At this juncture, a counter-trend rally/bounce would be as normal as the 90 degree+ days we are having in Florida this week. BUT KEEP IN MIND, and to repeat, a rally/bounce at this juncture would not change the main trend/big picture and is coming out of severe weakness. Coming into today, this week, the DOW is down 4.67%, the S&P 6% and the NASDAQ 6.12%. Even more shocking is what has occurred since the midday highs of just last Wednesday. In just 6.5 days to yesterday’s low, the DOW dropped 10.3%, the S&P 12.52% and the NASDAQ, 13.64%. Those numbers are not typos and the 6.5 days is not a typo.
If there is one area that may be in the bottoming process, it is the U.S. LISTED CHINESE STOCKS. As the indices have come down, they rallied off their bear market lows and while pulling back in the latest market dump, they have firmly held above the lows and are mostly now sticking ABOVE the flattening out 50 day moving average. The Chinese government had put the screws to their own companies but seems as of now, they have backed away. In fact, China’s central bank has given a tentative green light for Ant Financial to finally go public. Go backwards and read when the government stopped it dead in its tracks. This move pretty much started the screws on Chinese companies. The jury is still out on whether it goes public. This continues to be something to watch as these China names dropped as much as 90% over the past 18 months. There is every chance with such a huge drop, they can come out of the bear first. The big issue and the wild card will remain the China government as there is no way of knowing if we wake up one morning and they decide to put the screws to these companies again. We are on watch. Trust remains a 1 out of 10.
Otherwise, maybe we are finally starting a relief rally of unknown price and time. But we could have said that earlier in the week. To repeat, at this juncture, any relief rally would not change the major trend/big picture. Our fundamental worries all remain. We believe we are already in recession. We believe there is going to be some serious lower guidance issued as we go into earnings season. We continue to have less than zero confidence in those that caused a lot of the problems we are seeing and are still running the show. And just a little fact from our area. Inventory of homes have skyrocketed over the past 30 days and we mean skyrocketed. We are also seeing some significant price drops in quite a few homes.
Fast forward to this morning. Another big gap to the upside. Time to review some of the rules of bear markets:
Bear market rallies occur because of weakness, not strength. We repeat, in just 6.5 days to the recent low, the DOW dropped 10.3%, the S&P 12.52% and the NASDAQ, 13.64%.
Most of the biggest days the market has ever had were in bear markets.
Bear market rallies can last weeks and gain double digits. So far, the longest bear market rally for this bear market has been 11 days which means we are probably overdue for something better.
Bear markets usually have the cries of a bottom on every up day. We are getting a ton of that.
In bear markets, eventually they get them all.
Price will drop a lot farther than anyone would believe in bear markets. We have already outlined the numbers for the many on the NASDAQ.
We walk into this morning with deeply oversold conditions after another stunning drop. On top of that, we cannot even count one sector in bull mode as the whole energy complex topped out in recent days. Most do not understand how that can happen with oil prices so elevated. It is simple. THEY ARE STOCKS! What did we say? In bear markets, they eventually get them all. No sectors with a bullish stance is the definition of deeply oversold and a condition for near-term rallies. We can count on one hand when we have seen this.
We have no clue how long a bounce/rally lasts or how far it goes. We will just get the clues for when it peters out.
The crypto. Regardless of the trading over the weekend where so many are thrilled to see a good bounce off the lows, we remain with “90% of the coins will drop 90% or more with most going to 0!” We laugh when Elon comes out to defend Dogecoin when he is obviously neck deep. That one is down 90%+ from the highs.
Central bankers…do not get us started. They were out in droves over the 3 day weekend, all trying to defend themselves and despite going 0 for 100, they keep predicting the future. JUST REMEMBER, ALL ROADS EVENTUALLY LEAD TO EASY MONEY. That’s who they are. The only reason they are raising rates is because they are forced to because of the inflation they lit the fuse on. A couple of them came out to tell us eventually they can go back to 0% and print more money. We wonder why they would even say that.
Janet Yellen…keep in mind, that is not Janet Yellen. That is the administration talking. It’s good to know higher taxes and more government will cure the problems caused by the government. Feel better now?