Stocks Way Up to End the Week

Is it a bear market rally or the start of a new bull market? Were you forwarded this email? [Sign-up to Rude Awakening here.]( [Unsubscribe]( [The Rude Awakening] It’s come to our attention that you might be missing out on extra benefits exclusively for Rude Awakening subscribers. Check out our website where you can find archives, updates, and everything else included in your subscription. You can access it by [clicking here now](. Stocks Way Up to End the Week - Tech stocks lead the way, despite the Fed’s hiking cycle underway. - Should we “gather ye rosebuds while ye may?” - Or is this a bear market rally ready to whipsaw investors? Recommended Link [Trump’s Final Gift To America]( [Click here for more...]( There’s a little-known way Trump could – one day – have his revenge. It involves a Federal Ruling he oversaw in the final year of his Presidency that could change America forever… unleash an estimated $15.1 trillion in new wealth… and create countless ways for everyday Americans to benefit. What is this little understood decision? And how will it impact you? [Click Here To Learn More]( Sean Ring Editor, Rude Awakening Good morning to you on this sunny Monday in the Philippines! I have only 11 more days in the country, so I’m trying to be as gluttonous as possible. My father-in-law is an expert on cooking squid, and tonight I’m about to have caribou offal (the innards) and… well… nuts. I’ll see if all those libido-enhancing stories are true! I’m a huge fan of liver, kidney, and intestines, so this is just a step up for me. If you’re an older person with some maladies you haven’t been able to shake, I highly recommend eating internal organs. As a culture, we got away from this practice to our detriment. [The Liver King]( eats the stuff raw. I’m not quite ready for that, but I’m happy to eat the guts cooked… for now. Another quick bit of housekeeping before I talk about the wild markets last week: As I’ll be traveling from the Philippines to Rome, and it’ll be challenging to write a piece and get it published with the time zone changes, I will send videos during the journey. This is sort of a test drive to see if you’d enjoy more video commentary from me. If it’s not to your liking, please let me know. As I’ve got a face for radio, I’m not going to be upset if you just prefer I write! With that said, let’s get to the charts, as last week caught me off guard. One last thing before I begin. Many of these charts come from the [Daily Chart Report]( which I glance at every day. A Big Rally Let’s not hold back. Last week was a substantial up week for the major US indexes. Credit: [The Daily Chart Report]( I genuinely thought the market would fall further as the death cross in the SPX happened. That’s when the 50-day moving average crosses below the 200-day moving average. The falloff didn’t happen. In fact, the death cross looked like a buy signal! Clown world stuff, to me. And my goodness, that’s a big up candle. I wouldn’t be surprised if we rallied for a few more weeks from here. But I’m not ready to call a new bull market. Let’s recapture the old highs first. Why I’m Skeptical The Vix Credit: [The Daily Chart Report]( There’s a huge problem when you turn an index into a futures contract. It can - and will - be traded. That’s fine, you say? Sure, but all the supply and demand issues - and incentives - of traders manifest themselves in trading the contracts. That means they’re no longer an “average,” but the weighted average price of the traders who trade the contracts. And that means it’s no longer pure. Does that 24-handle look rational to you? It looks like some traders underestimate the risks that are still out there. Yield Curve Flat to Inverted Have a look at the current yield curve. Credit: [The Daily Chart Report]( The yield curve inverting has preceded 6 of the last six recessions. The 2s/10s - or the 10-year yield minus the 2-year yield has just hit 0.18%. It’s about to invert. Not good. Recommended Link [The No. 1 Crypto Of 2022 Is Poised To Be Even Bigger Than NFTs, Blockchain, Or Bitcoin?]( If you act fast, you can get in before everyone else catches on. [Click Here For More Details]( The Fed is Still Hiking Stocks are generally bullish at the beginning of the hiking cycle, but stocks tend to get hit… hard as time goes on. This is the central bank pricking the bubble. Of course, Jay Powell and his crew are trying to engineer a soft landing. But it’s just not going to happen. Why, you ask? Because it never does. From [Frank Shostak on mises.org]( (bolds mine): Thus, whenever the central bank loosens its monetary stance, it sets in motion an economic boom by means of the diversion of real savings from wealth generators to various non-wealth-generating activities that a free unhampered market would not facilitate. Whenever the central bank reverses its monetary stance, this slows down or puts to an end the diversion of real savings toward activities that do not generate real wealth and that undermines their existence. The trigger to boom-bust cycles is central bank monetary policies and not some mysterious factors. Consequently, whenever a looser stance is introduced, this should be regarded as the beginning of an economic boom. Conversely, the introduction of a tighter stance sets in motion an economic bust, or the liquidation phase. The severity of the liquidation phase is dictated by the extent of distortions caused during the economic boom. The greater the distortions, the more severe the liquidation phase is going to be. Any attempt by the central bank and the government to counter the liquidation phase through monetary stimulus will only undermine the pool of real savings, weakening the economy. Furious Bear Market Rallies Are Quite Common A [bear market rally]( is when during a bear market when assets quickly appreciate in the short term, over days and weeks, before heading back down to new lows. We may be in the middle of one right now. Remember, the Nasdaq was down over 20% from its most recent peak, thus signifying a bear market. Since then, we’ve had a furious rally, but it’s not like we’ve recaptured any highs. Admittedly, that’s a ginormous up candle for last week. But other than retaking the 50-day moving average, we haven’t done much else. Inflation Hasn’t Disappeared There’s a big elephant in the room, and its name is inflation. It’s rampant, and it’s killing purchasing power. The Fed knows it’s behind the curve and will act with haste. This will prick the bubble for sure. But in case you’d like some advice on what to do concerning inflation, look no further than Mayor Mike’s famous Bloomberg. My comments are italicized. In this [piece]( you’ll find such gems as: “First, you have to know your budget to control your budget.” Profound. “To deal with gas prices, it’s worth reconsidering public transportation if it’s an option where you live. Fares are up about 8% compared with 38% for gasoline.” Realistic, for the country folk. Not. “Though your palate may not be used to it, tasty meat substitutes include vegetables (where prices are up a little over 4%, or lentils and beans, which are up about 9%). Plan to cut out the middle creature and consume plants directly. It's a more efficient, healthier and cheaper way to get calories.” Let them eat bugs! “And stay away from buying in bulk — you usually don’t save any money by buying more.” As the French would ask, “Quoi?” And the cherry on top: “If you’re one of the many Americans who became a new pet owner during the pandemic, you might want to rethink those costly pet medical needs. It may sound harsh, but researchers actually don’t recommend pet chemotherapy — which can cost up to $10,000 — for ethical reasons.” So ride the bus, eat bugs, don’t buy in bulk, and kill your pets! Then you’re right as rain. Wrap Up This rally may be a whipsaw, head fake, bear market rally. Stay vigilant. Until tomorrow. All the best, Sean Ring Editor, Rude Awakening P.S. To sign up for the Wiggin Sessions, [click here.]( By clicking this link, you will receive a free subscription to Wiggin Sessions and offers from us and our affiliates that we think might interest you. You can unsubscribe at any time. 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