The Market’s Starting to Wobble Again

Another down day points to a prolonged slump. [The Rude Awakening] December 07, 2022 [WEBSITE]( | [UNSUBSCRIBE]( The Market’s Starting to Wobble Again - The SPX had two awful days to start the week, down about 150 points. - We’re nowhere near retail capitulation yet, which means there’s much more downside. - A Santa Claus rally is looking increasingly unlikely. [FDR did it first; Biden plans much worse…]( On April 5, 1933, President Roosevelt signed Executive Order 6102 — changing the U.S. dollar forever… On March 9, 2022, President Biden signed Executive Order 14067 — which could change the dollar again, into something much worse… [Go here now to see the potentially sinister outcome of Biden’s new executive order](. [Click Here To Learn More]( [Sean Ring] SEAN RING Happy Hump Day! It’s downright freezing here in Asti, as in zero degrees Celsius. But I’m finally getting used to it, as my cough and cold have disappeared. I’ve been annoyed at the market since mid-October when this latest bear market rally started. The SPX crossed the 50-day moving average by Halloween, which vexed me. Last Wednesday, it crossed the 200-day moving average, and I was livid. But it may have turned out to be a “nothing burger,” after all. The SPX has had an awful week so far, making the breach of the 200-day MA look like a “bull trap.” According to [Investopedia]( A bull trap is a false signal, referring to a declining trend in a stock, index, or other security that reverses after a convincing rally and breaks a prior support level. The move "traps" traders or investors that acted on the buy signal and generates losses on resulting long positions. A bull trap may also refer to a whipsaw pattern. In this edition of the Rude, I’ll show you a few things I’ve seen lately that make me think we’re on our next leg down. First, Price Action Okay, here’s the usual weekly chart I show on the monthly asset class report: [SJN] You can see how we got above the 200-day MA (penultimate white candle) last week, and we're back below it this week (the last red candle). It’s also worth noting that our most recent high of 4,100 is much lower than the previous high of 4,300. Lower highs are not indicative of bullish sentiment. Let’s look at the daily candles now: [SJN] When we zoom in on the daily price chart, we can see that big white, up candlestick from last Wednesday. You can also see the corresponding volume surge on that day. A probable explanation for that was the algorithms buying when they got a sniff of the 200-day moving average line. Traders often use the 200-day MA line to distinguish between bull and bear markets. (Above it, bullish; below it, bearish). But once we got above the line, selling kicked in, as you can see from the next four days in the volume box. This tells me that profit-taking was the order of the day rather than new bullish positions. And if that’s the case, we may be heading down for a while. Next, Stock Holdings [Game of Trades]( released a great YouTube video about stock holdings and retail capitulation. In short, retail is still in the market and has not capitulated at all. Here’s a chart from Louis Blyth Lanes on Twitter: [SJN] Credit: [@louisllanes](. It may be hard to see, so I’ll explain it to you. At the market lows of 2003 and 2009 (after the Dotcom Crash and Great Financial Crisis, respectively), investors only allocated about 40% of their portfolios to stocks. But even after this year’s awful stock performance, investors still hold about 61% of their portfolios in equities. That could mean we’ve got a long way to go down. I also wanted to check out the number of stocks above their 200-day moving average. [SJN] We’ve recovered from the lows, that’s for sure. But the Fed is still hiking, unlike most other times in the last 20 years. James Altucher has been helping people make a fortune with cryptocurrencies for several years. The whole internet laughed at him when Bitcoin crashed from its high of over $19,000… … but the laughing stopped when Bitcoin rocketed even higher, just as James predicted… … hitting over $60,000 in value. Now it has crashed again… and James is back with a NEW prediction about how to make a fortune with cryptocurrencies. And it’s NOT with Bitcoin. [Click here to find out what James is predicting now… and how to make up to an 8,788% return with crypto by 2025.]( [Click Here To Learn More]( Then, the Macro Good friend and Rude reader, Iowa Michael, made me laugh the other day. He passed on a quote from his friend, noted economist Yuri Maltsev: A pessimist is an optimist with better information. I cracked up. I mean, I want to be happy. I want to tell you unicorns and rainbows will save us. It’s just, well, I’ve got better information. Let’s look at Clown World unemployment and inflation. Those numbers are ok, considering. But by Clown World, I mean that because the unemployment rate is still low (3.7%) and inflation (7.7% year-on-year) is coming off, Chairman Pow will continue to hike rates into 2023. [SJN] That’s a big problem for companies that depend on financing themselves at 0%. Capital expenditure is slowing down, as well. [SJN] This puts the recession probability at almost 90%: [SJN] None of this bodes well for the market in 2023. From the [WSJ]( Some investors still stress patience regarding when the Fed’s aggressive rate increases are going to start affecting closely watched jobs data. “When you look at what the Fed’s trying to do, everyone talks about the lag,” said Stephanie Lang, chief investment officer at Homrich Berg. “Even though they’ve been hiking for a while, we are just getting to the point where it’s going to really impact the broader economy.” I agree with Ms. Lang. I’m sure I know how further hikes will affect the economy. However, we’ve not seen how the past hikes have affected the economy. That’s because we’re only nine months removed from Chairman Pow’s first hike this past March. And it takes about that long for that hike to filter through the economy enough to affect demand. Over the coming months, we’ll see the subsequent hikes rear-end the economy with impunity. Then Chairman Pow will have some decisions to make. Hike more? Pause and wait? Immediately cut? This is what happens when you paint yourself into a corner. Wrap Up I’m sure we’ve just ended our latest sucker’s rally and are on the way back down. In the SPX, 3,650 is the first level I’d watch for, followed by 3,500. In the meantime, this made me chuckle: [SJN] All the best, [Sean Ring] Sean Ring Editor, Rude Awakening [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2022 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. 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