Just some notes on what we think is important right now:
BOND YIELDS, after amazingly going from 2.7% to almost 3.5% on the 10 year in just 11 trading days, are finally pulling back. We have not seen the main trend change yet. Just a normal pullback. We think this is one of the most important parts of the market to watch. The same goes for OIL PRICES now pulling back. Price was quite relentless for weeks.
INDICES with a gap to the upside today. 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.