So...Now That Momentum is Green

Midday Momentum w/ Garrett {NAME} Returns Tomorrow! [Image](   [ARCHIVES]( LIVE]( [Twitter]( [Youtube]( [Instagram]( [Tiktok]( [Discord]( [LinkedIn]( Your VIP PASS to Tom Gentile’s Darknet Trader Challenge! Legendary trader Richard Dennis took a handful of novices and taught them how to trade. In just 5 years, these beginners made $175 million between them. Tom Gentile wants to do the same! In fact, he’s ready to take you under his wing, and teach you the secrets of millionaire-traders! It all happens Wednesday, January 11th at 1pm. [Go here now to confirm your spot for this MUST-SEE EVENT!](   January 09, 2023 Dear Reader Momentum is Green. The markets turned green on Friday morning and continue to push higher on the back of optimism around a “soft landing”. I find it a bit preposterous that we’re going down the road on this one - as it’s just another iteration of the “pivot” optimism that has failed time and time again. But for now, we are in an uptrend, although I don’t have much trust that this rally is sustainable. Today, we’re seeing another run by Chinese stocks as Goldman Sachs (GS) adds Alibaba to its “Conviction List.” This is interesting as China’s COVID numbers look horrible, and oil prices remain under pressure. Additionally, I’m keeping an eye on the Brazil ETF (EWZ). I was two months early on this prediction, but pro-Bolsonaro voters have stormed the nation’s Presidential Palace and refuse to accept the victory of leftist rival President Luiz Inácio Lula da Silva. They have taken over the nation’s Congress, the Supreme Court, and the presidential palace. This unrest will likely continue into the week. So… Now That Momentum is Green… The jobs report on Friday was enough to pull my 2023 outlook on the S&P 500 slightly higher to 3,250. Up a whopping 1.5 points. But the reaction to the news was a little more important than the news itself. Gold jumped to $1,875, while oil prices pulled back – typical of recessionary fears. The S&P 500 went up to the 3,880 resistance level – and stayed there for a little while. It then tested the move toward 3,900. It’s always confusing when conflicting data arrives – and people try to make sense of it. Last week, we had high job openings (JOLTs Report), wage growth beating expectations (API), and lower initial job claims. It all suggested the Fed must do more. It was all bad news for stocks on Thursday. But then, Friday, we saw a slight drop in the rate of wage growth and modest job growth. Rick Santelli on CNBC gushed about this jobs report – and that might have spooked bears and fueled a run-on “Marlboro Red” cigarettes in the South Loop of Chicago (what’s that $18 a pack now?). Of course, this also whipsawed the performance of the 10-year bond against the S&P 500. Momentum had been negative since December 12. However, we never had any level of significant motion as the S&P 500 remained range-bound between 3,800 and 3,910 for the last few weeks. With momentum turning positive on Friday morning, there appears to be a healthy amount of capital finally rotating into stocks for the first time this year. This can be bullish for financials as they prepare to kick off earnings season next week. But that’s really not giving me any sustainable confidence. The first challenge: Volatility seasonality likes to start pushing higher in the coming days. This momentum swing may only last four or five days, and from there, we could see the next leg down. The second challenge: Did anyone pay attention to the freaking data this week outside of the wage figure? George Vankov sent me his post from LinkedIn on Saturday, January 7, pointing out the obvious. 1) The ISM Manufacturing PMI dropped to 46.2. This has been in contraction mode since November 22. 2) The Non-Manufacturing PMI just fell into contractionary levels since COVID hit. 3) Average work week hours fell to 34.3 hours. George notes that a decline is typically a leading indicator of pending layoffs. 4) The durable goods order was terrible. Two months in a row will likely hit companies, and we’ll see a drop in corporate profitability and forecasts for the year. 5) And the big one – the Fed cut $44 billion from its balance sheet – the largest amount since it started its QT program – and no one blinked. There is a direct causal relationship between the S&P 500 and the Fed’s balance sheet. It can’t be ignored. The drain of liquidity from the global system will weigh on valuations – especially if a recession hits. George noted that the S&P 500 PE multiple is at 20x. I noted last week that a move down to 15x would take us into that 3,000 to 3,100 range – as that multiple aligned with the Fed’s tightening efforts in 2018. But historically, recessions can take us down to 12-13x. So – you know – maybe the “Soft Landing” isn’t coming? Finally, about the week, it was good to see that Michael Burry is back to his original thesis. If the Fed moves too quickly in the opposite direction, cuts rates, and starts buying assets, we can anticipate another wave of inflation worse than what we just witnessed. We increased the entire money supply by 40% in 2020, so what good will low-interest rates do to prevent capital from screaming back off the sideline and bringing us more inflation? The answer is “None. None more good.” If the Fed wants to stop a repeat of the 1970s, it must continue its tightening path – even if that means taking the market down to 3,000 and driving unemployment up to 5%. Anyone who has just started saying, “The Soft Landing is Here,” needs to stop that. We’re nowhere close to this drama being over. What You Missed The U.S. government just passed a $1.7 trillion spending bill to end 2022… and I wonder if money matters anymore. How do we quantify this? What is the cost of this madness? How do we even think about the idea that we are on the cusp of a $32 trillion debt? This isn’t sustainable. This isn’t possible. This explains why other central banks are buying up gold with a level of abandon that I can’t quite describe. Central banks are buying more gold than they have in 55 years… The World Gold Council (WGC) says that central banks bought a staggering $20 billion in gold (or $399 tonnes) in Q3 2022. I don’t know what comes next, but I can only anticipate that this ends poorly. Talk about a flashpoint… They are raiding the Treasury. Doesn’t that inspire confidence? We’re on the verge of becoming Argentina. We’re well on our way. I’ve been buying more gold. And I’m heavy on oil stocks. And we’ve been strategically adding positions in our short-term and long-term Flashpoint Trader portfolios. It’s going to be a very interesting year for commodities and the things we need in America. So if you want to know which materials and sectors are worthy of your time and effort this year, join the ranks of successful traders and [sign up for Flashpoint Trader today](. For a limited time, Midday Momentum readers can get a monthly subscription for just $199, so [Click Here to Start Your Journey to Trading Success](. I’m excited to announce that I’ll be back for Midday Momentum on Money Morning LIVE tomorrow. So don’t miss out on the strategies that will help you win in 2023. I look forward to seeing you tomorrow and taking our trading to the next level. Cheers! Garrett {NAME}   IMPROVING SECTORS: Everything   WEAKENING SECTORS: Nothing   WATCHLIST: BABA, XLF, SKYW,   [YouTube]( Did you miss the show? No worries, we’ve got you covered.   [Shhh... 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