#S&P500TradingSignals

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A Sharp Reflex Rally

While it is indeed a sharp “reflex rally,”  With follow through today, please remember this: “Bear Markets” are not resolved in a single Day, Week, or a Month. Most importantly, "bear markets” do not end with “consumer confidence” still very elevated.    Notice that during each of the previous two bear market cycles, confidence dropped by an average of 58 points. This past week, we saw early indications of the unemployment that is coming to America as jobless claims surged to 10 million, and unemployment in April will surge to 15-20%. Confidence, and ultimately consumption, Which comprises 70% of GDP, will plummet as job losses mount. It is incredibly difficult to remain optimistic when you are unemployed. No Light At The End Of The Tunnel Yet The markets have been clinging on to “hope” that as soon as the virus passes, there will be a sharp “V”-shaped recovery in the economy and markets. While we strongly believe this will not be the case, we do acknowledge there will likely be a short-term market surge as the economy does initially come back “online.”  That surge could be very strong and will once again have the media crowing the “bear market” is over. However, for now, we are not there yet. Most importantly, as shown below, the majority of businesses will run out of money long before SBA loans, or financial assistance can be provided. This will lead to higher, and a longer-duration of unemployment. What the cycle tells us is that jobless claims, unemployment, and economic growth are going to worsen materially over the next couple of quarters. The problem with the current economic backdrop, and mounting job losses, is the vast majority of American’s were woefully unprepared for any disruption to their income going into recession. Two important points: The economy will eventually recover, and life will return to normal.  The damage will take much longer to heal, and future growth will run at a lower long-term rate due to the escalation of debts and deficits.  For investors, this means a greater range of stock market volatility and near-zero rates of return over the next decade. The Bear Still Rules History tells the story covering the last 8 full fledged bear markets: The should be sold into! In other words, if you have taken the decline thus far, When you see the rally explode up, sell it and preserve as much as you can before the next dip. On Friday, our colleague, Jeffery Marcus of TP Analytics, penned the following: When the 11-year bull market trend ended, other shorter trends were also violated.  In late February, the S&P 500 fell below its 14-month uptrend line, and in early March the 13-month uptrend line was violated.  Those breaks set in place the steep declines seen in the 2nd and 3rd weeks of March. While it may seem like an epic battle is going on around S&P 500 2500, the real problem is the downtrend forming from the 2/19 high. TPA still continues to see real long term support in the 3% range between 2110 and 2180. A less likely move below that support, would leave long term support levels of the lows of 2014 and 2015. S&P 500 – Long Term

His analysis agrees with our own: “While the technical picture of the market also suggests the recent “bear market” rally will likely fade sooner than later. Such an advance will ‘lure’ investors back into the market, thinking the ‘bear market’ is over. Importantly, despite the sizable rally, participation has remained extraordinarily weak. If the market was seeing strong buying, as suggested by the media, then we should see sizable upticks in the percent measures of advancing issues, issues at new highs, and a rising number of stocks above their 200-dma.” On a daily basis, these measures all have room to improve in the short-term. However, the market has now confirmed longer-term technical signals suggesting the “bear market” has only just started. There are reasons to be optimistic about the markets in the very short-term. We will get through this crisis. People will return to work. The economy will start moving forward again. However, it won’t immediately go right back to where we were previously. We are continuing to extend the amount of time the economy will be “shut down,” which exacerbates the decline in the employment, and personal consumption data. The feedback loop from that data into corporate profits, and earnings, is going to make valuations more problematic even with low interest rates currently.  This is NOT the time to try and “speculate” on a bottom of the market. You might get lucky, but there is very high risk you could wind up losing even more capital. For long-term investors like our Wealth Preserver Members, just remain patient and let the market dictate when the bottom has been formed. As you can see in the image below, the InterAnalyst Green Buy signal will come as it has every other time. But it only signals when the market is on solid footing.  Bear markets never end with optimism, but in despair. So remain patient, it the bear will end and you will capture the slingshot move back up once the markets are on solid footing. Although we continue to author opinion and analysis, please remember that our writings do not replace the green buy and red sell signals derived from over 140 years of market analytics. Use the Wealth Maximizer Pro to help give you daily charts and signals to help with daily market direction. Apply those to the Wealth Maximizer Weekly charts and signals to give you more confidence in the direction. When the Wealth Preserver Monthly signal confirms both the Wealth Maximizer and Wealth Maximizer Pro memberships, you are prepared for the slingshot.   Members Version of A Sharp Reflex Rally Members please login to view your market signals and read the balance of this post for entry and exit points.   Read the full article

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Markets Are Way Ahead Of Reality

If the 35% surge in the S&P in the past two months seems too good to be true as even hard-core optimists like JPM's Marko Kolanovic now admits, announcing that he is "dialing down" his optimism while Goldman sees little upside for stocks from here...

... it's probably because it is, as the latest Wall Street professional to join the chorus of naysayers and skeptics including such luminaries as David Tepper and Stanley Druckenmiller, claims. In an interview with the Financial Times, Manolo Falco, Citigroup's co-head of investment banking said that financial markets were "way ahead of reality" with tougher times to come, and is warning corporate clients that they should raise as much money as they could before the pandemic’s true cost is factored in by investors. "We definitely feel that the markets are way ahead of reality. We really are telling every client to tap the market if they can because we think the pricing now couldn’t get any better,” Falco said, adding that "as the second quarter comes along and we start seeing the pain, and the collateral effects of that, we think this is going to be much tougher than it looks."

Manolo Falco, Citigroup's co-head of investment banking. His comments came at the end of a week when stock markets largely rallied even as relations between the US and China just hit rock bottom, as riots were about to break out across the US which now has more than 40 million unemployed, and as millions of businesses around the world remained shut and economies lurched towards their worst recessions in memory. "Markets are pricing a V , everyone’s coming back to work, and this is going to be fine,” Mr Falco said. “I don’t think it’s going to be that easy quite frankly" said the investment banking icon who just made Robinhood's shitlist. Investors’ optimism led investment grade companies to raise a record $1 trillion of debt in the first five months of the year, putting investment banks such as Citi on course for a surge in debt capital markets revenues in the second quarter of the year compared with 2019.

Citi is not the only bank to take advantage of the bond issuance feast, which has been explicitly backstopped by the Fed which as we learned last week has been busy buying up over a dozen ETFs.

Last week senior bankers predicted another strong quarter for trading. This was especially true at JPMorgan Chase, whose investment bank boss Daniel Pinto said trading revenues in the second quarter could be up as much as 50% compared with a year earlier. Falco was more circumspect on the prospect of a wave of activist investment in the aftermath of the coronavirus crisis. Low asset prices can tempt activist investors to buy into companies on the cheap and then look for ways to make them more profitable, often by cutting costs and jobs, but mostly issuing more debt (although with corporate leverage now at even record-er levels than just 2 months ago it is unclear just who has the capacity for even more debt). "You gotta be careful though because an activist can become very quickly a focus of governments if they really step in too hard at a time when people, what they want is to protect employment and to actually get things going in the economy," Falco said. "We’ve got to be careful because in some cases . . . maybe those are at the wrong time and could create a lot of anger." We doubt that: in fact, if activist investors step up and end up causing millions more to be fired, it will simply mean that the government's free handouts will have to be extended even further, Congress will have to pass even more stimulus bills, and the Fed will have to monetize even more debt bringing us that much closer to the period of runaway inflation so eagerly sought by the Federal Reserve. In other words, more layoffs mean win, win, wins for everyone, except those who still believe in working hard and saving, of course. Read the full article

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Velocity Of Financial Collapse

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Market Support Is Deteriorating Fast

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P/E Ratio: The Over/Under Value Market Indicator

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P/E Ratio: The Over/Under Value Market Indicator

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The P/E Ratio Is Screaming At You

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Another Panic Cycle

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6 MUST FILL TRADING GAPS

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6 MUST FILL TRADING GAPS

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Dalio: Cash Is Trash

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Is The Dead Cat Bounce Over?

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