long term investor like me to jump in a bit early?
Risk of the market dropping a bit further
Risk of it taking a number of months to bust 4200 with conviction, all the while collecting dividends
Risk of missing the bust out with stocks I wish to invest in popping maybe 5% or more before technicals say enter now.
I realize you have your investment rules you must follow. For me though your words sound optimistic for the bull being near. Your words imply no capitulation phase, so a 10-20% drop is less likely than the start of the bull within say 6 months. So why not me invest now/soon, collect dividends and await the likely start of the bull sooner than later? I expect the market to be higher in 12 months so even if we dip further short term (and miss the bottom), I am OK knowing I will be positive in 12 months and beyond. Thanks Keith.
True–I am convinced that the outlook is for a bull market to emerge – and true, my rules say wait for a 4200 confirmation (aka a break that lasts a few weeks). Yes, there cold be a pullback here – mostly because the market is so narrow in breadth, all that needs to happen is a bit of profit taking in the techs and things will decline quickly.
But, to your point – as a long termed investor you could just grin and bear any volatility and get in now. Or, leg in by steps, which is the way I tend to like doing things.
I generally don’t like shorting but some of these AI stocks look ripe for a pull back. Maybe I’ll buy a few put options.
You would be in good company. Larry McDonald (formerly top ranked junk bond trader) just put on a NASDAQ short. He has a reputation for being more often right then wrong in most of his trades.
On May 11th (Lots to cover today) you thought we were going into the early recession stage. Are you now thinking the Market will go up before it starts its decent into recession?
Hi Paul
“The market” – as judged by cap weighted tech orientated indices, may go up in the nearterm as the hype continues
But “The real market” as judged by broad indices or those without a particular bias weighting in tech is in a downtrend – per my chart in todays blog (the “BS” blog!)