Wednesday, November 2, 2022

Morning Note: Equity Market Conditions Remain Negative (beyond the short-term) for now...

Here's from last month's post where I reported on the then score of our "PWA Equity Market Conditions Index."

"One of our many tools is what we call the PWA Equity Market Conditions Index (EMCI), an indicator (developed 8/31/2021) that we score at the end of each month.

August's score plunged from 0 (essentially neutral) to -50 (notably bearish), and the S&P 500 followed with a plunge of its own, to the tune of -9.61% for September...

As September came to a close, our score improved to -25... We'll see to what degree, if any, the market in October reflects these somewhat improved (although still negative) conditions."

As you'll see below, indeed, October reflected those somewhat improved conditions... But note that overall conditions remain negative -- supporting our short-term thesis which, at present, has odds favoring a Q4 rally, but then a yet lower low as this bear market plays itself out.

Here's from our latest report:

10/31/2022 PWA EQUITY MARKET CONDITIONS (EMCI) INDEX: -25 (no change from 9/30/2022)

SP500 past 30 days +7.99%:

After scoring a 25-pt improvement during September, our EMCI showed no overall change in October (although there was movement among its components), remaining at -25, reflecting still on-balance negative equity market conditions.

Inputs that showed improvement:

SPX Technical Trend (from neutral to positive)

Breadth (from negative to neutral)

Inputs that deteriorated:

US Dollar (from positive to neutral) -- (based solely on our technical analysis)

Economic Conditions (from neutral to negative)

Inputs that remained bullish:

Sector Leadership

Sentiment (net fear. I.e., contrarian indicator)

Inputs that remained bearish:

Interest Rates

Fed Policy



Credit Market Conditions

Areas that remained neutral:

Fiscal Policy

EMCI since inception:

SP500 since EMCI inception:

All market eyes will be on the Fed come 11am pt this morning... Stay tuned. 

Asian equities were mostly green overnight, with 10 of the 16 markets we track closing higher.

Europe's leaning a little red so far this morning, with 10 of the 19 bourses we follow trading down as I type.

US stocks are lower to start the session: Dow down 93 points (0.29%), SP500 down 0.39%, SP500 Equal Weight down 0.59%, Nasdaq 100 down 0.15%, Nasdaq Comp down 0.38%, Russell 2000 down 1.19%.

The VIX sits at 26.26, down 1.74%.

Oil futures are down 0.38%, gold's up 0.43%, silver's up 0.65%, copper futures are down 0.50% and the ag complex (DBA) is down 0.55%.

The 10-year treasury is up (yield down) and the dollar is down 0.16%

Among our 35 core positions (excluding options hedges, cash and short-term bond ETF), 11 -- led by AMD, silver, Mexico equities, emerging market equities, Asia Pac equities and gold -- are in the green so far this morning. The losers are being led lower by Albemarle, base metals miners, Disney, Oil services stocks and MP Materials.

"In an abundant world, knowledge grows by elimination, rather than by addition. It’s more about recycling rather than consuming or producing."

Andrei, Vizi. Economy of Truth 

Have a great day!

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