Tuesday, September 27, 2022

Morning Note: Another Bull Bites the Dust

Okay, so, the June low in stocks wasn't, on a closing basis, the ultimate low after all -- not after yesterday. Yesterday's session confirms the present bear market is still alive and well, making it the 12th longest in history, although the 24% decline (SP500) makes it, frankly, benign, thus far, in the grand historical scheme of things. Even our own (subject to change) downside target doesn't get us to -30%... 

Just throwing that out there...

Recall a few months ago I shared herein when a young man asked me if he should take his sister and brother-in-law's advice and go all in Apple and Amazon. My reply being, "when your sister and brother in law tell you that they're sick to their stomachs, they've sold, and they'll never own stocks again, that's when you buy Apple and Amazon with both fists."

Some of you may recall at what turned out to be the bottom of the 2015/2016 correction, we, with confidence, bought Apple, JP Morgan and Disney... At the time, sentiment was resoundingly sour, many were certain the next bear market was at hand (just a few % to go to make it official), and, lo and behold, amid all that pessimism, a durable bottom was formed.

Now, to be clear, I'm not calling a bottom, and, clients, while you've seen some rotation and a small new position here and there (cyber security and defense stocks most recently), you know we're not backing up the truck right here... But I have to say, it's getting very hard to find a bull, anywhere! 

So, while we see odds favoring a bit more pain before this bear goes into hibernation, there's (from a contrarian standpoint) plenty of potential oomph for a bear market rally right here (it's hard to breathe when your side of the boat is so crowded)... It does seem, however, that the rallies are getting faded awfully fast of late... So we'll see.

I woke this morning to the following news items:   emphasis mine...

(Bloomberg) -- Ned Davis Research’s Tim Hayes got a lot of
things right, from advising dollar bulls to stick around to
cutting his global-equity view days after the rout began. Saying that the worst was over for the latter in mid-August wasn’t necessarily one of them.
* A month after shifting his global-equity outlook to overweight from underweight, the firm’s chief investment strategist is returning to his negative stance again and conceding that the upgrade was premature.

This is what I've been talking about the past few days (videos)... I.e., another bull bites the dust...

And the following headline:

Durable goods orders decline for 2nd straight month.

Yeah, the Fed is indeed hiking rates into a weakening economy...

And, just sayin, this: 

Hungarian Central Bank Says It's Ending Its Rate Hike Cycle

Hungary got after it (the inflation fight), as did the likes of Brazil, from the get go, and, hmm, they believe it's already time to pause...

Hungarian policy rate (2-yr graph):

Thirteen Fedheads hit the speaking circuit this week... Stay tuned...

Asian equities were mixed overnight, with 8 of the 16 markets we track closing lower.

Europe's rallying so far this morning, with 17 of the 19 bourses we follow trading up as I type.

US stocks are green to start the session: Dow up 298 points (1.02%), SP500 up 1.40%, SP500 Equal Weight up 1.23%, Nasdaq 100 up 1.87%, Nasdaq Comp up 1.82%, Russell 2000 up 1.56%.

The VIX sits at 30.36, down 5.89%.

Oil futures are up 2.37%, gold's up 0.94%, silver's up 1.98%, copper futures are up 1.18% and the ag complex (DBA) is up 1.25%.

The 10-year treasury is up(yield down) and the dollar is down 0.32%

Among our 35 core positions (excluding options hedges, cash and short-term bond ETF), 34 -- led by uranium miners, AMD, Dutch Bros, Albemarle and oil services stocks -- are in the green so far this morning. The 1 loser so far is our long-term treasury bond ETF.

Too few investors, amateurs and pros alike, do this (in either direction):
"What I try to do in my trades is look for disconfirming evidence. It’s a very difficult practice and I have to continually train myself to ask why I believe something is going to go down, not why it should go up."

--Jim Leitner

Have a great day!


  1. All the Bulls are hiding. LOL.
    I think market will bottom when dollar peaks and bond yields drop. There are many signs that the housing market is dropping like a rock. Therefore inflation should come down accordingly since 15% of individual income is spent on housing and housing related materials and services. I am not sure if Fed Powell cares since he is laser focused of becoming the next Arthur Frank Burns.

    1. Yes Sam, very good point regarding the dollar. It's a huge problem globally for sure... And I agree, housing has some serious headwinds right here... Although today's data doesn't quite support that notion: New home sales for August were 685k, vs consensus expectations of 498k... The Case-Shiller Home Price Index shows a 16.1% year over year average rise in price... However, the more telling monthly figure was -0.8%... The FHFA House Price Index was released as well; it showed 13.9% annual average price increase, but a -0.6% monthly decline... I fully expect continued weakness going forward, but not nearly a 2008 scenario...

      Also keep in mind, the way housing is accounted for in the inflation data is funky... It's not about inflation in home prices. Instead what's used is what the call "owners' equivalent rent." They literally do a survey of homeowners and ask them how much they would charge in rent were they to rent their house out today... That's it, that's the housing inflation data... And it tends to lag notably; i.e., it doesn't tend to decline until several months after home prices have peaked...