The stock market is ‘weak for good news’ and 10% to 12% rally, it says

Emphasize the positive, they say. And why not, as we cruise on Monday, pointing to higher stocks in hopes of easing US tariffs on China.

It is true that nowadays optimism is a long order, the US economy is slowing down, Kovid is not done yet (hopefully MonkeyPix will leave soon) and Russian boots are still on Ukrainian soil. S&P 500 Index as SPX
Dangerously teeters near the beer market, investors are understandably torn between buying dips and selling rips.

This does not mean that some people are not calling for downstairs.

Last week, we heard from technician Tom DeMark, who, after calling the bottom of the covid in 2020, predicted that a “surprise rally” was being held on our way to start driving inflation শ energy and commodities শীর্ to the top.

Ours in that exuberant vein Call of the day From Mr. Blond of The Stock in the Middle Blog, who says the extra-selling condition is “putting the markets at risk for some good news.”

“It’s not always easy to identify a specific catalyst, but Mr. Blond sees inflation at its worst, rate markets are calming down because the most terrible Fed scenarios are being removed,” Mr Blond wrote.

He hopes to have a relief rally in the next four to six weeks and on his risk scale (1 to 10 – worst), this is a step from 2 to 4 for him. “This reflects the view that major equity indicators may rally from 10% to 12% and still have a clear downward trend, so the risk / reward has shifted somewhat.”

The graph below Mr. Blond summarizes the 2-year rolling S&P 500 drawdown, where 20% pullbacks are possible not only out of nowhere, but also out of the Great Recession. In his view, equity markets have already met the minimum standards of a cyclical beer market with an 80% probability of a “normal” recession.

@mrblonde_macro

“The bottom line is that significant losses have already occurred and it is probably inappropriate to be more bearish today than 6 months ago even if the corrections have to go further,” he said.

Elsewhere, he points to the Nasdaq Composite Comp,
Suitable for relief because it has declined 20% for 6 consecutive weeks, recovered 50% of its rally from the low of March 2020, and among other factors its forward evaluation has returned to pre-COVID average.

@mrblonde_macro

Then there’s the abundance of “grolling beer market” stories in the media – a general reflection of market sentiment. Reluctant to rely on any sentiment signals, he noted that in the last 30 years, similarly bearish attitudes have pushed stock prices higher after four to six weeks.

His sentiment measurement adds to the investor intelligence and the American Association of Individual Investors survey, which has been normalized over a two-year period. And of course there are false-positive risks, but “it’s hard to fight the 30-year historical potential of high prices in 4-6 weeks,” he says.

@mrblonde_macro

Further evidence points to a turning point: a recent Bank of America fund managers’ survey shows that managers have the highest cash balances in 20 years, as well as recent surrenders among retailers. Quoting Goldman Sachs, Mr. Blond said they seem to have sold 50% of what they bought in 2020-2021.

Still avoiding deep surrender, he said, note that the measure of his own choice has not yet violated the negative 2.5%. Standing in the way are power, utilities, insurance and staples, although the last sector started selling last week.

@mrblonde_macro

Overall, Mr Blond believes that we are moving beyond the worst possible inflation, “and that if the market starts to believe this, it could end the crisis and act as a positive development.” This is not to make it easy for the Fed to “put all its policy chips on the most lagging index among them,” inflation.

Read the full post here.

Buzz

Beijing has increased stay orders for workers and students and ordered more mass trials as the Cowid case jumps.

During his visit to Asia, President Joe Biden said that the US recession was not inevitable, and that the US would protect Taiwan in the event of a Chinese aggression. Elsewhere, Russia continues to invade eastern Ukraine.

U.S. officials are warning of an outbreak of monkeypox, a U.S. case and several in Europe, with experts pointing to the sex of two ravens in Spain and Belgium,

After a two-year absence, the World Economic Forum is back in Davos, Switzerland, to try to solve many urgent problems for the Uber-rich. Addressing the crowd (of course), Ukrainian President Vladimir Zelensky called for “maximum” sanctions on Russia for its brutal attacks.

Rafael Bostick, president of the Atlanta Fed, and Ether George, president of the Kansas City Fed, will both speak at Monday’s event. The US data calendar is empty, but the week will bring us the latest Fed meeting minutes from Wednesday and Friday’s favorite inflation measure.

Market

Uncredited

Stock Futures YM00

ES00

NQ00
Bond yields push higher with BX: TMUBMUSD10Y

BX: TMUBMUSD02Y,
And oil prices CL00
There are also. And the risk appetite is high, with the dollar DXY
Down across the board. Stablecoin Luna has received a boost as cryptocurrencies are stabilizing, and investors are burning their coins.

Ticker
Random reading

A weak opening for the new Downton Abbey movie could prove that older women are still wary after Kovid.

How a couple and their 19 dogs escaped from a war-torn city in Ukraine.

Need to know start early and update up to opening hours, but sign up here to receive delivery once in your email box. The emailed version will be sent at 7:30 a.m.

Want more for the next day? Sign up for the Barons Daily, a morning briefing for investors with exclusive comments from Barons and Marketwatch authors.

Related Posts

Leave a Reply

Your email address will not be published.