Time to Take off the Bear Suit

Keep your eyes on this market… [Morning Reckoning] May 23, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Time to Take off the Bear Suit - We’re already seeing some forgotten tech-growth names from the Covid Bubble catch higher - Keep your eye on these stocks… - Why I’m watching crypto… [Do NOT pay your May electric until you see this!]( If you live in one of these 43 states… [Click here to learn more]( You must [watch this urgent warning]( immeditaly. (You Need To Learn About AOC’s “Green New Scam” In Order To Opt-Out) To learn the single most important move you need to make to protect you and your family this summer... [Click here now]( or the play button above. [LEARN MORE]( Baltimore, Maryland May 23, 2023 [Greg Guenthner] GREG GUENTHNER Good morning Reader, Just a few weeks ago, I was writing to you about the ugly, maddening market conditions frustrating most investors. While most stocks weren’t on the brink of serious breakdowns, there was a distinct lack of follow-through in most areas of the market. Rallies would appear, then fizzle before they could make any substantial headway. Only the mega-caps seemed to want to play nice with Apple Inc. (AAPL), Microsoft Inc. (MSFT) and just a few of their cohorts consistently marching higher. Naturally, this action can cause traders to think bearish thoughts. After all, if stocks keep bumping into resistance and failing, maybe there simply aren’t enough buyers to get them over the hump. Don’t get me wrong – prepping for downside action wasn’t the worst decision you could have made earlier this month. I was even making my own list of decent short opportunities, from sluggish small-caps to the teetering tech-growth names. It’s one thing to stay on top of the market. Leaning heavily short before witnessing any actual breakdowns is an entirely different story… Remember: If the market doesn’t scare you out, it will wear you out. As I’ve noted, there was nothing scary about the choppy market action. Most stocks weren’t breaking down — they were simply stuck in sideways ranges. That’s what happens in choppy, potentially basing conditions: stocks grind away, wearing down the resolve of everyone whose mind is stuck replaying last year’s bear market. Investors get frustrated and sell. They give up on ever making back the losses. And they swear they’ll never again get sucked into another bubble. Of course, this is precisely when stocks begin to bounce. The initial move is often violent, catching nearly everyone off guard. It can also push market leaders far into overbought territory. This is where we find ourselves today. Market leading mega-cap tech and semiconductor stocks helped spark last week’s furious breakout, helping push the Nasdaq Composite to a gain of more than 3% on the week to close at new year-to-date highs. While these gains from the tech space easily bested the S&P 500, the large-cap index was also able to post new year-to-date highs. Now, the chase is on. Sold-out bulls are fighting to get back into the market after last week’s squeezy action. Instead of selling in May and going away for the summer, stocks are catching bids left and right. And we’re already seeing another broad rally to start the new trading week. Unless this is the mother-of-all fakeouts, it’s time to take off the bear suit and plan your next move. Here’s where I’m looking to find my next momentum trades… [Response Requested]( 1/1000th of an ounce of gold available As a Morning Reckoning reader, Jim Rickards is offering you 1/1000th of an ounce of gold when you upgrade your account. It will come in the form of a “Gold Back” - a new type of gold currency that’s starting to spread across America ([click here to view](. If you have not responded to Jim’s offer yet, and want to know how to claim yours… Please click the link below for details. [Click here to learn how to claim your new Gold Back Currency<]( Thanks! Amber Anderson Customer Service [LEARN MORE]( - Speculative tech plays catch-up I’m already seeing some forgotten tech-growth names from the Covid Bubble catch higher following last week’s broad market breakout. I already mentioned a few favorable earnings reactions we were seeing throughout this beaten-down group. Keep in mind, many of these names have been building wide bases for a year or more. The only thing missing has been upside breakouts. That’s quickly changing. Just look at the action from Cathie Wood’s infamous ARK Innovation ETF (ARKK): [chart] ARKK looked dead in the water at the beginning of May when it briefly lost the $35 level — which also marked the March lows. We discussed its multiple attempts to clear $40 and its 200-day moving average in late April as the ETF slumped last month. But the $35 test held. ARKK has now started the new trading week with a bang, gaining nearly 5% on Monday to vault off its 200-day moving average following some constructive action last week. This could be the first step toward ARKK regaining some of the momentum that pushed it off its lows back in January. We should remain on the lookout for those individual tech-growth stocks that are completing big bases for explosive moves higher. - Thinking smaller Last week’s thrust higher placed many mega-cap tech names firmly in overbought territory. While this is a positive development in the long-term, we should keep an eye on some rotation into other stocks and sectors as these leaders inevitably consolidate. If we are in the midst of a strong bull move into the summer, the tech giants will probably need to churn sideways while other groups take the baton. We’ve already highlighted the explosive move in tech-growth to start the week. We should also monitor other beaten-down groups, such as regional banks (KRE) and small-caps (IWM) — both of which have greatly underperformed. KRE has already rallied double-digits off its May lows. If smoother market conditions lie ahead, we could continue to see a sharp recovery in these names in the weeks ahead. - Waiting for Crypto Stocks are firming up as Memorial Day approaches. But what about Bitcoin? We’ve discussed at length about how the crypto and speculative tech trades have been two sides of the same coin. But a divergence has been on full display since last week’s broad market rally. Stocks have stormed higher. But Bitcoin? It’s barely budged… [chart] To be fair, Bitcoin has been able to cling to those late March consolidation lows just under $27K. But there’s been no positive momentum in the crypto space since that failed push above $30K last month. The speculative tech stocks are already on the move. Is crypto next? Common sense says yes — as long as our correlations hold true. I’ll be watching crypto — along with the crypto-related stocks — for a sharp move higher to materialize in the near future. What do you think? What other potential rallies am I missing as the market firms up? Let me know by emailing me [here](mailto:feedback@dailyreckoning.com). Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Warning: Will “Bidenflation” Destroy Your Retirement?]( [Click here to learn more]( If you’re like most Americans, you’ve worked hard for decades to build your financial legacy. And now, as a result of Biden’s disastrous money printing policies, that’s all at risk. According to one top retirement expert, “Bidenflation” threatens to destroy your retirement and make your hard-earned savings worthless. That’s why you must take action right away to protect yourself… [Click here now to get the simple, step-by-step actions to survive “Bidenflation.”]( [LEARN MORE]( In Case You Missed It… Worst. President. Ever. And It Ain’t Biden… Sean Ring, Editor [Sean Ring] SEAN RING Dear Reader, Good morning from Jacksonville International Airport, where I’m waiting for my flight to Atlanta. And from there, I’ll fly all the way to Milan. What a wonderful time it’s been here! I got to meet most of my colleagues, who are some of the best people I know. We’ve closed the bar down in the Jekyll Island Resort Club every night. Brian Maher, the venerable editor of the Daily Reckoning, has been instrumental in that endeavor and excellent company to boot. Sitting down with Jim Rickards, Matt Insley, Doug Hill, Zach Scheidt, Dan Amoss and Byron King for our Whisky (no “e,” thank you very much!) Bar was a fantastic experience. We'll let you know as soon as we finish editing the film on that. Our very own Miss Moneypenny, Lydia England, deserves all the credit in the world for organizing the event. Dustin Weisbecker, Patrick McKelvey, Frank DeVechio, Jonathan Eaton, Amanda Stiltner, Brian Damario, Rick Barnard, Emily Graham, Chris Harris, Ben Gurtshaw, Marilyn Herbst and Zach Fowler all deserve immense gratitude for their hard work behind the scenes. Thank you! If I missed anyone, please forgive the unintentional omission. At this grand old hotel and resort, we got to absorb history. And while I was mulling over the Fed, the history started to come together… Dinner, Two Nights Ago Paradigm’s very own Gandalf the Grey, Byron King, and his lovely wife, Barbara, are a treat to spend time with. We shared a great dinner at Eighty Ocean Kitchen and Bar on the ocean side of Jekyll Island. I remain amazed by the quality of conversation whenever I’m with Byron. And as you’d guess, Mrs. King is just as erudite and intelligent as her leading man. Oh, and she’s beautiful, too! To top it off, we somehow wound up with an Italian native as our waiter. Being a native Tuscan, Alex ribbed me about choosing Piedmont over his impossibly beautiful region. Byron and Barbara left after dessert while I stayed behind to imbibe more of the American ales with the rest of the Paradigm crew. Snacks, Yesterday Afternoon I went down to the Pantry to say goodbye to Matt Insley, who was rushing back to Maryland to see his newborn daughter. (Congrats to the whole Insley family!) Luckily, I ran into Byron and Barbara and sat down with them for about 30 minutes. And boy, did that clear up a few things. I told Byron, “You know, we’re here talking about the Fed and everything that entails. But Woodrow Wilson was a mess. He also introduced the Fed, Prohibition, and dragged us into World War I!” Byron looked at me seriously and added, “And don’t forget about the income tax!” [New “WiFi Crypto” Token is Going NUTS!]( Only a handful of crypto investors know about this… But there’s a tiny, affordable device… That’s paid investors real crypto – every day, with zero work… Just for having a working WiFi connection! It sounds crazy, but it’s true… And [this 3:28 video]( explains everything. [Click here to view it NOW](. [LEARN MORE]( Temperance and the Tax (1913) Of course! The [Second Plank of the Communist Manifesto]( was introduced in 1913 as well. How Wilson is ranked in the Top 10 of Presidents is beyond my comprehension. Byron went on to explain the situation. I’ll paraphrase his wise words. Well, Wilson was a supporter of the temperance movement. But you have to realize something. At the time, the US government took up only 3% of GDP. Not 13%. Not 33%. Only 3%. That 3% was funded this way: One-third came from tariffs. One-third came from selling postage stamps. And the final third came from taxes on alcohol. But if you’re going to “temper” - or cut out altogether - your ability to tax alcohol, you’ve got to come up with something else. That’s why the income tax was introduced. An astute reader like you may be thinking, “Hang on, the income tax (1913) preceded Prohibition (1919) by six years. How could the income tax be a result of Prohibition?” Great question. The short answer is that the temperance movement cut into the revenues. Prohibition was merely the codification of what was already happening on the ground. Government revenues from alcohol sales experienced a significant decline before Prohibition was introduced. The temperance movement gained considerable momentum in the late 19th and early 20th centuries, driven by concerns about the social, moral, and health impacts of alcohol consumption. As a result, many states and localities started implementing restrictions on alcohol sales and consumption. This led to a decrease in alcohol production and sales, subsequently reducing the revenue generated from alcohol-related taxes and fees. Add to it that several states had already implemented their own prohibition laws before the 18th Amendment (Prohibition) was ratified. These state-level prohibition measures, often referred to as "dry laws," further restricted or banned the sale and production of alcohol within their jurisdictions. Of course, government revenues from alcohol sales declined even before the nationwide implementation of Prohibition. The declining revenues from alcohol, coupled with the growing influence of the temperance movement, contributed to the overall push for Prohibition at the federal level. But we’ll get to Prohibition later. Let’s review Wilson’s enormous mistakes first. [Send Me Your Mailing Address!]( [Click here to learn more]( The biggest gold bull market in history has just begun. That’s why New York Times best-selling author Jim Rickards has arranged to send his must-read book on gold to any U.S. citizen with a valid mailing address today. [Click here now to see how to claim your copy of The New Case For Gold](. [LEARN MORE]( The Federal Reserve Act (1913) We’ve beaten this horse to death this week. But, after that fateful November 1910 meeting here on Jekyll Island, President Wilson signed what would become known as the Federal Reserve Act of 1913 [with his four gold pens](. Entry Into World War I (1917) Wilson campaigned for re-election in 1916 on a platform of maintaining neutrality and keeping the United States out of World War I. So much for that. What contributed to his decision to enter the U.S. into the war just months after his re-election? Let’s count the ways: - German submarine warfare: Germany's use of unrestricted submarine warfare, which targeted and sank both military and civilian ships, played a significant role in shifting public opinion and Wilson's stance on the war. The sinking of the British passenger liner RMS Lusitania in 1915, resulting in the loss of American lives, had already strained U.S.-German relations. - The Zimmermann Telegram: In early 1917, the British intercepted and decoded a secret telegram from German Foreign Minister Arthur Zimmermann to the German ambassador in Mexico. The telegram proposed a military alliance between Germany and Mexico, with the promise of supporting Mexico in reclaiming lost territories from the United States. The revelation of this telegram further fueled anti-German sentiment and outraged the American public. - Public opinion and pressure: While Wilson campaigned on a platform of neutrality, there was a growing segment of the American population, particularly among certain influential groups and the media, that supported U.S. intervention in the war. Over time, public sentiment shifted, and there was increasing pressure on Wilson to take a more active role in the conflict. - Economic interests: The war presented economic opportunities for the United States. As the conflict continued, American businesses saw profits from supplying goods to the Allied powers. Wilson likely recognized the potential economic benefits of U.S. involvement in the war, as it could boost the American economy and position the country as a major player on the world stage. - Wilson's naive idealism: Wilson believed that the United States had a unique opportunity to shape the post-war world and establish a lasting peace. He developed his vision, known as the Fourteen Points, which outlined principles for peace. This included self-determination for nations and the establishment of a League of Nations. Wilson saw U.S. intervention in the war as necessary to achieve his vision and ensure a just and lasting peace. Whether Wilson walked us into the war or he pushed us, is inconclusive. Ultimately, it was a combination of factors that got us into the conflict. Prohibition (1919) My grandfather was born in 1919. I’m so glad I wasn’t around for this tomfoolery. During his presidency, Wilson publicly expressed his support for Prohibition. He saw it as a moral duty and an opportunity to promote social order and increase productivity, particularly during World War I. Wilson believed that banning alcohol would help conserve resources, maintain discipline among the troops, and bolster the war effort. While Wilson didn’t actively push for the amendment himself, his endorsement and influence helped sway public opinion and create political pressure on state legislatures to ratify the amendment. The ratification of the 18th Amendment in 1919, which prohibited the manufacture, sale, and transportation of alcoholic beverages, Prohibition became the law of the land. Of course, Prohibition did not go as planned, leading to unintended consequences such as the rise of illegal activities and the growth of organized crime. Thank heavens the ban on alcohol was eventually repealed with the ratification of the 21st Amendment in 1933. Wrap Up How Woodrow Wilson is considered anything other than a complete screw-up is beyond my comprehension. He was a warmongering, income-taxing, central banking monster. And he deprived the citizenry of a stiff drink as he did all this! Oh, the shame of it all. The Federal Reserve vexes us daily. The income tax redistributes your hard-earned cash to someone else every April 15th. And you can certainly argue America’s interventionist, itchy trigger finger is a direct descendant of Wilson’s damn fool crusading. At least, we can have a martini. Perhaps we can reverse some of his other awful decisions one day. Let me know what you think by emailing me [here](mailto:feedback@dailyreckoning.com). See you next week! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com Twitter: [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 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. 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