Bubble Trouble – Fed Mismanagement

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,935
S&P 500: 2,992
Nasdaq Comp.: 8,117
Russell 2000:1,539
Monday  September 23, 2019
  9:15 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
          ……………………………………………..
TECHNICAL

Friday’s rally failure suggests sellers are waiting to hit buyers  at slightly higher levels.  Today’s market will start on a positive note, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
Minor Support: DJIA:26,857 ; S&P 500:2,979 ; Nasdaq Comp.:8,071;
Minor Resistance: DJIA:26,991; S&P 500:2,999; Nasdaq Comp.:8,179
………………………………………………………….
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..
Thursday Sept. 19  “Follow the Bouncing Ball”
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
…………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

Last week President Trump urged the Fed to cut rates to zero, or lower. I wrote that would be insane.
Monday, I speculated the Fed won’t cut its benchmark fed funds rate today at all, something the Street has been hoping for, having run stocks up over the last two weeks.
We’ll see.
While the Duke University/CFO Global Business Outlook finds 53% of those surveyed expect a recession within a year.  The 10 year business expansion that began in July 2009 is  not going without a fight, and that may cause the Fed to pass on a rate cut today.
The University of Michigan’s consumer sentiment index bounced in September, albeit from a three-year low, U.S. industrial production edged up in August and a 0.3 percent rise core consumer prices (excl food and energy) in August brings  year/year increase to 2.4 percent.
Pre-open trading in futures is a ho-hummer, so it looks like the Street expects a rate cut or doesn’t care.
The Fed and U.S. banking system is struggling to cope with a scarcity of bank reserves, which Axios reports have been declining for the last  five years. Axios.com’s “Markets” also reports the Fed could indicate it plans  to stabilize the level of reserves today resulting in an increase in bond purchases on the order of quantitative easing (QE) in the opinion of Gennadity Goldberg, senior U.S. rates  strategist at TD Securities.
If there is a bottom line here, it is confusion, things happening that were unexpected and that spells uncertainty, a stable market’s nemesis.
Yesterday, I headlined, “A Bubble Waiting to Be Pricked,” an obvious reference to the fact stock prices are  historically overpriced and vulnerable to a nasty decline.
When ?
       When several major institutions abandon their inflexible “buy” algorithms and sell.  You’ll know it when you see it – straight down 12% – 16% in days.

Tuesday Sept. 17  “A Bubble Waiting to Be Pricked”
      Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
……………………………………………………….
Monday Sept 16   “Any Chance the Fed Won’t Cut Rates Wednesday????”
The S&P 500 stopped short of posting a new high Friday, odds favor that it won’t today.  The biggest issue remains the Fed, and will it cut its fed funds rate  on Wednesday ?
The Street is almost unanimously  expecting a rate cut, but Econoday.com points out that consumer prices are  firming up. Core inflation rose higher than expected in August, up 0.3 percent for the third straight 0.3 percent increase putting the core rate of increase at 2.4 percent.
This remains a high risk market. Cas reserves of 30% – 50% are  justified.
…………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

How Much Risk Can You Afford ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,094
S&P 500: 3,006
Nasdaq Comp.:8,182
Russell 2000:1,561
Friday September 20, 2019
  9:28 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
  ……………………………………………..
TECHNICAL

Yesterday’s rally failure suggests sellers are waiting to hit buyers  at slightly higher levels.  Today’s market will start on a positive note, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
Minor Resistance: DJIA:27,306; S&P 500:3,001; Nasdaq Comp.:8,190
………………………………………………………….
Thursday Sept. 19  “Follow the Bouncing Ball”
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
…………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

Last week President Trump urged the Fed to cut rates to zero, or lower. I wrote that would be insane.
Monday, I speculated the Fed won’t cut its benchmark fed funds rate today at all, something the Street has been hoping for, having run stocks up over the last two weeks.
We’ll see.
While the Duke University/CFO Global Business Outlook finds 53% of those surveyed expect a recession within a year.  The 10 year business expansion that began in July 2009 is  not going without a fight, and that may cause the Fed to pass on a rate cut today.
The University of Michigan’s consumer sentiment index bounced in September, albeit from a three-year low, U.S. industrial production edged up in August and a 0.3 percent rise core consumer prices (excl food and energy) in August brings  year/year increase to 2.4 percent.
Pre-open trading in futures is a ho-hummer, so it looks like the Street expects a rate cut or doesn’t care.
The Fed and U.S. banking system is struggling to cope with a scarcity of bank reserves, which Axios reports have been declining for the last  five years. Axios.com’s “Markets” also reports the Fed could indicate it plans  to stabilize the level of reserves today resulting in an increase in bond purchases on the order of quantitative easing (QE) in the opinion of Gennadity Goldberg, senior U.S. rates  strategist at TD Securities.
If there is a bottom line here, it is confusion, things happening that were unexpected and that spells uncertainty, a stable market’s nemesis.
Yesterday, I headlined, “A Bubble Waiting to Be Pricked,” an obvious reference to the fact stock prices are  historically overpriced and vulnerable to a nasty decline.
When ?
       When several major institutions abandon their inflexible “buy” algorithms and sell.  You’ll know it when you see it – straight down 12% – 16% in days.

Tuesday Sept. 17  “A Bubble Waiting to Be Pricked”
      Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
……………………………………………………….
Monday Sept 16   “Any Chance the Fed Won’t Cut Rates Wednesday????”
The S&P 500 stopped short of posting a new high Friday, odds favor that it won’t today.  The biggest issue remains the Fed, and will it cut its fed funds rate  on Wednesday ?
The Street is almost unanimously  expecting a rate cut, but Econoday.com points out that consumer prices are  firming up. Core inflation rose higher than expected in August, up 0.3 percent for the third straight 0.3 percent increase putting the core rate of increase at 2.4 percent.
This remains a high risk market. Cas reserves of 30% – 50% are  justified.
……………………………………………………..

Friday  Sept. 13  “The Recession Decider”
RECESSION  – are we in one ?

We can’t really ask the  National Bureau of Economic Research (NBER), the official “decider” of when a recession  starts or ends,  because that decision is announced 6 to 21 months after the fact.
     Its decision is based on a host of factors over time, including production, employment, construction, income, trade and sentiment to mention a few.
The NBER does not accept the simplistic measure, of the beginning of a recession. –  two consecutive quarters of declining GDP because there  were too many false signals.  With regards to  the Great Recession of 2007 – 2009, GDP declined in the  1st, 3rd and 4th  quarters, but none two back to back.
       Be prepared on September 26th  for the press to headline “RECESSION” if the growth of  Q3’s GDP is less than 2.0%.  That would be the 2rd straight decline in GDP following Q1’s +3.1% growth and Q2’s +2.0.
Based on the long lead time for NBER, a recession may have started months ago, since many key indicators are on the threshold of turning negative.
However, the best indicator for calling turns in the economy is the stock market, it tends to turn ahead of the end of expansions and recessions by 3 to 12 months.
July’s all-time high in the S&P 500 will likely be broken today, suggesting the beginning of a recession has not started, UNLESS the S&P 500 fails to make a new high.
If  this attempt  to break to new highs fails, July’s high of 3,027 could signal a recession has already started.
BUBBLE ?
     Yes, it  acts like one. All the hype by the Administration on trade and the Fed on interest rates is driving stock  and bond prices upward.
Currently this is the third probe by the market averages into this general area in a year.   With its recent surge, the market has discounted a Fed cut in rates and progress in trade talks between the U.S. and China next month, so there is no room for disappointment in either.
Bubbles are orchestrated by outright greed and/or  external events, in this case hype of a rate cut and progress in the trade talks. They are not representative of  a rational conclusion of value.  Once they burst, there is little time to  sell.
      The urge to buy is irresistible, money can be made quickly as long as the bubble is inflating.
The dot-com bubble burst in 2000 was followed by a 50% drop in the S&P 500 and a 78% drop in the Nasdaq Comp.   CAREFUL !

………………………………………………………………
Thursday  Sept 12 “Trump Urges Fed to Cut Rates to Zero or Lower – INSANITY !”
What could be more enticing for investors than expectations of another  cut in the fed funds rate on the 18th and promises of progress in  US/China  trade talks next month ?
      That’s what makes for an expanding Bubble in stock prices.
But, that’s what will eventually decimate portfolio values when the bubble bursts.
When ?
I don’t know.  The Administration and Fed hype is relentless,  driven by fear that 2020 will be  a recession/bear market year, making Donald Trump a one-term president.
Yesterday, Trump urged the Fed to cut interest rates to zero or lower.
That is insane.

Negative interest rates have never proved they would stoke economic growth or stir inflationary pressures. Low interest rates punish savers and people who rely on some semblance of a return on their money. Many cannot afford to invest in the stock market.  Low interest rates adversely impact Bank profitability and in turn, lending.
What is the message here ?   Are we headed for a global depression ?
Is that why the Fed reversed its policy in January ?
The S&P 500 is attacking this area for the fourth time  in a year, each within  2.6% to  3.0% of the July 31 peak.
Stocks are historically overvalued by anywhere from 25% to 45%. No wonder why the Administration and Fed are petrified at the prospect of a bear market.
But by these efforts to avert a recession/bear market, the Administration and Fed are setting investors up for a horrendous drubbing.
The actions of the Administration and Fed are simply inflating the bubble more and more at a time stocks are  more overpriced than at any time in history, except the dot-com bubble burst in 2000 which led to a 50% drop in the S&P 500 and 78% drop in the Nasdaq Composite.
…………………………………………….
Wednesday, Sept. 11  “What a Bubble Looks Like”
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
………………………………………………………………
Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
………………………………………..

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

Follow the Bouncing Ball

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,147
S&P 500: 3,006
Nasdaq Comp.:8,177
Russell 2000:1,568
Thursday September 19, 2019
  9:14 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
……………………………………………..
TECHNICAL

Yesterday’s strong close should drive the market to new all-time highs. As always, a rally failure would  indicate the BIG money is using strength to ease out of the market.

Minor Support: DJIA:27,081;S&P 500:2,998;Nasdaq Comp.:8,153
Minor Resistance: DJIA:27,220; S&P 500:3,016; Nasdaq Comp.:8,217
………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

Last week President Trump urged the Fed to cut rates to zero, or lower. I wrote that would be insane.
Monday, I speculated the Fed won’t cut its benchmark fed funds rate today at all, something the Street has been hoping for, having run stocks up over the last two weeks.
We’ll see.
While the Duke University/CFO Global Business Outlook finds 53% of those surveyed expect a recession within a year.  The 10 year business expansion that began in July 2009 is  not going without a fight, and that may cause the Fed to pass on a rate cut today.
The University of Michigan’s consumer sentiment index bounced in September, albeit from a three-year low, U.S. industrial production edged up in August and a 0.3 percent rise core consumer prices (excl food and energy) in August brings  year/year increase to 2.4 percent.
Pre-open trading in futures is a ho-hummer, so it looks like the Street expects a rate cut or doesn’t care.
The Fed and U.S. banking system is struggling to cope with a scarcity of bank reserves, which Axios reports have been declining for the last  five years. Axios.com’s “Markets” also reports the Fed could indicate it plans  to stabilize the level of reserves today resulting in an increase in bond purchases on the order of quantitative easing (QE) in the opinion of Gennadity Goldberg, senior U.S. rates  strategist at TD Securities.
If there is a bottom line here, it is confusion, things happening that were unexpected and that spells uncertainty, a stable market’s nemesis.
Yesterday, I headlined, “A Bubble Waiting to Be Pricked,” an obvious reference to the fact stock prices are  historically overpriced and vulnerable to a nasty decline.
When ?
       When several major institutions abandon their inflexible “buy” algorithms and sell.  You’ll know it when you see it – straight down 12% – 16% in days.

Tuesday Sept. 17  “A Bubble Waiting to Be Pricked”
      Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
……………………………………………………….
Monday Sept 16   “Any Chance the Fed Won’t Cut Rates Wednesday????”
The S&P 500 stopped short of posting a new high Friday, odds favor that it won’t today.  The biggest issue remains the Fed, and will it cut its fed funds rate  on Wednesday ?
The Street is almost unanimously  expecting a rate cut, but Econoday.com points out that consumer prices are  firming up. Core inflation rose higher than expected in August, up 0.3 percent for the third straight 0.3 percent increase putting the core rate of increase at 2.4 percent.
This remains a high risk market. Cas reserves of 30% – 50% are  justified.
……………………………………………………..

Friday  Sept. 13  “The Recession Decider”
RECESSION  – are we in one ?

We can’t really ask the  National Bureau of Economic Research (NBER), the official “decider” of when a recession  starts or ends,  because that decision is announced 6 to 21 months after the fact.
     Its decision is based on a host of factors over time, including production, employment, construction, income, trade and sentiment to mention a few.
The NBER does not accept the simplistic measure, of the beginning of a recession. –  two consecutive quarters of declining GDP because there  were too many false signals.  With regards to  the Great Recession of 2007 – 2009, GDP declined in the  1st, 3rd and 4th  quarters, but none two back to back.
       Be prepared on September 26th  for the press to headline “RECESSION” if the growth of  Q3’s GDP is less than 2.0%.  That would be the 2rd straight decline in GDP following Q1’s +3.1% growth and Q2’s +2.0.
Based on the long lead time for NBER, a recession may have started months ago, since many key indicators are on the threshold of turning negative.
However, the best indicator for calling turns in the economy is the stock market, it tends to turn ahead of the end of expansions and recessions by 3 to 12 months.
July’s all-time high in the S&P 500 will likely be broken today, suggesting the beginning of a recession has not started, UNLESS the S&P 500 fails to make a new high.
If  this attempt  to break to new highs fails, July’s high of 3,027 could signal a recession has already started.
BUBBLE ?
     Yes, it  acts like one. All the hype by the Administration on trade and the Fed on interest rates is driving stock  and bond prices upward.
Currently this is the third probe by the market averages into this general area in a year.   With its recent surge, the market has discounted a Fed cut in rates and progress in trade talks between the U.S. and China next month, so there is no room for disappointment in either.
Bubbles are orchestrated by outright greed and/or  external events, in this case hype of a rate cut and progress in the trade talks. They are not representative of  a rational conclusion of value.  Once they burst, there is little time to  sell.
      The urge to buy is irresistible, money can be made quickly as long as the bubble is inflating.
The dot-com bubble burst in 2000 was followed by a 50% drop in the S&P 500 and a 78% drop in the Nasdaq Comp.   CAREFUL !

………………………………………………………………
Thursday  Sept 12 “Trump Urges Fed to Cut Rates to Zero or Lower – INSANITY !”
What could be more enticing for investors than expectations of another  cut in the fed funds rate on the 18th and promises of progress in  US/China  trade talks next month ?
      That’s what makes for an expanding Bubble in stock prices.
But, that’s what will eventually decimate portfolio values when the bubble bursts.
When ?
I don’t know.  The Administration and Fed hype is relentless,  driven by fear that 2020 will be  a recession/bear market year, making Donald Trump a one-term president.
Yesterday, Trump urged the Fed to cut interest rates to zero or lower.
That is insane.

Negative interest rates have never proved they would stoke economic growth or stir inflationary pressures. Low interest rates punish savers and people who rely on some semblance of a return on their money. Many cannot afford to invest in the stock market.  Low interest rates adversely impact Bank profitability and in turn, lending.
What is the message here ?   Are we headed for a global depression ?
Is that why the Fed reversed its policy in January ?
The S&P 500 is attacking this area for the fourth time  in a year, each within  2.6% to  3.0% of the July 31 peak.
Stocks are historically overvalued by anywhere from 25% to 45%. No wonder why the Administration and Fed are petrified at the prospect of a bear market.
But by these efforts to avert a recession/bear market, the Administration and Fed are setting investors up for a horrendous drubbing.
The actions of the Administration and Fed are simply inflating the bubble more and more at a time stocks are  more overpriced than at any time in history, except the dot-com bubble burst in 2000 which led to a 50% drop in the S&P 500 and 78% drop in the Nasdaq Composite.
…………………………………………….
Wednesday, Sept. 11  “What a Bubble Looks Like”
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
………………………………………………………………
Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
………………………………………..

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

A Bubble Waiting to Be Pricked

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,076
S&P 500: 2,997
Nasdaq Comp.:8,153
Russell 2000:1,584
Tuesday September 17, 2019
  9:12 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Yesterday, I headlined, “Any Chance the Fed Won’t Cut Rates Wednesday ??”
Clearly that is NOT what anyone on the Street expects, but clearly it is possible.
As noted yesterday, the core consumer price index rose higher than expected in August, up, 0.3% for the third straight  month and 2.4% from a year ago.
Treasury yields jumped sharply last week in face of profit taking after a big Fed-induced bond rally this year.(bond prices move inversely to yield).
       If the Fed does not cut rates, expect the market to take a big hit since it has risen sharply in expectation of  Fed action to cut, as well as in anticipation of progress in the US/China  trade talks next month.
Would it stop lending or borrowing ?  Probably not, it may enhance it, since borrowers would scramble to get loans ahead of further increased borrowing costs.
In fact, the downtrend in rates probably discouraged borrowing  as lower rates were anticipated.
Two weeks ago, I warned of the dangers of buying the long bond, noting a reversal to the upside in rates would crush the value of bonds.
I doubt that would happen, since   we may already be in a recession, or at least the early stages of one.
         Bubble bursting ?  Too early to tell.  October looms, anything can happen.
When it bursts, it will be straight down 12% – 16%.  That is because, so many big investors would get a “sell” signal at the same time.
……………………………………………..
TECHNICAL

This is classic “bubble” stuff. If the Fed does NOT cut rates on the 18th, and or, if the October trade negotiations break down or look like a ho-hummer, the bears will take over.
Odds of new highs are good, but NOT sustainable.
But first, the Street must deal with the Iran/Saudi issue. Was Iran responsible for the attack on Saudi’s energy facilities over the weekend and will the United States retaliate militarily ?
While the market will have to pull back initially today in face of uncertainty over the Saudi oil incident, the real test will be the Fed’s decision on Wednesday.
        Failure to cut its fed funds rate would  whack it.   No one expects that. As noted above, there are ever so slight chances of inflation raising its ugly head.

………………………………………………………
Minor Support: DJIA:26,903;S&P 500:2,997;Nasdaq Comp.:8,136
Minor Resistance: DJIA:27,120; S&P 500:3,003; Nasdaq Comp.:8,159
………………………………………………………….
Monday Sept 16   “Any Chance the Fed Won’t Cut Rates Wednesday????”
The S&P 500 stopped short of posting a new high Friday, odds favor that it won’t today.  The biggest issue remains the Fed, and will it cut its fed funds rate  on Wednesday ?
The Street is almost unanimously  expecting a rate cut, but Econoday.com points out that consumer prices are  firming up. Core inflation rose higher than expected in August, up 0.3 percent for the third straight 0.3 percent increase putting the core rate of increase at 2.4 percent.
This remains a high risk market. Cas reserves of 30% – 50% are  justified.
Wednesday ????”

Friday  Sept. 13  “The Recession Decider”
RECESSION  – are we in one ?

We can’t really ask the  National Bureau of Economic Research (NBER), the official “decider” of when a recession  starts or ends,  because that decision is announced 6 to 21 months after the fact.
     Its decision is based on a host of factors over time, including production, employment, construction, income, trade and sentiment to mention a few.
The NBER does not accept the simplistic measure, of the beginning of a recession. –  two consecutive quarters of declining GDP because there  were too many false signals.  With regards to  the Great Recession of 2007 – 2009, GDP declined in the  1st, 3rd and 4th  quarters, but none two back to back.
       Be prepared on September 26th  for the press to headline “RECESSION” if the growth of  Q3’s GDP is less than 2.0%.  That would be the 2rd straight decline in GDP following Q1’s +3.1% growth and Q2’s +2.0.
Based on the long lead time for NBER, a recession may have started months ago, since many key indicators are on the threshold of turning negative.
However, the best indicator for calling turns in the economy is the stock market, it tends to turn ahead of the end of expansions and recessions by 3 to 12 months.
July’s all-time high in the S&P 500 will likely be broken today, suggesting the beginning of a recession has not started, UNLESS the S&P 500 fails to make a new high.
If  this attempt  to break to new highs fails, July’s high of 3,027 could signal a recession has already started.
BUBBLE ?
     Yes, it  acts like one. All the hype by the Administration on trade and the Fed on interest rates is driving stock  and bond prices upward.
Currently this is the third probe by the market averages into this general area in a year.   With its recent surge, the market has discounted a Fed cut in rates and progress in trade talks between the U.S. and China next month, so there is no room for disappointment in either.
Bubbles are orchestrated by outright greed and/or  external events, in this case hype of a rate cut and progress in the trade talks. They are not representative of  a rational conclusion of value.  Once they burst, there is little time to  sell.
      The urge to buy is irresistible, money can be made quickly as long as the bubble is inflating.
The dot-com bubble burst in 2000 was followed by a 50% drop in the S&P 500 and a 78% drop in the Nasdaq Comp.   CAREFUL !

………………………………………………………………
Thursday  Sept 12 “Trump Urges Fed to Cut Rates to Zero or Lower – INSANITY !”
What could be more enticing for investors than expectations of another  cut in the fed funds rate on the 18th and promises of progress in  US/China  trade talks next month ?
      That’s what makes for an expanding Bubble in stock prices.
But, that’s what will eventually decimate portfolio values when the bubble bursts.
When ?
I don’t know.  The Administration and Fed hype is relentless,  driven by fear that 2020 will be  a recession/bear market year, making Donald Trump a one-term president.
Yesterday, Trump urged the Fed to cut interest rates to zero or lower.
That is insane.

Negative interest rates have never proved they would stoke economic growth or stir inflationary pressures. Low interest rates punish savers and people who rely on some semblance of a return on their money. Many cannot afford to invest in the stock market.  Low interest rates adversely impact Bank profitability and in turn, lending.
What is the message here ?   Are we headed for a global depression ?
Is that why the Fed reversed its policy in January ?
The S&P 500 is attacking this area for the fourth time  in a year, each within  2.6% to  3.0% of the July 31 peak.
Stocks are historically overvalued by anywhere from 25% to 45%. No wonder why the Administration and Fed are petrified at the prospect of a bear market.
But by these efforts to avert a recession/bear market, the Administration and Fed are setting investors up for a horrendous drubbing.
The actions of the Administration and Fed are simply inflating the bubble more and more at a time stocks are  more overpriced than at any time in history, except the dot-com bubble burst in 2000 which led to a 50% drop in the S&P 500 and 78% drop in the Nasdaq Composite.
…………………………………………….
Wednesday, Sept. 11  “What a Bubble Looks Like”
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
………………………………………………………………
Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
………………………………………..
Monday Sept, 9 “Street Wish List – Rate Cut, Good trade news – October”
The market has attracted buyers who are hoping for a Fed rate cut on the 18th and positive developments  in October  coming out of the US/China trade talks.
Fed Chief Jerome Powell said Friday that the US economy “remains strong”…. “Labor market is in a good place” …..that “the labor market is in a good place.”
      If so, why is the Fed cutting its fed funds rate ?
      Why would it encourage more borrowing when  Politico reports “
High Debt Levels Are Weighing on Economies, adding  “Debt Owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis [2007-2009] to $246.6 trillion.”
If  stock prices bear any correlation to earnings, it is worth pointing out that FactSet  now projects a decline of 0.4% in S&P 500’s Q2 earnings and a decline of 3.5% in Q3. For CY 2019, it sees earnings rising only 1.9%. What’s more, projections for 2020 have dropped from double digits to earnings growth of 8%, as of this day.
August’s Consumer Sentiment Index dropped  below 90, the first time since 2012.
The ISM Manufacturing Index has dropped below the expansion level .
Why then is Fed Chief Powell saying the economy remains strong ?
     Why not tell the truth – the economy is sucking wind ?
Granted the market would be going down not up, buy at least investors would  not be so quick to rush in at all-time highs.
When will these guys start to tell the truth.
     It’s all about preventing a recession/bear market in 2020, a presidential election year.  The problem here is, when a recession does hit, the Fed won’t have any means to counter it.  That can only mean one thing – an extended recession/bear market.

………………………………………………………………..

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

The Recession “Decider”

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,182
S&P 500:3,009
Nasdaq Comp.:8,194
Russell 2000:1,575
Friday September 13, 2019
  9:09 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
RECESSION  – are we in one ?
We can’t really ask the  National Bureau of Economic Research (NBER), the official “decider” of when a recession  starts or ends,  because that decision is announced 6 to 21 months after the fact.
     Its decision is based on a host of factors over time, including production, employment, construction, income, trade and sentiment to mention a few.
The NBER does not accept the simplistic measure, of the beginning of a recession. –  two consecutive quarters of declining GDP because there  were too many false signals.  With regards to  the Great Recession of 2007 – 2009, GDP declined in the  1st, 3rd and 4th  quarters, but none two back to back.
       Be prepared on September 26th  for the press to headline “RECESSION” if the growth of  Q3’s GDP is less than 2.0%.  That would be the 2rd straight decline in GDP following Q1’s +3.1% growth and Q2’s +2.0.
Based on the long lead time for NBER, a recession may have started months ago, since many key indicators are on the threshold of turning negative.
However, the best indicator for calling turns in the economy is the stock market, it tends to turn ahead of the end of expansions and recessions by 3 to 12 months.
July’s all-time high in the S&P 500 will likely be broken today, suggesting the beginning of a recession has not started, UNLESS the S&P 500 fails to make a new high.
If  this attempt  to break to new highs fails, July’s high of 3,027 could signal a recession has already started.
BUBBLE ?
     Yes, it  acts like one. All the hype by the Administration on trade and the Fed on interest rates is driving stock  and bond prices upward.
Currently this is the third probe by the market averages into this general area in a year.   With its recent surge, the market has discounted a Fed cut in rates and progress in trade talks between the U.S. and China next month, so there is no room for disappointment in either.
Bubbles are orchestrated by outright greed and/or  external events, in this case hype of a rate cut and progress in the trade talks. They are not representative of  a rational conclusion of value.  Once they burst, there is little time to  sell.
      The urge to buy is irresistible, money can be made quickly as long as the bubble is inflating.
The dot-com bubble burst in 2000 was followed by a 50% drop in the S&P 500 and a 78% drop in the Nasdaq Comp.   CAREFUL !

………………………………………………………………
TECHNICAL
This is classic “bubble” stuff. If the Fed does NOT cut rates on the 18th, and or, if the October trade negotiations break down or look like a ho-hummer, the bears will take over.
Odds of new highs are good, but NOT sustainable.

………………………………………………………
Minor Support: DJIA:27,126;S&P 500:3,004;Nasdaq Comp.:8,176
Minor Resistance: DJIA:27,271; S&P 500:3,018; Nasdaq Comp.:8,219
………………………………………………………….
Thursday  Sept 12 “Trump Urges Fed to Cut Rates to Zero or Lower – INSANITY !”
What could be more enticing for investors than expectations of another  cut in the fed funds rate on the 18th and promises of progress in  US/China  trade talks next month ?
      That’s what makes for an expanding Bubble in stock prices.
But, that’s what will eventually decimate portfolio values when the bubble bursts.
When ?
I don’t know.  The Administration and Fed hype is relentless,  driven by fear that 2020 will be  a recession/bear market year, making Donald Trump a one-term president.
Yesterday, Trump urged the Fed to cut interest rates to zero or lower.
That is insane.

Negative interest rates have never proved they would stoke economic growth or stir inflationary pressures. Low interest rates punish savers and people who rely on some semblance of a return on their money. Many cannot afford to invest in the stock market.  Low interest rates adversely impact Bank profitability and in turn, lending.
What is the message here ?   Are we headed for a global depression ?
Is that why the Fed reversed its policy in January ?
The S&P 500 is attacking this area for the fourth time  in a year, each within  2.6% to  3.0% of the July 31 peak.
Stocks are historically overvalued by anywhere from 25% to 45%. No wonder why the Administration and Fed are petrified at the prospect of a bear market.
But by these efforts to avert a recession/bear market, the Administration and Fed are setting investors up for a horrendous drubbing.
The actions of the Administration and Fed are simply inflating the bubble more and more at a time stocks are  more overpriced than at any time in history, except the dot-com bubble burst in 2000 which led to a 50% drop in the S&P 500 and 78% drop in the Nasdaq Composite.
…………………………………………….
Wednesday, Sept. 11  “What a Bubble Looks Like”
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
………………………………………………………………
Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
………………………………………..
Monday Sept, 9 “Street Wish List – Rate Cut, Good trade news – October”
The market has attracted buyers who are hoping for a Fed rate cut on the 18th and positive developments  in October  coming out of the US/China trade talks.
Fed Chief Jerome Powell said Friday that the US economy “remains strong”…. “Labor market is in a good place” …..that “the labor market is in a good place.”
      If so, why is the Fed cutting its fed funds rate ?
      Why would it encourage more borrowing when  Politico reports “
High Debt Levels Are Weighing on Economies, adding  “Debt Owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis [2007-2009] to $246.6 trillion.”
If  stock prices bear any correlation to earnings, it is worth pointing out that FactSet  now projects a decline of 0.4% in S&P 500’s Q2 earnings and a decline of 3.5% in Q3. For CY 2019, it sees earnings rising only 1.9%. What’s more, projections for 2020 have dropped from double digits to earnings growth of 8%, as of this day.
August’s Consumer Sentiment Index dropped  below 90, the first time since 2012.
The ISM Manufacturing Index has dropped below the expansion level .
Why then is Fed Chief Powell saying the economy remains strong ?
     Why not tell the truth – the economy is sucking wind ?
Granted the market would be going down not up, buy at least investors would  not be so quick to rush in at all-time highs.
When will these guys start to tell the truth.
     It’s all about preventing a recession/bear market in 2020, a presidential election year.  The problem here is, when a recession does hit, the Fed won’t have any means to counter it.  That can only mean one thing – an extended recession/bear market.

………………………………………………………………..

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

Trump Urges Fed to Cut Rates to Zero or Lower – INSANITY !

INVESTOR’S first read.com – Daily edge before the open
DJIA: 27,137
S&P 500:3,000
Nasdaq Comp.:8,169
Russell 2000:1,575
Thursday September 12, 2019
  6:48 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
What could be more enticing for investors than expectations of another  cut in the fed funds rate on the 18th and promises of progress in  US/China  trade talks next month ?
      That’s what makes for an expanding Bubble in stock prices.
But, that’s what will eventually decimate portfolio values when the bubble bursts.
When ?
I don’t know.  The Administration and Fed hype is relentless,  driven by fear that 2020 will be  a recession/bear market year, making Donald Trump a one-term president.
Yesterday, Trump urged the Fed to cut interest rates to zero or lower.
That is insane.

Negative interest rates have never proved they would stoke economic growth or stir inflationary pressures. Low interest rates punish savers and people who rely on some semblance of a return on their money. Many cannot afford to invest in the stock market.  Low interest rates adversely impact Bank profitability and in turn, lending.
What is the message here ?   Are we headed for a global depression ?
Is that why the Fed reversed its policy in January ?
The S&P 500 is attacking this area for the fourth time  in a year, each within  2.6% to  3.0% of the July 31 peak.
Stocks are historically overvalued by anywhere from 25% to 45%. No wonder why the Administration and Fed are petrified at the prospect of a bear market.
But by these efforts to avert a recession/bear market, the Administration and Fed are setting investors up for a horrendous drubbing.
The acions of the Administration and Fed are simply inflating the bubble more and more at a time stocks are  more overpriced than at any time in history, except the dot-com bubble burst in 2000 which led to a 50% drop in the S&P 500 and 78% drop in the Nasdaq Composite.
      ………………………………………………………………
TECHNICAL
This is classic “bubble” stuff. If the Fed does NOT cut rates on the 18th, and or, if the October trade negotiations break down or look like a ho-hummer, the bears will take over.
Odds of new highs are good, but NOT sustainable.

………………………………………………………
Minor Support: DJIA:27,109;S&P 500:2,998;Nasdaq Comp.:8,158
Minor Resistance: DJIA:27,217; S&P 500:3,017; Nasdaq Comp.:8,183
………………………………………………………….
Wednesday, Sept. 11  “What a Bubble Looks Like”
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
………………………………………………………………
Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
………………………………………..
Monday Sept, 9 “Street Wish List – Rate Cut, Good trade news – October”
The market has attracted buyers who are hoping for a Fed rate cut on the 18th and positive developments  in October  coming out of the US/China trade talks.
Fed Chief Jerome Powell said Friday that the US economy “remains strong”…. “Labor market is in a good place” …..that “the labor market is in a good place.”
      If so, why is the Fed cutting its fed funds rate ?
      Why would it encourage more borrowing when  Politico reports “
High Debt Levels Are Weighing on Economies, adding  “Debt Owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis [2007-2009] to $246.6 trillion.”
If  stock prices bear any correlation to earnings, it is worth pointing out that FactSet  now projects a decline of 0.4% in S&P 500’s Q2 earnings and a decline of 3.5% in Q3. For CY 2019, it sees earnings rising only 1.9%. What’s more, projections for 2020 have dropped from double digits to earnings growth of 8%, as of this day.
August’s Consumer Sentiment Index dropped  below 90, the first time since 2012.
The ISM Manufacturing Index has dropped below the expansion level .
Why then is Fed Chief Powell saying the economy remains strong ?
     Why not tell the truth – the economy is sucking wind ?
Granted the market would be going down not up, buy at least investors would  not be so quick to rush in at all-time highs.
When will these guys start to tell the truth.
     It’s all about preventing a recession/bear market in 2020, a presidential election year.  The problem here is, when a recession does hit, the Fed won’t have any means to counter it.  That can only mean one thing – an extended recession/bear market.

………………………………………………………………..
TECHNICAL
      It’s early September, the restart of US/China trade talks won’t take place for more than a month. As we have seen in the past, a lot can happen between now and then.
Technically, the market has  traced out a base in the DJIA 25,600 (S&P500:2,850) area and can run to new  all-time highs in face of another Fed rate cut  and hype about  trade talks.
This does not preclude another leg down after this run, October has tended to punish stocks before the beginning of the historically positive November/April  run up in stocks.
      Expect the Administration, the Fed and certain prominent  individuals on the Street to say anything to convince investors we are not in a recession and facing a bear market.   They know a recession in 2020 would decrease chances of  a Trump re-election.
…………………………………………………………..

Friday  Sept. 6   “Rally Over ??”
Why would anyone want to rush in to the market that is significantly overvalued by historical precedent, selling close to  an all-time high with the economy on the threshold of a recession ?

Most likely it is humans being human, not wanting to miss making some fast money, the kind of greed that precedes every bull market top.
Memories tend to be short, especially when those memories are ugly. It’s been 11 years since a bear market was sinking its talons into millions of  petrified investors.
  If the looming trade talks yield meaningful progress, the market will spike higher.  But I think the smart money will be selling into that spike.
I sense that the Trump administration and Fed fear a bear market because it has the potential to be brutal and long-lasting, kind a combo of 1987 (minus 41%) and 2007-2009 (minus 55%).
The ’87 bear was not accompanied by a recession, but was triggered by computerized “program trading” run amok causing a technical breakdown, 20.5% in just  one day (Black Monday Oct. 19).
The 2007-2009 bear market was triggered by the implosion of highly leveraged mortgages and credit  leading to a recession.
What troubles me most is leverage  and a reliance on computer algorithms to do the Street’s thinking and take action  .
         While there have been bear markets without a recession,  there has never been a recession that was not accompanied by a bear market.
………………………………………………….
Thursday Sept. 5 “The Bubble Is Back !  Will They Ever Learn ?”

 NO !  They never will.  They never have, not in 2007, 2000, 1998, 1990, 1987, 1983, 1981, 1980, 1976, 1973, 1968, 1966, 1961.
Here we go again, trade war rhetoric, Trump says China wants to make a trade deal…  “We’ll see what happens.”  Right !  That said just when it seemed the stock market was about to plunge.
But that’s not all. Trump also said Iran wants to talk…they want  to make a deal.
Not to be upstaged, the Fed’s Beige Book painted a positive picture even though the US ISM Manufacturing Index slipped below 50 (no growth) in August, its  fourth straight month and Consumer Sentiment had its worst drop since 2012.
Maybe this is the time something good will happen, but I warned yesterday to beware of  Bear Market Rallies Driven By Fed Comments and Trade War Bullshit.”
Here’s the problem with the “news whipsaw.”
      It sucks investors back in the stock market which puts them at risk of getting clobbered if the news fails to turn out positive.
The administration and its soul mate, the Fed, will stop at nothing to head off a recession in 2020, which is fine if they can pull it off.
BUT DO NOT MANIPULATE STOCK PRICES, because people get hurt, big-time if the ploy fails.
       Let the market find a level that discounts real and possible positives and negatives.
………………………………………………….
Wednesday Sept. 4 “Beware: Bear Market Rallies Driven By Fed Comments and Trade War Bullshit”
     Early futures  trading indicates the market will open higher. News of progress on US/China trade would  crank the market up, as would statements by the Fed about another cut in interest rates.
We are in a global slowdown which will be labeled recession  looking back around year-end.
Lower rates are not going to do it. Senseless rhetoric won’t either. Expect the  debt laden consumers and businesses to walk away in coming months. Government debt does  not allow for additional spending.  Everyone needs to step back and re-load.
The Street is hanging tough, does not want a bear market, or thinks the damage to the economy and stock market will be limited.
Where they are going wrong here is,  just when it looks like the economy and market will survive with minimal damage, things get worse, then get worse after that, a string of endless negatives that changes a 12% correction into a 35% – 45% bear market.
     Just one recession warning sign, the ISM Manufacturing Index and the New Orders Index slipped below 50 (no growth)  in August, the fourth straight decline. A survey of purchasing managers, the index encompasses inventories, employment, production,  supplier deliveries, exports, imports, and prices.
US Consumer Sentiment dropped below 90 in August, the biggest monthly drop  since 2012.
To make matters worse, Bridgewater Associates Ray Dalio is warning the Fed no longer has the tools to reverse economic downturns even if it cuts its fed funds rate for the second time  September 18. Printing money and buying assets has a limited impact, according to Dalio,  founder of the world’s largest hedge fund and consistently successful at managing money.
The Fed did a great job in helping the country survive  a total meltdown in the 2008-2009 Great Recession/Bear market, but overstayed the recovery trying to micro-manage the economy and stock market.  Now they are a financial eunuch with limited impact.
FYI: Oftentimes the market will run in reverse to the day’s trend between 2:45 and 3:20. Be careful not to get sucked in. For lack of a better name, I have call it the “mid-afternoon counter move.”
…………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

WHAT A BUBBLE LOOKS LIKE

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,909
S&P 500:2,978
Nasdaq Comp.:8,084
Russell 2000:1,543
Wednesday September 11, 2019
  8:38 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
………………………………………………………………
TECHNICAL
We are in a news whipsaw market marked by good and bad days. Currently, the bulls have control. If the Fed does NOT cut rates on the 18th, and or, if the October trade negotiations break down or look like a ho-hummer, the bears will take over.
Odds of new highs are good, but NOT sustainable.

………………………………………………………
Minor Support: DJIA:27,111;S&P 500:2,986;Nasdaq Comp.:8,169
Minor Resistance: DJIA:26,857; S&P 500:2,973; Nasdaq Comp.:8,067
………………………………………………………….
Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
………………………………………..
Monday Sept, 9 “Street Wish List – Rate Cut, Good trade news – October”
The market has attracted buyers who are hoping for a Fed rate cut on the 18th and positive developments  in October  coming out of the US/China trade talks.
Fed Chief Jerome Powell said Friday that the US economy “remains strong”…. “Labor market is in a good place” …..that “the labor market is in a good place.”
      If so, why is the Fed cutting its fed funds rate ?
      Why would it encourage more borrowing when  Politico reports “
High Debt Levels Are Weighing on Economies, adding  “Debt Owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis [2007-2009] to $246.6 trillion.”
If  stock prices bear any correlation to earnings, it is worth pointing out that FactSet  now projects a decline of 0.4% in S&P 500’s Q2 earnings and a decline of 3.5% in Q3. For CY 2019, it sees earnings rising only 1.9%. What’s more, projections for 2020 have dropped from double digits to earnings growth of 8%, as of this day.
August’s Consumer Sentiment Index dropped  below 90, the first time since 2012.
The ISM Manufacturing Index has dropped below the expansion level .
Why then is Fed Chief Powell saying the economy remains strong ?
     Why not tell the truth – the economy is sucking wind ?
Granted the market would be going down not up, buy at least investors would  not be so quick to rush in at all-time highs.
When will these guys start to tell the truth.
     It’s all about preventing a recession/bear market in 2020, a presidential election year.  The problem here is, when a recession does hit, the Fed won’t have any means to counter it.  That can only mean one thing – an extended recession/bear market.

………………………………………………………………..
TECHNICAL
      It’s early September, the restart of US/China trade talks won’t take place for more than a month. As we have seen in the past, a lot can happen between now and then.
Technically, the market has  traced out a base in the DJIA 25,600 (S&P500:2,850) area and can run to new  all-time highs in face of another Fed rate cut  and hype about  trade talks.
This does not preclude another leg down after this run, October has tended to punish stocks before the beginning of the historically positive November/April  run up in stocks.
      Expect the Administration, the Fed and certain prominent  individuals on the Street to say anything to convince investors we are not in a recession and facing a bear market.   They know a recession in 2020 would decrease chances of  a Trump re-election.
…………………………………………………………..

Friday  Sept. 6   “Rally Over ??”
Why would anyone want to rush in to the market that is significantly overvalued by historical precedent, selling close to  an all-time high with the economy on the threshold of a recession ?

Most likely it is humans being human, not wanting to miss making some fast money, the kind of greed that precedes every bull market top.
Memories tend to be short, especially when those memories are ugly. It’s been 11 years since a bear market was sinking its talons into millions of  petrified investors.
  If the looming trade talks yield meaningful progress, the market will spike higher.  But I think the smart money will be selling into that spike.
I sense that the Trump administration and Fed fear a bear market because it has the potential to be brutal and long-lasting, kind a combo of 1987 (minus 41%) and 2007-2009 (minus 55%).
The ’87 bear was not accompanied by a recession, but was triggered by computerized “program trading” run amok causing a technical breakdown, 20.5% in just  one day (Black Monday Oct. 19).
The 2007-2009 bear market was triggered by the implosion of highly leveraged mortgages and credit  leading to a recession.
What troubles me most is leverage  and a reliance on computer algorithms to do the Street’s thinking and take action  .
         While there have been bear markets without a recession,  there has never been a recession that was not accompanied by a bear market.
………………………………………………….
Thursday Sept. 5 “The Bubble Is Back !  Will They Ever Learn ?”

 NO !  They never will.  They never have, not in 2007, 2000, 1998, 1990, 1987, 1983, 1981, 1980, 1976, 1973, 1968, 1966, 1961.
Here we go again, trade war rhetoric, Trump says China wants to make a trade deal…  “We’ll see what happens.”  Right !  That said just when it seemed the stock market was about to plunge.
But that’s not all. Trump also said Iran wants to talk…they want  to make a deal.
Not to be upstaged, the Fed’s Beige Book painted a positive picture even though the US ISM Manufacturing Index slipped below 50 (no growth) in August, its  fourth straight month and Consumer Sentiment had its worst drop since 2012.
Maybe this is the time something good will happen, but I warned yesterday to beware of  Bear Market Rallies Driven By Fed Comments and Trade War Bullshit.”
Here’s the problem with the “news whipsaw.”
      It sucks investors back in the stock market which puts them at risk of getting clobbered if the news fails to turn out positive.
The administration and its soul mate, the Fed, will stop at nothing to head off a recession in 2020, which is fine if they can pull it off.
BUT DO NOT MANIPULATE STOCK PRICES, because people get hurt, big-time if the ploy fails.
       Let the market find a level that discounts real and possible positives and negatives.
………………………………………………….
Wednesday Sept. 4 “Beware: Bear Market Rallies Driven By Fed Comments and Trade War Bullshit”
     Early futures  trading indicates the market will open higher. News of progress on US/China trade would  crank the market up, as would statements by the Fed about another cut in interest rates.
We are in a global slowdown which will be labeled recession  looking back around year-end.
Lower rates are not going to do it. Senseless rhetoric won’t either. Expect the  debt laden consumers and businesses to walk away in coming months. Government debt does  not allow for additional spending.  Everyone needs to step back and re-load.
The Street is hanging tough, does not want a bear market, or thinks the damage to the economy and stock market will be limited.
Where they are going wrong here is,  just when it looks like the economy and market will survive with minimal damage, things get worse, then get worse after that, a string of endless negatives that changes a 12% correction into a 35% – 45% bear market.
     Just one recession warning sign, the ISM Manufacturing Index and the New Orders Index slipped below 50 (no growth)  in August, the fourth straight decline. A survey of purchasing managers, the index encompasses inventories, employment, production,  supplier deliveries, exports, imports, and prices.
US Consumer Sentiment dropped below 90 in August, the biggest monthly drop  since 2012.
To make matters worse, Bridgewater Associates Ray Dalio is warning the Fed no longer has the tools to reverse economic downturns even if it cuts its fed funds rate for the second time  September 18. Printing money and buying assets has a limited impact, according to Dalio,  founder of the world’s largest hedge fund and consistently successful at managing money.
The Fed did a great job in helping the country survive  a total meltdown in the 2008-2009 Great Recession/Bear market, but overstayed the recovery trying to micro-manage the economy and stock market.  Now they are a financial eunuch with limited impact.

FYI: Oftentimes the market will run in reverse to the day’s trend between 2:45 and 3:20. Be careful not to get sucked in. For lack of a better name, I have call it the “mid-afternoon counter move.”
…………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

Street Marches to Tweet Hype

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,835
S&P 500:2,978
Nasdaq Comp.:8,087
Russell 2000:1,524
Tuesday September 10, 2019
  8:38 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
TECHNICAL
We are in a news whipsaw market marked by good and bad days. Currently, the bulls have control. If the Fed does NOT cut rates on the 18th, and or, if the October trade negotiations look like a ho-hummer, the bears will take over.

………………………………………………………
Minor Support: DJIA:26,725;S&P 500:2,967;Nasdaq Comp.:8,041
Minor Resistance: DJIA:26,917; S&P 500:2,989; Nasdaq Comp.:8,127
………………………………………………………….
Monday Sept, 9 “Street Wish List – Rate Cut, Good trade news – October”
The market has attracted buyers who are hoping for a Fed rate cut on the 18th and positive developments  in October  coming out of the US/China trade talks.
Fed Chief Jerome Powell said Friday that the US economy “remains strong”…. “Labor market is in a good place” …..that “the labor market is in a good place.”
      If so, why is the Fed cutting its fed funds rate ?
      Why would it encourage more borrowing when  Politico reports “
High Debt Levels Are Weighing on Economies, adding  “Debt Owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis [2007-2009] to $246.6 trillion.”
If  stock prices bear any correlation to earnings, it is worth pointing out that FactSet  now projects a decline of 0.4% in S&P 500’s Q2 earnings and a decline of 3.5% in Q3. For CY 2019, it sees earnings rising only 1.9%. What’s more, projections for 2020 have dropped from double digits to earnings growth of 8%, as of this day.
August’s Consumer Sentiment Index dropped  below 90, the first time since 2012.
The ISM Manufacturing Index has dropped below the expansion level .
Why then is Fed Chief Powell saying the economy remains strong ?
     Why not tell the truth – the economy is sucking wind ?
Granted the market would be going down not up, buy at least investors would  not be so quick to rush in at all-time highs.
When will these guys start to tell the truth.
     It’s all about preventing a recession/bear market in 2020, a presidential election year.  The problem here is, when a recession does hit, the Fed won’t have any means to counter it.  That can only mean one thing – an extended recession/bear market.

………………………………………………………………..
TECHNICAL
      It’s early September, the restart of US/China trade talks won’t take place for more than a month. As we have seen in the past, a lot can happen between now and then.
Technically, the market has  traced out a base in the DJIA 25,600 (S&P500:2,850) area and can run to new  all-time highs in face of another Fed rate cut  and hype about  trade talks.
This does not preclude another leg down after this run, October has tended to punish stocks before the beginning of the historically positive November/April  run up in stocks.
      Expect the Administration, the Fed and certain prominent  individuals on the Street to say anything to convince investors we are not in a recession and facing a bear market.   They know a recession in 2020 would decrease chances of  a Trump re-election.
…………………………………………………………..

Friday  Sept. 6   “Rally Over ??”
Why would anyone want to rush in to the market that is significantly overvalued by historical precedent, selling close to  an all-time high with the economy on the threshold of a recession ?

Most likely it is humans being human, not wanting to miss making some fast money, the kind of greed that precedes every bull market top.
Memories tend to be short, especially when those memories are ugly. It’s been 11 years since a bear market was sinking its talons into millions of  petrified investors.
  If the looming trade talks yield meaningful progress, the market will spike higher.  But I think the smart money will be selling into that spike.
I sense that the Trump administration and Fed fear a bear market because it has the potential to be brutal and long-lasting, kind a combo of 1987 (minus 41%) and 2007-2009 (minus 55%).
The ’87 bear was not accompanied by a recession, but was triggered by computerized “program trading” run amok causing a technical breakdown, 20.5% in just  one day (Black Monday Oct. 19).
The 2007-2009 bear market was triggered by the implosion of highly leveraged mortgages and credit  leading to a recession.
What troubles me most is leverage  and a reliance on computer algorithms to do the Street’s thinking and take action  .
         While there have been bear markets without a recession,  there has never been a recession that was not accompanied by a bear market.
………………………………………………….
Thursday Sept. 5 “The Bubble Is Back !  Will They Ever Learn ?”

 NO !  They never will.  They never have, not in 2007, 2000, 1998, 1990, 1987, 1983, 1981, 1980, 1976, 1973, 1968, 1966, 1961.
Here we go again, trade war rhetoric, Trump says China wants to make a trade deal…  “We’ll see what happens.”  Right !  That said just when it seemed the stock market was about to plunge.
But that’s not all. Trump also said Iran wants to talk…they want  to make a deal.
Not to be upstaged, the Fed’s Beige Book painted a positive picture even though the US ISM Manufacturing Index slipped below 50 (no growth) in August, its  fourth straight month and Consumer Sentiment had its worst drop since 2012.
Maybe this is the time something good will happen, but I warned yesterday to beware of  Bear Market Rallies Driven By Fed Comments and Trade War Bullshit.”
Here’s the problem with the “news whipsaw.”
      It sucks investors back in the stock market which puts them at risk of getting clobbered if the news fails to turn out positive.
The administration and its soul mate, the Fed, will stop at nothing to head off a recession in 2020, which is fine if they can pull it off.
BUT DO NOT MANIPULATE STOCK PRICES, because people get hurt, big-time if the ploy fails.
       Let the market find a level that discounts real and possible positives and negatives.

Wednesday Sept. 4 “Beware: Bear Market Rallies Driven By Fed Comments and Trade War Bullshit”
     Early futures  trading indicates the market will open higher. News of progress on US/China trade would  crank the market up, as would statements by the Fed about another cut in interest rates.
We are in a global slowdown which will be labeled recession  looking back around year-end.
Lower rates are not going to do it. Senseless rhetoric won’t either. Expect the  debt laden consumers and businesses to walk away in coming months. Government debt does  not allow for additional spending.  Everyone needs to step back and re-load.
The Street is hanging tough, does not want a bear market, or thinks the damage to the economy and stock market will be limited.
Where they are going wrong here is,  just when it looks like the economy and market will survive with minimal damage, things get worse, then get worse after that, a string of endless negatives that changes a 12% correction into a 35% – 45% bear market.
     Just one recession warning sign, the ISM Manufacturing Index and the New Orders Index slipped below 50 (no growth)  in August, the fourth straight decline. A survey of purchasing managers, the index encompasses inventories, employment, production,  supplier deliveries, exports, imports, and prices.
US Consumer Sentiment dropped below 90 in August, the biggest monthly drop  since 2012.
To make matters worse, Bridgewater Associates Ray Dalio is warning the Fed no longer has the tools to reverse economic downturns even if it cuts its fed funds rate for the second time  September 18. Printing money and buying assets has a limited impact, according to Dalio,  founder of the world’s largest hedge fund and consistently successful at managing money.
The Fed did a great job in helping the country survive  a total meltdown in the 2008-2009 Great Recession/Bear market, but overstayed the recovery trying to micro-manage the economy and stock market.  Now they are a financial eunuch with limited impact.

FYI: Oftentimes the market will run in reverse to the day’s trend between 2:45 and 3:20. Be careful not to get sucked in. For lack of a better name, I have call it the “mid-afternoon counter move.”
…………………………………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

Street Wish List – Rate Cut, Good News on October Trade Talks

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,797
S&P 500:2,978
Nasdaq Comp.:8,103
Russell 2000:1,505
Monday September 9, 2019
  9:09 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The market has attracted buyers who are hoping for a Fed rate cut on the 18th and positive developments  in October  coming out of the US/China trade talks.
Fed Chief Jerome Powell said Friday that the US economy “remains strong”…. “Labor market is in a good place” …..that “the labor market is in a good place.”
      If so, why is the Fed cutting its fed funds rate ?
      Why would it encourage more borrowing when  Politico reports “
High Debt Levels Are Weighing on Economies, adding  “Debt Owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis [2007-2009] to $246.6 trillion.”
If  stock prices bear any correlation to earnings, it is worth pointing out that FactSet  now projects a decline of 0.4% in S&P 500’s Q2 earnings and a decline of 3.5% in Q3. For CY 2019, it sees earnings rising only 1.9%. What’s more, projections for 2020 have dropped from double digits to earnings growth of 8%, as of this day.
August’s Consumer Sentiment Index dropped  below 90, the first time since 2012.
The ISM Manufacturing Index has dropped below the expansion level .
Why then is Fed Chief Powell saying the economy remains strong ?
     Why not tell the truth – the economy is sucking wind ?
Granted the market would be going down not up, buy at least investors would  not be so quick to rush in at all-time highs.
When will these guys start to tell the truth.
     It’s all about preventing a recession/bear market in 2020, a presidential election year.  The problem here is, when a recession does hit, the Fed won’t have any means to counter it.  That can only mean one thing – an extended recession/bear market.

………………………………………………………………..
TECHNICAL
      It’s early September, the restart of US/China trade talks won’t take place for more than a month. As we have seen in the past, a lot can happen between now and then.
Technically, the market has  traced out a base in the DJIA 25,600 (S&P500:2,850) area and can run to new  all-time highs in face of another Fed rate cut  and hype about  trade talks.
This does not preclude another leg down after this run, October has tended to punish stocks before the beginning of the historically positive November/April  run up in stocks.
      Expect the Administration, the Fed and certain prominent  individuals on the Street to say anything to convince investors we are not in a recession and facing a bear market.   They know a recession in 2020 would decrease chances of  a Trump re-election.
………………………………………………………
Minor Support: DJIA:26,676;S&P 500:2,968;Nasdaq Comp.:8,047
Minor Resistance: DJIA:26,897; S&P 500:2,989; Nasdaq Comp.:8,129
………………………………………………………….
Friday  Sept. 6   “Rally Over ??”
Why would anyone want to rush in to the market that is significantly overvalued by historical precedent, selling close to  an all-time high with the economy on the threshold of a recession ?

Most likely it is humans being human, not wanting to miss making some fast money, the kind of greed that precedes every bull market top.
Memories tend to be short, especially when those memories are ugly. It’s been 11 years since a bear market was sinking its talons into millions of  petrified investors.
  If the looming trade talks yield meaningful progress, the market will spike higher.  But I think the smart money will be selling into that spike.
I sense that the Trump administration and Fed fear a bear market because it has the potential to be brutal and long-lasting, kind a combo of 1987 (minus 41%) and 2007-2009 (minus 55%).
The ’87 bear was not accompanied by a recession, but was triggered by computerized “program trading” run amok causing a technical breakdown, 20.5% in just  one day (Black Monday Oct. 19).
The 2007-2009 bear market was triggered by the implosion of highly leveraged mortgages and credit  leading to a recession.
What troubles me most is leverage  and a reliance on computer algorithms to do the Street’s thinking and take action  .
         While there have been bear markets without a recession,  there has never been a recession that was not accompanied by a bear market.
………………………………………………….
Thursday Sept. 5 “The Bubble Is Back !  Will They Ever Learn ?”

 NO !  They never will.  They never have, not in 2007, 2000, 1998, 1990, 1987, 1983, 1981, 1980, 1976, 1973, 1968, 1966, 1961.
Here we go again, trade war rhetoric, Trump says China wants to make a trade deal…  “We’ll see what happens.”  Right !  That said just when it seemed the stock market was about to plunge.
But that’s not all. Trump also said Iran wants to talk…they want  to make a deal.
Not to be upstaged, the Fed’s Beige Book painted a positive picture even though the US ISM Manufacturing Index slipped below 50 (no growth) in August, its  fourth straight month and Consumer Sentiment had its worst drop since 2012.
Maybe this is the time something good will happen, but I warned yesterday to beware of  Bear Market Rallies Driven By Fed Comments and Trade War Bullshit.”
Here’s the problem with the “news whipsaw.”
      It sucks investors back in the stock market which puts them at risk of getting clobbered if the news fails to turn out positive.
The administration and its soul mate, the Fed, will stop at nothing to head off a recession in 2020, which is fine if they can pull it off.
BUT DO NOT MANIPULATE STOCK PRICES, because people get hurt, big-time if the ploy fails.
       Let the market find a level that discounts real and possible positives and negatives.

Wednesday Sept. 4 “Beware: Bear Market Rallies Driven By Fed Comments and Trade War Bullshit”
     Early futures  trading indicates the market will open higher. News of progress on US/China trade would  crank the market up, as would statements by the Fed about another cut in interest rates.
We are in a global slowdown which will be labeled recession  looking back around year-end.
Lower rates are not going to do it. Senseless rhetoric won’t either. Expect the  debt laden consumers and businesses to walk away in coming months. Government debt does  not allow for additional spending.  Everyone needs to step back and re-load.
The Street is hanging tough, does not want a bear market, or thinks the damage to the economy and stock market will be limited.
Where they are going wrong here is,  just when it looks like the economy and market will survive with minimal damage, things get worse, then get worse after that, a string of endless negatives that changes a 12% correction into a 35% – 45% bear market.
     Just one recession warning sign, the ISM Manufacturing Index and the New Orders Index slipped below 50 (no growth)  in August, the fourth straight decline. A survey of purchasing managers, the index encompasses inventories, employment, production,  supplier deliveries, exports, imports, and prices.
US Consumer Sentiment dropped below 90 in August, the biggest monthly drop  since 2012.
To make matters worse, Bridgewater Associates Ray Dalio is warning the Fed no longer has the tools to reverse economic downturns even if it cuts its fed funds rate for the second time  September 18. Printing money and buying assets has a limited impact, according to Dalio,  founder of the world’s largest hedge fund and consistently successful at managing money.
The Fed did a great job in helping the country survive  a total meltdown in the 2008-2009 Great Recession/Bear market, but overstayed the recovery trying to micro-manage the economy and stock market.  Now they are a financial eunuch with limited impact.

FYI: Oftentimes the market will run in reverse to the day’s trend between 2:45 and 3:20. Be careful not to get sucked in. For lack of a better name, I have call it the “mid-afternoon counter move.”
…………………………………………………………………
Tuesday  Sept. 3  “Overvalued Stocks + Trade War Escalation + Recession = Nasty Crunch”

November  29, 2018 Investors first read blog, “Fed’s Powell Jumps in Trump’s Swamp.”  I criticized Powell for caving to Trump who demanding it cut interest rates to head off a plunging stock market.
Powell, acquiesced, saying “There is no preset policy path, adding, “We do not see dangerous excesses in the stock market…that no major asset class is significantly inflated.”  Really ?
The stock market rallied sharply sucking sideline sitters in only to have them hammered by a 13-day, 16% free fall.
January 11, 2019 blog: “Fed Chief Powell Says: No Recession 2019”  – WRONG ! It Has Already Started !,” I blogged.
Again the stock market soared giving investors a false sense of security.  I think the Fed loves the power to move markets. They don’t like heat, too many egos.
I have never thought the Fed understood market action, the back and forth jousting as investors duke it out to arrive at a value that discounts positives and negatives, real and perceived.  They have a “balance your checkbook mentality” where everything has to make sense. In the real world, it doesn’t.
         What is happening in America is all so crazy, so phony. The end cannot be pretty.  We are living in a world where lies from the very top are the new normal.
The stock market has been propped up artificially by rhetoric and a “Street” that cannot accept the fact the party is over – last call.
Maybe I have experienced too many bear markets (13 in all) always seeking answers, the truth, but this one really sucks. It reeks of arrogance and naivete.
The stock market is one place you cannot afford  to be deluded, because score is kept every day and eventually some of the BIG players will Get it,  bail out – others follow.
You see, so many decisions are based on computer algos, and they cannot possibly be programmed to factor in the gross dysfunction of our government, the lies, and disrespect for the rule of law.
        While the price of a stock is determined by any number of yardsticks, at the end of the day (or bear market) it is a matter of opinion based human emotions of fear and greed and these are open ended at extremes.
When the bear calls, it will be straight down as all those algos self-destruct.
CYA !!
Oh,
one other point – as interest rates plummet and bond prices soar, what happens to the panicky buyers of long bonds when interest rates rebound ?
The value of their bond portfolio plunges, of course.
…………………………………………

What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

Rally Over ???

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,728
S&P 500:2,976
Nasdaq Comp.:8,116
Russell 2000:1,510
Friday September 6, 2019
  9:09 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Why would anyone want to rush in to the market that is significantly overvalued by historical precedent, selling close to  an all-time high with the economy on the threshold of a recession ?
Most likely it is humans being human, not wanting to miss making some fast money, the kind of greed that precedes every bull market top.
Memories tend to be short, especially when those memories are ugly. It’s been 11 years since a bear market was sinking its talons into millions of  petrified investors.
  If the looming trade talks yield meaningful progress, the market will spike higher.  But I think the smart money will be selling into that spike.
I sense that the Trump administration and Fed fear a bear market because it has the potential to be brutal and long-lasting, kind a combo of 1987 (minus 41%) and 2007-2009 (minus 55%).
The ’87 bear was not accompanied by a recession, but was triggered by computerized “program trading” run amok causing a technical breakdown, 20.5% in just  one day (Black Monday Oct. 19).
The 2007-2009 bear market was triggered by the implosion of highly leveraged mortgages and credit  leading to a recession.
What troubles me most is leverage  and a reliance on computer algorithms to do the Street’s thinking and take action  .
         While there have been bear markets without a recession,  there has never been a recession that was not accompanied by a bear market.
………………………………………………………………..

TECHNICAL
      It’s early September, the restart of US/China trade talks won’t take place for more than a month. As we have seen in the past, a lot can happen between now and then.
Even so, this week’s announcement has chased shorts and brought in buyers which will have to run its course.
A rally failure today is a good possibility.
Expect the Administration, the Fed and certain prominent  individuals on the Street to say anything to convince investors we are not in a recession and facing a bear market.   They know a recession in 2020 would decrease chances of  a Trump re-election.
………………………………………………………
Minor Support: DJIA:26,597;S&P 500:2,956;Nasdaq Comp.:8,049
Minor Resistance:DJIA:26,801; S&P 500:2,977; Nasdaq Comp.:8,118
………………………………………………………….
Thursday Sept. 5 “The Bubble Is Back !  Will They Ever Learn ?”

 NO !  They never will.  They never have, not in 2007, 2000, 1998, 1990, 1987, 1983, 1981, 1980, 1976, 1973, 1968, 1966, 1961.
Here we go again, trade war rhetoric, Trump says China wants to make a trade deal…  “We’ll see what happens.”  Right !  That said just when it seemed the stock market was about to plunge.
But that’s not all. Trump also said Iran wants to talk…they want  to make a deal.
Not to be upstaged, the Fed’s Beige Book painted a positive picture even though the US ISM Manufacturing Index slipped below 50 (no growth) in August, its  fourth straight month and Consumer Sentiment had its worst drop since 2012.
Maybe this is the time something good will happen, but I warned yesterday to beware of  Bear Market Rallies Driven By Fed Comments and Trade War Bullshit.”
Here’s the problem with the “news whipsaw.”
      It sucks investors back in the stock market which puts them at risk of getting clobbered if the news fails to turn out positive.
The administration and its soul mate, the Fed, will stop at nothing to head off a recession in 2020, which is fine if they can pull it off.
BUT DO NOT MANIPULATE STOCK PRICES, because people get hurt, big-time if the ploy fails.
       Let the market find a level that discounts real and possible positives and negatives.

Wednesday Sept. 4 “Beware: Bear Market Rallies Driven By Fed Comments and Trade War Bullshit”
     Early futures  trading indicates the market will open higher. News of progress on US/China trade would  crank the market up, as would statements by the Fed about another cut in interest rates.
We are in a global slowdown which will be labeled recession  looking back around year-end.
Lower rates are not going to do it. Senseless rhetoric won’t either. Expect the  debt laden consumers and businesses to walk away in coming months. Government debt does  not allow for additional spending.  Everyone needs to step back and re-load.
The Street is hanging tough, does not want a bear market, or thinks the damage to the economy and stock market will be limited.
Where they are going wrong here is,  just when it looks like the economy and market will survive with minimal damage, things get worse, then get worse after that, a string of endless negatives that changes a 12% correction into a 35% – 45% bear market.
     Just one recession warning sign, the ISM Manufacturing Index and the New Orders Index slipped below 50 (no growth)  in August, the fourth straight decline. A survey of purchasing managers, the index encompasses inventories, employment, production,  supplier deliveries, exports, imports, and prices.
US Consumer Sentiment dropped below 90 in August, the biggest monthly drop  since 2012.
To make matters worse, Bridgewater Associates Ray Dalio is warning the Fed no longer has the tools to reverse economic downturns even if it cuts its fed funds rate for the second time  September 18. Printing money and buying assets has a limited impact, according to Dalio,  founder of the world’s largest hedge fund and consistently successful at managing money.
The Fed did a great job in helping the country survive  a total meltdown in the 2008-2009 Great Recession/Bear market, but overstayed the recovery trying to micro-manage the economy and stock market.  Now they are a financial eunuch with limited impact.

FYI: Oftentimes the market will run in reverse to the day’s trend between 2:45 and 3:20. Be careful not to get sucked in. For lack of a better name, I have call it the “mid-afternoon counter move.”
…………………………………………………………………
Tuesday  Sept. 3  “Overvalued Stocks + Trade War Escalation + Recession = Nasty Crunch”

November  29, 2018 Investors first read blog, “Fed’s Powell Jumps in Trump’s Swamp.”  I criticized Powell for caving to Trump who demanding it cut interest rates to head off a plunging stock market.
Powell, acquiesced, saying “There is no preset policy path, adding, “We do not see dangerous excesses in the stock market…that no major asset class is significantly inflated.”  Really ?
The stock market rallied sharply sucking sideline sitters in only to have them hammered by a 13-day, 16% free fall.
January 11, 2019 blog: “Fed Chief Powell Says: No Recession 2019”  – WRONG ! It Has Already Started !,” I blogged.
Again the stock market soared giving investors a false sense of security.  I think the Fed loves the power to move markets. They don’t like heat, too many egos.
I have never thought the Fed understood market action, the back and forth jousting as investors duke it out to arrive at a value that discounts positives and negatives, real and perceived.  They have a “balance your checkbook mentality” where everything has to make sense. In the real world, it doesn’t.
         What is happening in America is all so crazy, so phony. The end cannot be pretty.  We are living in a world where lies from the very top are the new normal.
The stock market has been propped up artificially by rhetoric and a “Street” that cannot accept the fact the party is over – last call.
Maybe I have experienced too many bear markets (13 in all) always seeking answers, the truth, but this one really sucks. It reeks of arrogance and naivete.
The stock market is one place you cannot afford  to be deluded, because score is kept every day and eventually some of the BIG players will Get it,  bail out – others follow.
You see, so many decisions are based on computer algos, and they cannot possibly be programmed to factor in the gross dysfunction of our government, the lies, and disrespect for the rule of law.
        While the price of a stock is determined by any number of yardsticks, at the end of the day (or bear market) it is a matter of opinion based human emotions of fear and greed and these are open ended at extremes.
When the bear calls, it will be straight down as all those algos self-destruct.
CYA !!
Oh,
one other point – as interest rates plummet and bond prices soar, what happens to the panicky buyers of long bonds when interest rates rebound ?
The value of their bond portfolio plunges, of course.
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Friday Aug. 30 “U.S. To Hold Off on Planned Tariff Hike ?”

Reportedly, the market’s two-day surge was a response to a comments Chinese government   official, Jingyi Pan of IG that suggested a halt in the one-upmanship in hikes by both sides, i.e. China would not respond to another US hike with one of their own.
       US money managers bought that ?   How amateurish !   Granted, the market would rally sharply, but tariffs aren’t the only issue here, and with stocks as over valued as they are, the markets would have to slide back again as recession fears become reality (ex tariffs).
Movements up and down in the market have been powered by “news whipsaw” not rational thinking.
A recent study by Ned Davis, one of the Street’s most brilliant technicians for many years concludes that stocks are higher than they have ever been 80% of the time going back to 1928 and are historically expensive relative to overall corporate profits, revenue and book.
The euphoria of a 10-year bull market is hard to shut off. Up-ticking bull markets, one’s that snap back immediately after corrections can be addictive to the point investors  simply cannot walk away.
This will be a case-in-point once again.
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What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 120 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 123 months is 4 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
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George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.