Was Thursday's Rally The Beginning?

The overwhelming majority of the world only makes money when stocks go higher, which is why personally I wish the market went up every day. But of course...it doesn't. Thursday of this week, even when we look back 20 years from now, will be a day that will be remembered. It was the third-largest 60/40 stock/bond return ever in a day...ever. It was the largest single-day drop in the 10-year yield since...October 2008 when Lehman Brothers went under...woah. It was the largest one day decline in the dollar since...October 2008 when Lehman Brothers went under...and the largest 5 day decline in the dollar...ever...man. I could rifle off all the stats, but it was one for the record books. Nasdaq up 7%, the Dow and S&P both up 6%...in one day...you get the idea. Now, the question is immediately turning into, "is this the beginning of the next move?" Now, the truth is I don't really know if this is the beginning of the next move or not. Maybe it is. Maybe it isn't. Below are some statistics that actually make me think it is NOT the beginning of the next move. First, the market actually has a three-week window to breathe right now. There is no jobs report, CPI number, or FOMC meeting until December. So there absolutely could be a sustained rally between now and December, however, a few things stand out to me. 1) Yesterday's rally was led by the worst companies...by far. The Goldman Sachs unprofitable tech basket was up 15.16% yesterday. These are companies that do not generate a profit. For example, Carvana, which has seen its stock go from $360 down to $7 was up 31% yesterday. Great but that company is terrible (at least according to my mother!) and will almost certainly never generate a profit let alone survive. Even up 15.16% yesterday, the unprofitable tech basket is still down 60% this year. 2) The size of the move yesterday can also be attributed to very low liquidity. Like, really low. The 5 year average for the bid/ask in the S&P futures is $16,000,000, yesterday, it was just $5,000,000. That is weak and pathetic. 3) Today, the University of Michigan survey showed inflation expectations rising to 5.1% at this time next year. If you listen to Jay Powell, he says he needs inflation expectations to come down, and while CPI has potentially peaked, inflation expectations have not. All this goes to say, markets do not go in a straight line no matter what direction they are going. Markets ebb and flow up and down. The challenge I see moving forward that I do not think the market will need to confront until Q1 2023 is the following: Rate hikes do not impact the economy for 9-12 month, according to most "economists". That means the rate hike in March of this year is only just starting to hit the economy, let alone the additional 350 basis points of hikes that have come since. If that is true, I don't see how earnings get better as margins and profits likely go down, with companies resorting to cutting costs (firing people) to offset that drop in margin. Time will tell, but I don't think a Fed pause really does anything at this point. Stay small and win more trades, Steven STONY BROOK SECURITIES LLC IS A PUBLISHER AND DOES NOT OFFER TRADING ADVICE OR RECOMMENDATIONS. ALL INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY AND NOT AN OFFER OR A RECOMMENDATION TO TRADE FUTURES CONTRACTS, STOCKS, OPTIONS OR FOREX. GOVERNMENT REGULATIONS REQUIRE DISCLOSURE OF THE FACT THAT WHILE THE TRADING IDEAS AND TRADING METHODS SHOWN ON THIS WEBSITE MAY HAVE WORKED IN THE PAST; BUT PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. WHILE THERE IS A POTENTIAL FOR PROFITS THERE IS ALSO A HUGE RISK OF LOSS. A LOSS INCURRED IN CONNECTION WITH TRADING FUTURES CONTRACTS, STOCKS, OPTIONS OR FOREX CAN BE SIGNIFICANT. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION SINCE ALL SPECULATIVE TRADING IS INHERENTLY RISKY AND SHOULD ONLY BE UNDERTAKEN BY INDIVIDUALS WITH ADEQUATE RISK CAPITAL. AN INVESTOR COULD POTENTIALLY LOSE ALL OR MORE THAN THE INITIAL INVESTMENT. [FULL INVESTMENT RISK DISCLOSURE]( Copyright © 2022 Stonybrooksecurities LLC, All rights reserved. Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](. Questions? Contact support@stonybrooksecurities.com