Friday, July 1, 2022

Morning Note: Seen Better Setups...

Last evening I performed the monthly scoring of our latest proprietary indicator, "The PWA Equity Market Conditions Index", and, well, I'll just say that I've seen better setups in my day.

Here's from our internal report:
06/30/2022 PWA EQUITY MARKET CONDITIONS (EMCI) INDEX: -41.67 (from -8.33 on 5/30/2022)

SP500 past 30 days:

Our EMCI’s decline from -8 to end May to -42 to end June is substantial; reflecting notable deterioration of general equity market conditions over the past few weeks. Demanding continued caution and active hedging going forward.

Inputs that showed improvement:

Inputs that deteriorated:
Sector Leadership (bearish from neutral)
Economic Conditions (bearish from neutral)
Technical Trend (bearish from neutral)

Breadth (neutral from positive)

Inputs that remained bullish:
Dollar (technically-suspect [increased odds of rolling over] of late)
Sentiment (net fear)

Inputs that remained bearish:
Fed Policy
Credit Market Conditions

Inputs that remained neutral:
Interest Rates
Fiscal Policy

EMCI from inception (8/31/2021):

SP500 from EMCI inception:

Per the above, as well as our latest messaging herein and on video commentaries, probabilities point to more downside in equities -- with intermittent rallies along the way -- as current conditions play themselves out. The good news is they will indeed play themselves out, offering up actionable longer-term opportunities in the process.

On deck is our weekly economic update and end of week stock market snapshot...

Asian equities continued to sell off overnight, with 13 of the 16 markets we track closing lower.

Europe, on the other hand, is mostly green so far this morning, with all but 4 of the bourses we follow trading higher as I type.

US stocks are mixed to start the session: Dow up 58 points (0.19%), SP500 up 0.25%, SP500 Equal Weight up 0.50%, Nasdaq 100 down 0.18%, Nasdaq Comp down 0.03%, Russell 2000 up 0.62%.

The VIX sits at 28.21, down 1.74%.

Oil futures are up 1.85%, gold's down 0.86%, silver's down 3.38%, copper futures are down 3.19% and the ag complex (DBA) is down 0.61%.

The 10-year treasury is up (yield down) and the dollar is up 0.70%.

Among our 38 core positions (excluding options hedges, cash and short-term bond ETF), 14 -- led by Dutch Bros, treasury bonds, utilities stocks, emerging market bonds and wind stocks -- are in the green so far this morning. The losers are being led lower by AMD, silver, carbon credits, our semiconductor ETF and South Korean equities.

"...the world would be a dull place if people lacked conceit and confidence in their own good fortune. Keynes had to admit that “If human nature felt no temptation to take a chance . . . there might not be much investment merely as a result of cold calculation.” Nobody takes a risk in the expectation that it will fail. When the Soviets tried to administer uncertainty out of existence through government fiat and planning, they choked off social and economic progress."

--Bernstein, Peter L.. Against the Gods (p. 12). Wiley. Kindle Edition.

Have a great day!