Monday, May 24, 2021

SQUARE a bullish technical take, we also joined

05-24-2021   After today’s jump, please protect your profits=; from our double bottom technical buy...

Bullish?    Very interesting.....Square quietly preparing to offer checking and savings accounts, according to Bloomberg https://www.bloomberg.com/news/articles/2021-05-24/square-to-take-aim-at-jpmorgan-with-checking-savings-accounts?sref=QY7kFAuy

On 5/14/2021    We are LONG  200-shares of SQ  at $193.00

SQ in 2020 into 2021 went on a parabolic run, from a post-Covid-19 sell-off...from a low print of  $32.33 to on March 18th 2020, we saw a stellar lockdown and great stimulus run to all-time recent highs of $283.19 on February 16th, 2021, a subsequent sell-off to $191.36 a potential retest of the relative highs on  April 14th, 2021 at 278.19 then another rollover to $192.21just a few days back...(May 19th, 2021....now we sit right above the daily 200sma at 205.90 today after a 10+ point reversal run....the 240ema my favorite indicator is at $192.74 (where we took on a 200-share LONG position at $192.75 a likely double bottom....we also had longer term support off of the weekly 50sma at 193.65....we also pulled back to the 38.2% Fibonacci retracement as you can see from the charts!   





Tuesday, May 18, 2021

Wise Owl COIN buy levels are getting close 05-17-2021

 

WE ARE CLOSING in on my BUY ZONE     

 Reviewed    05-18-2021     Developed   04-23-2021      I will be LONG  (800/ /200 for the portfolio)  on  “COIN”  at  $175   or a failure to hold below  $220.00   target $320.00   then $375.25    Its optionable also affords GREAT covered call potential/premium close to 10% (out to July monthlies, ATM)    

Crypto platform Coinbase rolls out convertible debt deal, stock skids below $250 reference price    

From Barrons.....Coinbase Global, the leading U.S. cryptocurrency exchange, is highly dependent on Bitcoin. But Bitcoin is becoming a smaller overall part of the crypto-economy, and that could pose a problem for Coinbase. If other coins that aren’t supported by Coinbase (ticker: COIN) start to dominate the industry, the company may lose market share to other exchanges that list those coins. The shift in the crypto market away from Bitcoin dominance was one topic on Coinbase’s earnings call late on Thursday after the company released its first-quarter earnings. Investors had mixed feelings about the earnings report, which showed Coinbase’s fast growth but also highlighted how competition could affect the company’s results. Shares were up 1% in midday trading Friday. 

Bitcoin was once the unquestioned king of cryptocurrencies, making up more than 90% of the crypto market at the start of 2017. Its market share has since declined, as more coins have been introduced and gained in value. But Bitcoin still made up about 60% of the total crypto market cap in 2020, and was even around 70% at the start of 2021 as Bitcoin’s value surged. Since then, Bitcoin has risen in value but other coins have risen even more. In the past week, Bitcoin has dropped 12% even as Ethereum — the second most valuable cryptocurrency, has risen 5%. Bitcoin now makes up about 40% of the total $2.3 trillion market cap of cryptocurrencies. 

In the past, cryptocurrencies tended to move in tandem, with nearly all of the top 50 coins heading in the same direction on any given day. But that has now clearly changed.

So far, it’s not clear whether Bitcoin’s relative underperformance is significantly hurting Coinbase’s results. Bitcoin makes up 62% of the assets on Coinbase’s platform, meaning its customer assets are more heavily weighted toward Bitcoin than its portion of the overall crypto market cap would imply.   

Sunday, May 9, 2021

Looking to SHORT "DE" DEERE at the levels below into and after their earnings due 5/21/2021

Looking to take profits on 1/2 of DE at $350.00 ahead of earnings   5/21/2021   (Please protect profits)    

 05-10-2021      Trade    I am SHORT   “400”   “DE”  at   $400.00

A potential SHORT idea...please, as always do your due diligence...I believe the price action has propelled DE into Cloud-9 valuations, and the best is likely already priced in....DE has likely pulled forward a bevy of future earnings these past 2-quarters; and future price action is about future earnings and revenues, not current and past earnings and revenues!

DE has rallied incessantly (due to stimulus) checks, and historically low-interest rates and their extended payment options....” 0% APR fixed rate for 72 months†  [side note I bought 2-machines using basically free money for 6-years]

Ø  DE posted a high of ~$182.00 in 2019 however from the lows of $106.25+/- on 3/19/2020. It has risen ~270% helping to power the indexes and ETF’s it resides in higher, as you can see from the earnings chart below DE’s earnings were higher in 2018 & 2019 than they were in 2020 and 2021, and its stock price was nearer 50% of today’s value!


Agriculture and construction machinery maker Deere (DE) was hit hard by the pandemic as softer commodity prices and sluggish building activity weakened demand for their equipment. After a rough first half of 2020, green shoots emerged during DE's fiscal 2020Q3 (ending July), followed by a notable recovery the next quarter as the company blew out expectations.  Since DE does not provide quarterly guidance, their results can widely deviate from analysts' estimates. When times are good, the company tends to surpass expectations and vice versa. The $1.70/share positive EPS surprise this past quarter was significant [likely pulling forward demand] ... In the midst of the pandemic, DE's Construction & Forestry segment bore the brunt of the downturn. This business segment which manufactures loaders, excavators, and dump trucks, has significant exposure to road-building projects and to the oil and gas industry. As crude oil prices deteriorated oil and gas producers scaled back on drilling activity, curbing orders for DE's equipment. Consequently, sales in the Construction & Forestry business dove by 25% in 2020/Q2 and by 28% in 2020/Q3...the beat was likely buoyed from by improving economic activity and constrained output, crude oil prices have basically doubled from last May (likely not to be repeated again). The vastly improved financial conditions in the oil and gas industry helped fuel a major rebound in this segment: during 2021Q1, revenue increased 21% year/year to $2.5 billion.

DE is best known for its farming and agriculture machines, which make up the bulk of its business. Our U.S. farming industry is poised to thrive this year after the pandemic drove food demand sharply higher. Rising prices for agriculture commodities, such as soybeans, corn, and wheat, reflect the bullish conditions for farming.

DE's upgraded product roadmap, combined with the strength in their end markets, provided the firm with sufficient confidence to lift their FY-2021 net income guidance to $4.6 to $5.0 billion from $3.6 to $4.0 billion. With the stock up over ~220% from last March's low point, investors are clearly seeing greener pastures ahead. The huge rally indicates that some of the good news is already priced in, but with momentum building under DE's business, investors may be harvesting more gains this year.

SO I am looking to SHORT DE......

Developed   05-10-2021   Next earnings May 21st  S&P EPS consensus: $4.38  S&P revenue consensus: $10.27 billion, likely as good as it gets      I will be SHORT (400-shares) of  “DE”  at  $419.95  or a failure to hold above $405.00 once obtained.....1st downside target $348.75 thereafter $305.00     I like using a Call-spread, or a vertical PUT buy-write strategy to implore leverage; out 7-12 weeks...   Its is of course optionable      Current P/E = 36.00+/-     Forward P/E = 26.75    281-million share float   1.2% Short interest        VERY overextended in my opinion as this stock a year ago was trending in a near $135.00+/- to $189.00+/- and has gone parabolic this past year.



My near-term indicators are now on a SELL  12 out of 13 indicators. These levels below sport a 75% and 85% confidence/probability factors.

  A reminder my friends:   I reiterate this very incantation everyday multiple times to get myself centered to trade this awful market……" Every-Day in every way....I'm feeling better and better about my trading; I am getting better and stronger in my ability to utilize and run good money management and too pull the trigger on positive trading set-ups that provide good risk-to-reward; I will always be aware of the big picture...but intraday I will trade what I see and my technicals indicate....and above all I will always seek to constantly improve my trading and short-term investing knowledge every day!"

Please my friends keep an eye on the DEBT With debt & leverage at all-time highs, rising interest rates will lead to the mother of all credit crises. And what if the FED and other central bankers manipulate rates low? With 10,000 baby boomers turning 65 every day, historic low rates (screwing savers) are leading us into the mother of all pension crises; but these are not the favorite people of those in power!

PLEASE TRADE CAUTIOUSLY on the LONG SHORT side, be quick to book profits and in times of uncertainty it’s ALWAYS very prudent to wait till the smoke clears if you are uncertain; remember trade when perceived risk to reward favors your trades; and that NOT to trade is often a prudent decision as well! 

DISCLAIMER

 

Wise Owl Wealth Mastery is neither an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities members/subscribers should buy or sell for themselves. Members/Readers/Subscribers are responsible for their own investment activity and should always check with their licensed financial advisor and their tax advisor to determine the suitability of any investment prior to engaging. Materials may only be quoted or reproduced by permission and release only. Please remember...these ideas, signals, and/or market-timing-suggestions are not a recommendation to buy or sell any equity/option, it is an informational technical analysis which allows you to better understand market technicals, technical analysis, and positional trading information. These summations offer information on previous suggested potential trade recommendations or potential trades and various technical trigger points for trading opportunities. These alert features are an information service for subscribers only. As always, trading and investing involves inherent risk you should always seek the advice of a professional advisor before making any investment decisions.

 

As all investment entail inherent risk; Wise Owl Wealth Mastery research seeks to assist investors in determining for themselves when to buy and when to sell to attempt to maximize profits or minimize losses. All final investment decisions are yours and as a result you could make or lose money. Wise Owl Wealth Mastery , its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed. Wise Owl Wealth Mastery its employees and/or affiliates do not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Wise Owl Wealth Mastery sit on the Board of Directors of any covered company. Wise Owl Wealth Mastery is not a broker/dealer, and the firm does not underwrite securities, manage assets or perform investment banking activities. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information and do not constitute an offer to buy or sell any security.

 

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Please email any comments or questions to Steve at sgttraining@comcast.net 


Thursday, April 22, 2021

This cat has two white stripes and stinks


 

If you take the time to read the whole report, as I did, there was a remarkable disclosure in the latest JPMorgan earnings report: they are the largest TBTF “US” bank that historically has been known for making loans to the enslaved broader population...and they reported that in 2021/Q1 their total deposits rose by a staggering 24% year/year and up 6% from 2020/Q4, to $2.278 trillion, while the total amount of loans issued by the bank was virtually flat at $1.011 trillion, and down 4% from a year ago....they are taking in more money than thy are loaning out! For the 1st time in their history, JPM had 100% more deposits than loans, the ratio of loans to deposits dropped below 50% for the 3rd quarter in a row after plunging in the aftermath of the Covid-19 nasty pandemic:

v  An even more spectacular divergence between total deposits and loans, emerged at Bank of America where deposits similarly hit a new all-time high of $1.88 trillion, even as the bank's loans have continued to deteriorate at an alarming rate and are now at $911 billion, below the level during the great TBTF banker led financial crisis: in other words, there have been 12 years with basically zero loan growth at Bank of America! (so, where are the profits coming from?

The same trend exists at Citigroup... and Wells Fargo the data across the TBTF (4) banks shows something astonishing as there has been no loan growth since the global TBTF banker led great financial crisis, while total deposits have basically doubled! As such there are two major undertones we should draw from the collapsing loan-to-deposit ratio.

Ø  The first, one is that this ratio is a closely watched metric that measures how much lending a bank is doing when compared to its capacity to lend.

Ø  The second, is arguably the most fundamental question in modern fractional reserve banking: what comes first, loans or deposits, in other words do private, commercial banks create the money in circulation (by first lending it out) or is the central bankers responsible for money creation?

Interestingly there are now far more deposits than there are loans in the US banking system.

As you are all aware now knows, we live in a New MMT world where the “BS” FED and Treasury have merged and where one basically monetizes what the other has to sell. And since “Alice and the Mad-Hatter” have alluded to; the new world of MMT says that there is nothing to worry about from such debt monetization, even so-called cheerleading respected economists have been swept into this frenzy and illusion and are urging the US to issue as much debt as thy possibly can (with the placating Biden administration glad to accommodate). 

There is just one problem: the core tenet of MMT is no longer applicable. As a reminder, according to MMT loans create deposits not the other way around, and this massive crazy-ass socialist crackpot theory further claims that Reserve balances have nothing to do with this they are part of the banking system that ensures financial stability. Watch the following clip from one of the head Lonny Tune developers of MMT, Warrn Mosler who explains how so-called loans create deposits.

Only now when we look at the data that is not the case, as the empirical data mentioned above makes it plainly obvious that the core theory of MMT on which all its other pathetic staggered premises are built on a false foundation, with huge negative consequences. Starting with the collapse of Lehman-Brothers loan creation has been virtually non-existent (as total loans are now at close to the same levels seen at the time of Lehman's demise) while deposits have risen close to $10 trillion; a interesting development as it is here that the FED's massive excess reserves have gone the delta between the two is almost precisely the total amount of reserves injected by the FED since the Lehman-Brothers debacle-crisis.

 So, I suspect you are all waiting with baited breadth wondering what does all of this mean? In a nutshell, with the FED now slowing deposit formation, banks will have no choice but to issue loans to offset the lack of outside money injection by the FED. In other words, while bank deposits have already experienced the benefit of future inflation and have manifested it greatly in the stock market as the TBTF bankers reap trading profits, it is now the time of the matching asset to play catch up. This also means that while deposit growth (i.e., parked reserves at the FED collecting interest) in the future will slow to a trickle, banks will have no choice but to flood the country with trillions in loans, about a third of the currently outstanding loans, just to catch up to the head start provided by the FED!  Once banks launch this wholesale lending effort, it is then that the true destructive inflation from what the FED has done in the past decade will finally rear its ugly head. Right now, we have seen that excess deposits over loans is entirely driven by the trillions in reserves pumped into the coffers of their bastard sons, the TBTF bakers by the FED!  It also explains why even as the FED has pumped trillions of illusionary reserves into banks (that have parked the majority at the FED collecting interest), which have ended up as deposits on bank balance sheets (giving the illusion of profits), the velocity of M2 money has plunged to an all-time low (and will soon drop below the fractional reserve system singularity of 1.0x), as loan demand is nowhere near enough to offset the FED's forced deposit creation which incidentally ends up not in the economy but in the capital markets (stock market, commodities, and other assets), resulting in broad deflation offset by asset price hyperinflation.

 Another reason why this premise is critical: in a world where the dominant daily argument is whether the US is facing deflation or inflation, and where many so-called old-time real economists like myself have become convinced that we are facing a significant surge in higher prices. But don't take my word for it here is an excerpt from the latest "Flows and Liquidity" report from JPMorgan strategist Nick Panigirtzoglou in which he confirms all of my observations and writes that “a common feature of this week's US bank earnings reports has been the weakness in loan growth. Indeed, weekly data from the FED's H8 release shows that the pace of US bank lending remains in negative territory, exhibiting persistent weakness since last summer.

He went on to state that the weakness “followed a temporary spike in bank lending during 2020/Q2, immediately after the virus crisis erupted, and is reminiscent of the US bank lending trajectory after the Lehman crisis. After a temporary spike immediately after the Lehman crisis, driven by companies and consumers tapping bank credit lines, the pace of US bank lending had remained largely in negative territory up until the middle of 2011. Although it entered positive territory after 2011, the pace of US bank lending had stayed significantly below pre -Lehman crisis levels, an important feature of the secular stagnation thesis."

A repeat of the post Lehman crisis period and the protracted weakness in bank lending would cast doubt to the idea of a sustained inflation impulse over the coming years. It would also act as a drag for money supply and liquidity creation going forward, reducing a key driver of asset prices.

We could likely infer further slowing in money creation over the coming years according to JPM, unless bank lending improves. JPMorgan's note concluded, “whether the protracted post Lehman period weakness in bank lending is repeated in the current post virus cycle will be critical in determining both the inflation and liquidity picture over the longer term. So far the trajectory for bank lending shows more similarities than differences to the post Lehman crisis period.”

 

Central Bankers, the FED working hard to enslave the working class and poor


The self-professed financial demi-god FED-Chief hypster Jerome Powell admitted this past week that our Federal Budget is very “Unsustainable” but incorrectly assumes that it is an easy fix later; through the past 6-months of our fiscal year 2021our punch-drunk spending-crazy government ran a record $1.7 trillion budget deficit. During an online seminar sponsored by the Economic Club of Washington DC, Powell stated this week that our economy can handle the current debt load {what is he smoking}. But he did warn that the long-term trajectory of the US budget is unsustainable.

He stated “The US federal budget is on an unsustainable path, meaning simply that our unfunded deficit/debt is growing meaningfully faster than the economy. And that is by definition unsustainable over time. It is a different thing to say the current level of the debt is unsustainable. It is not. The current level of debt is very sustainable. And there’s no question of our ability to service and issue that debt for the foreseeable future.”   However he failed to note that they only way to service that debt is to manipulate interest rates down to historical lows for many-many-many years out into the future “the facts are undigestible”!  Powell said the US government will eventually have to “get back to a sustainable path.” But he gave no timeframe!   “That is something that is best done in good times when the economy is at full employment and when taxes are rolling in. This is not the time to prioritize than concern. But it is nonetheless an important concern that we will ultimately have to return to again when the economy is strong.”

I have news for the Financial-Demi-God Newsflash this will never happen with him and his cronies screwing up our monetary policies.  If you remember my previous writing over the past 4-8 years our government was on a massive borrowing and spending spree [under the King-Trump and Obama administrations] long before the Covid-19 pandemic developed, and it will remain on this path as far as my old eyes can ere until their stupid path runs off the cliff like Wile Coyote.

It is extremely easy to just brush off the current government spending spree “due to the Covid-19 response.”. Virtually everybody being pranced about on the various financial networks [who reaped significant benefits from the massive fiscal stimulus, purely greed induced hype] agrees the stimulus was extremely necessary to deal with the economic negative economic impacts of the self-inflicted shutdown due to Covid-19. But if you had been reading my materials over the past 4+ years you would have noted that the King- Trump reckless spending administration was stimulating (massive bailouts) long before the Covid-19 crisis.  I found the King’s lies were a blatant massive Ponzi-scheme “purely a joke on the American people” as repeatedly during his campaign King-Trump promised that he would deal with the skyrocketing national debt and that only he could fix it he also stated repeatedly he could take care of it “fairly quickly and easily.”  And like all his incessant empty promises it never happened nor did he have any intensions of it happening. And he cannot blame the Covid-19 pandemic. AS due to ridiculous tax and spending policies the King-Trump administration ran huge deficits in the years preceding the outbreak. The budget deficit in the calendar year 2019 was over $1 trillion. And as you recall from my writing the King’s incessant public mantra “that the economy was booming because of the stock-market’s rise” . King Trump kept calling it “the greatest economy in the history of America” and as such would this not be the greatest time to tackle the ballooning deficit/debt budget problem? And let us never forget that “King-Trump’s main ass kisser” FED head Powell he was at King of the FED during this time.

So I ask the new $64,000 question, if the so called fiscally responsible Republicans weren’t willing to address the debt, does anybody actually think that the Placating Biden administration and his Democrat cronies will do it...if you think so, it is  time for you to check into a drug-rehab facility as you are high 😊 as after ramming through (he took lessons from the Mitch McConnell republican leader) a massive stimulus package, he is now looking to borrow (more deficit/debt) and spend on a massive “infrastructure” bill...despite their party affiliations politicians will always find a reason to borrow and spend money that they do not have or have any clue as to determine how to pay for their reckless spending.  

Please reflect upon and read a letter from our founding fathers as in a letter to James Madison, Thomas Jefferson asserted that we have no right to bind future generations to pay our debts. Politicians do the popular thing now to secure reelection tomorrow, with little concern for the long-term consequences. They hide the deteriorating economic house of cards behind government support programs. Powell is right when he says the federal budget is on an unsustainable path. But in my opinion, he is DEAD wrong to imply anything positive will ever be done about it.

 

 

Wednesday, April 14, 2021

Consumers are more financially strapped than thought!

 


Unfortunately, we saw that U.S. Consumer Debt rose again in February apparently, those redundant massive stimulus checks were not enough, a strange development. American consumers pulled felt the need to pull out their credit cards and ran up more massive balances in February and this surge in credit card spending should came as a surprise.

·         American consumers have piled up over $4.23 trillion in debt. This is slightly higher than the record $4.20 trillion in consumer debt as reported in February 2020 as the Covid-19 pandemic began to grip our nation.

According to the latest numbers from the Federal Reserve, consumer debt unexpectedly rose in February, and the trend is growing at an annual rate of 7.9%.  The $27.6 billion increase in consumer debt in February was the largest jump since November 2017. The FED consumer debt figures include credit card debt, student loans and auto loans, but do not factor in mortgage debt. The report showed that revolving debt, primarily reflecting credit card spending, jumped 10.1% in February. Americans now owe approximately $974.4 billion in credit card debt...what will be the next MMT bailout, forgiveness of this debt?  Credit card balances were over $1 trillion when the pandemic began. Many of the so called “CNBC” pundits take renewed consumer borrowing and spending as a sign the economy is almost fully recover. What a farce, as to me it appears that American “drunken-spending” consumers are running low on free-easy stimulus money. As a result, they are now having to spend money the old-fashioned way, they' “charge it” In other words, the sudden explosion in credit card spending are likely indicating real consumer stress.

 

This is exactly what the “BS” central bankers at the FED have stated that they want to see, more to see more borrowing and spending. FED Governor Lael Brainard spun the “strong” consumer credit / debit, numbers as good news (what a shame). She stated that we are seeing the kinds of financial conditions broadly that are very consistent with supporting the flow of credit to businesses and to households; I may have to go back to economics 101. As in my opinion building an economy (or economic data) on debt isn't smart or sustainable and this entire “BS” recovery is predicated on increased consumers spending toe massive amounts of stimulus which is just money borrowed (more and more taxpayer debt) and handed out by the federal government basically running up their own real-life debt-loads. When we dig into the numbers, they, unfortunately, reveal some disturbing trends that the FED-heads would prefer not to think about.

·         Loans valued at $2 trillion entered forbearance during the pandemic

·         As of the end of 2021/Q1, over 60 million Americans had skipped over $70 billion in debt payments that they owed. At some point, they will be forced to pay the bailout piper.

·         Meanwhile, almost 1-in-6 subprime auto loan borrowers are 60 days or more late on payments. That is the highest number on record.

·         There are also signs developing within the Hot housing market. Subprime mortgage delinquencies remain near record-high levels. And the full extent of the contagion is masked by massive forbearance programs.

·         In the stock investment world, margin lending has surged. As of late February, investors had borrowed a new record $814 billion against their portfolios, according to data from the Financial Industry Regulatory. Margin lending rose at the fastest annual rate since 2007 and it's up 49% from the previous highs last year.

Monday, February 22, 2021

Be ware of the TINA trade (interest rate) trade deterioration (there could be an alternative)

 


The stock market move higher on Friday only to finished mixed after Grandma Treasury Secretary Yellen said a large Covid-19 relief package is needed for a full recovery Yellen told CNBC Thursday after the closing bell that more *bailout* stimulus is necessary even as some economic data suggested a rebound is already underway. She added a $1.9 trillion stimulus deal could help the U.S. get back to full employment within a year [what types on medication was she popping]. She stated that “We think it’s especially important to have a big package [that] addresses the pain this pandemic has caused as 15 million Americans behind on their rent {in my opinion this should not have happened as many are willfully behind as they used bailout monies for other purposes}. “I think the price of doing too little is much higher than the price of doing something big. We think that the benefits will far outweigh the costs in the longer run,” she stated.

This week could be all about interest rates (several of my primary indicator “2 out of 13” that I use to facilitated my trading signals) as if we continue to see interest rate rise there is a quickly forming negative risk-contagion of a serious stock market correction if rates continue to sharply rise resulting in a dramatic and quick fundamental valuation reset and many portfolios would be prime candidates for a negative valuation reset... for the first time since June we are seeing that the 10-year yields are suddenly moving higher. One of my other primary indicators that I have used over the last 30 years is that when the SPX-500's P/E ratio tends to peak out in the 22 to 25 times range of forward earnings. Far too many knuckleheaded analheads and portfolio managers and quantitative researchers are looking at normalized nominal GDP growth in the 4.0% to 5.0% range (a massively inflated number), which is where longer-term interest rates should be normalized. However, I believe that normalized GDP growth is probably closer to 2.0%.

You should all contemplate what will happen to your holding if the looming fundamental and valuation reset; I see coming appears, I am guessing that there will be massive FEAR in the near-term. As we have already started to see that real interest rates have stated to move higher on the spike in commodity prices, and we could see some massive concerns about multiple resets for those TFAANG+M type of high-flying growth stocks that seem to be one directional due to short squeezes and being hard-to-borrow the problem many funds face in my opinion is that they have way too much concentration risk in rate-sensitive technology stocks. 

I previously stated in last week’s weekend-market-report that with the indexes/market already trading over 2-standard deviations above their 50dma’s I believed then that further upside was likely to be muted and extremely limited. Such was the case as this past week as the indexes/markets struggled all week during a normal bullish option-X week to hold gains as they traded in a very narrow range in a light volume environment volume environment. Given the extreme overbought and bullish conditions, there is a risk of an incredibly significant correction over the next few days/weeks. My proprietary indicators “that I have been honing for over 25-years” unfortunately do not yet distinguish between a 5.0% to 8.0% correction and or a more nasty 15.0% to a 20.0% sell-off; and history has shown us for the past decade that it doesn’t take long for robotic Pavlov’s trading dogs... so called “trading-bots” to buy the proverbial dips in anticipation of another wave of massive FED manipulation and intervention or soothing words about the Covid-19 vaccines...or another massive new stimulus bailout...this has been the conventional trend play since 03/2019; the bots buying all dips, as the FED throws in massive liquidity to support the markets and enrich their masters!   Remember my friends that these corrections in this one directional manipulated 12+ year bullish cycle often occur so quickly you do not have much time to decide how you want to respond!  I believe that the market has been struggling as of late due to the rise in interest rates.

 


As we touched on last week, investors may be starting to factor in the massive threats of significant real-life higher inflation and a rise in interest rates. With an economy pushing $84 trillion in debt [$157 trillion in underfunded liabilities and debt] the entire premise of “the consumer consumption function” as well as loony “valuation matrix justifications” for the equity markets, is based almost solely on historically low-interest rates and massive free flowing “bailout” stimulus (also massive FED Q/E). However, that is rapidly ending as the rise in rates is now approaching the proverbial “danger-danger Wil Robinson zone” for the markets interest rates are rapidly approaching the 1.5% to 2.0% over-head max barrier, where higher payments will collide with disposable income. Historically, such has not ended well for markets. 


 As I have previously written about extensively the rise in interest rates this year is much more problematic than most suspect. Higher interest payments on massive corporate loans taken out to exploit earnings as they were used to buy-back stock reduces real capital expenditures threatens needed refinancing and spreads through the economy like a nasty cancer; with focus on inflation fears and the likely subsequent FED tightening rising real yields that might prove to be the ultimate “noose” tightening around the neck for this risk rally. Higher real interest rates also quickly undermines one of the critical “bullish support legs” of this crazy rally these past 12-years in a massively over-indebted economy, as increases in interest rates are extremely challenging for these bullishly giddy markets whose valuation premise(s) rely on these historically low manipulated interest rates. 

We have seen in the past that each time interest rates have spiked; it has generally preceded a moderate to a significant market correction. When combined with higher inflationary pressures due to stimulus injections, such a situation becomes quite problematic. Higher borrowing costs and inflation compresses corporate profit margins and reduces real consumption as wages have for over 40+ years fail to increase commensurately. While the various Fed-heads and their fearless leader “Superman-Powell” continues to suggest through their reiterations that they will let “inflation run hot” for a while, the problem is that the real economy will not allow them such a privilege in my opinion. As the negative impacts of higher payments and costs (due to higher rates) will likely derail overspending very quickly, given the real economy is still massively and I mean massively overly dependent on FED and fiscal “life support.”