Current Market Carbon Copy of Market Oct./Nov. 2018

Current Market Carbon Copy of  Oct./Nov. 2018
INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,062
S&P 500: 2,886
Nasdaq Comp.:7,823
Russell 2000:1,523
Tuesday June 11, 2019
   8:52 a.m.
………………………..
gbifr79@gmail.com
Want to buy a winner ?  Get the board game “Rummikub”
WARNING: addictive
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
     The market action between May and June this year is a carbon copy of the market action between October and November 2018.
What happened in November 2018 is the market averages tested the October low, rallied sharply then plunged more than 16% to the December low.
A repeat of last  year’s pattern would take the market averages down to about DJIA: 24,650, S&P 500: 2,760, and Nasdaq Comp.:7,350 where the market would rebound briefly before a plunge of 15% -18%, that is “if” we get a repeat.
That pattern would be broken if the DJIA rises above 26,600, the S&P 500 above 2,940, and the  Nasdaq Comp.:8,100.
Bottom line: There is a chance we are close to a whipsaw pattern of trading that will result in a plunge in  prices in 4 to 6 weeks – no guarantees, of course, just keep an open mind and don’t chase stocks that have already rebounded, a good part of which may be short covering.
The Fed will attempt to prevent any major decline in prices going forward, but has already demonstrated it is politically biased.   All these Fed Governors sport high level pedigrees. Along with that is an ego and a sensitivity to the kind of visible criticism that President Trump  can vent.    Independence ???
I have no problem with Fed action to prevent a recession.  My blood boils when the Fed manipulates the market with “hints” that a cut  in their Fed funds rate is in the offing at a time the market is trying to adjust to the possibility of a recession.
       That announcement came the day after the market hit a four month low after breaking down from a top formation.   That’s MANIPULATION !
The markets MUST be allowed to trade freely.  By its action, the Fed prevented the market from finding a level that discounts the negatives present and foreseen.  What’s worse, it may just have sucked a lot of buyers in at a time a recession looms. At these levels, the market averages do not discount the recession the Fed sees.
I have been forecasting the Fed will cut its benchmark fed funds rate  on the 19th.  
Its July 30-31 meeting will not be accompanied by a press conference, so it is unlikely they will cut the rate then. If they announce an unscheduled press conference it would be a tip-off. They do not meet in August which leaves September 18, a long wait if they are trying to head off a recession.
TECHNICAL

Minor Support: DJIA:25,957;S&P 500:2,871;Nasdaq Comp.:7,727
Minor Resistance: DJIA:26,215; S&P 500:2,901;Nasdaq Comp.:7,862

…………………………………………..
Monday  (June 10)
  The stock market continues on a tear following Fed Chief Jerome Powell’s “hint” of  a cut in its fed funds rate in the near future.
Before rushing in, investors should question why the Fed sees the need for a rate cut.  I can answer that, they see signs of  looming recession.
If their concerns are justified, why would anyone be buying ?
Clearly a price/earnings ratio (P?E) of 29.6 is not a good reason. That exceeds the P/E in December 2007 of 20.7 by 40%.
What’s more, cuts in the funds rate have preceded the last 7 recessions anr for the obvious reason – the Fed saw a recession coming and began the process of trying to ease its impact.
By its action, hinting of a rate cut in the near future after the market had begun adjusting for the coming recession was irresponsible.  It sucked a lot of investors into the market, people thinking just because the Fed is dropping rates it was safe to buy.
THE PROBLEM HERE IS A 29.6 P/E DOES NOT DISCOUNT THE UGLINESS OF A RECESSION.
I believe markets should be allowed to trade freely without micro-managing by any organization, especially the Fed.
…………………………………………………….
Friday   (May 7)
       I believe we are  in the early stages of a recession.
I believe the Fed will cut its fed funds rate on June 19.
I believe the market will rally sharply in response
I believe that rally will be followed by the next leg of a bear market that
started on April 23 when  the DJIA  hit  26,695 (S&P 500:2,936).
The only hope the bulls have is if all tariffs are withdrawn, unlikely. Progress on tariffs can add to a rally, but not a reversal of a bear market.
Current levels of stock prices DO NOT DISCOUNT A RECESSION. That will take a 35% + plunge from here.  Hype out of the Fed and White House can only suck investors in at inflated prices.  _BEWARE !
……………………………………………….
Thursday  (Jun 6)
The market’s rebound has broken several “technical” barriers, including a minor downtrend line and a “Head & Shoulders top,” suggesting more upside.
But, this market is tiptoeing through a minefield and anything can happen.
Good news about Tariffs can juice it even higher, bad news about the economy, indicating a recession is a better good bet than previously thought would reverse an overbought market to the downside.
These are uncharted waters, and the waters are murky at best, fraught with rip currents and rogue waves at worst.
Memories tend to be short with a 24/7 news cycle that pummels viewers with overload. It’s been 11 years since the bear savaged investors and the economy to the point only a handful of  gutsy investors were willing to buy grossly oversold stocks.
Unfortunately, many sold out at the bottom and never got back in.
I see little respect for what can happen today, and part of that is due to the fact this Fed, headed up by Jerome Powell has assured the Street it will be there to goose stocks if there is a risk of a big decline.
I don’t believe Ben Bernanke or Janet Yellen would be as much a worrywart about a 7%-8%* drop in the market to hint about a rate cut to stem the tide, or was it politics that drives him.
I believe in letting the market find its comfort level.   I think we are already in the early stages of a recession, so artificially propping up the stock market  only puts investors at greater risk.
The biggest negative facing CEOs, money managers, business owners, the consumer and investors  today is CREDIBILITY,  Too much lying at the highest levels.  How can CEOs plan when they do not know what to expect next ?
A huge price will be paid for that, and this stock market with prices simply a matter of opinion, are vulnerable.
* incorrectly referred to as S&P 500 plunge of 10.2%
……………………………………………
Wednesday   (June 5)
      Just as I have been saying, the Fed is scared stiff that a recession/bear market will be ravaging the economy and investors in 2020, a presidential election year.
      What I have a problem with is the Fed’s timing of statements about policy as the stock market is adjusting for a recession, which after 10 years and huge problems could be devastating.
It’s a deliberate and political manipulation of the stock market and stands to  suck more and more  investors in at higher levels where their portfolios will get crushed.
After a  6.7% May plunge in the S&P 500, Fed Chief Jerome Powell said Tuesday it was closely monitoring the impact of trade developments and would act as appropriate to sustain the economic expansion.
That means a rate cut and a return to Quantitative Easing (QE) if necessary.  When will they ever learn.
Lower interest rates won’t help with individual, corporate and government debt inflated to such serious levels.
Wake up ! A rate cut has preceded the last 7 recessions. The Fed cuts rates because it is trying to prevent or reduce the impact of a recession.
       The stock market must be allowed to find a level that discounts known and perceived adversity, which in this case could mean  35% to 45% plunge in  the stock market.
…………………………………….
Tuesday (June 4)
As I have been saying, since February 22, the Fed will cut rates if it looks like we are entering a recession. Yesterday St. Louis Fed President James Bullard  said a rate cut may be necessary to “re-center inflation and inflation expectations at target and also to provide some insurance in case of a sharper-than-expected slowdown.”
That’s crap ! What he is really saying is that the Fed is scared stiff we may be in a recession  next year, a presidential election  year. Forget the inflation  stuff, it’s just a smokescreen for playing politics. Inflation has been non-extent for years.
Guarding  the nation against inflation is just a justification for the Fed’s existence. They did a great job in the 2008-2009 Great Meltdown, but have been market manipulators ever since. Let the market find its own comfort level !
While a rate cut stands to trigger a rally, especially in a depressed market, it would be bad news.
Why ?
Fed rate cuts preceded the last 7 recessions going back to 1960.
It says the Fed sees a recession underway and is beginning the process of reducing its impact.
……………………………………………
 This is exactly what I have been warning about:
“Fed to Cut Rate if Economy Deteriorates Further” ( Feb.22, DJIA: 25,850)
“Fed May Cut Fed Funds rate – Why Not to Cheer” (Mar.12, DJIA:25,650)
“Raise Cash if Fed Hints at Rate Cut” (Mar. 29, DJIA: 25,877)
“A Drop in Fed Funds Rate Precedes Recessions”  Mar 28, DJIA: 25,652)
“Street Betting on Rate Cut Designed to Head Off Recession”(Apr 2, DJIA:”26,258)
:Fed Rate Cut in Attempt to Prevent Recession”  (May 28,  DJIA: 25,585)
“Fed Rate Cut Can’t Stop the Recession/Bear Market”  (May 30, DJIA: 25,126)
“MARKET ON Edge – Not Even a Fed Rate Cut June 19 Could Stop a Recession/   Bear Market”  May 31, DJIA:25,169)
………………………………
When the Fed cuts rates, June 19 or September 18, it will trigger a sharp rally. That can be risky for buyers on the news this month because there is high risk of more downside. We will have to wait until September when the market will be lower and a rally less risky.
Obviously, good news, or administration hype about tariffs would trigger buying, as well, but only delay the inevitable – recession/bear market. Too much damage has been done, too much uncertainty about what to expect next has crippled confidence.
……………………………………………………
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

Fed to Cut Its Rate June 19 – Begin Raising Cash

INVESTOR’S first read.com – Daily edge before the open
DJIA: 25,983
S&P 500: 2,873
Nasdaq Comp.:7,742
Russell 2000:1,564
Monday June 10, 2019
   9:11 a.m.
………………………..
gbifr79@gmail.com
Want to buy a winner ?  Get the board game “Rummikub”
WARNING: addictive
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
    The stock market continues on a tear following Fed Chief Jerome Powell’s “hint” of  a cut in its fed funds rate in the near future.
Before rushing in, investors should question why the Fed sees the need for a rate cut.  I can answer that, they see signs of  looming recession.
If their concerns are justified, why would anyone be buying ?
Clearly a price/earnings ratio (P?E) of 29.6 is not a good reason. That exceeds the P/E in December 2007 of 20.7 by 40%.
What’s more, cuts in the funds rate have preceded the last 7 recessions anr for the obvious reason – the Fed saw a recession coming and began the process of trying to ease its impact.
By its action, hinting of a rate cut in the near future after the market had begun adjusting for the coming recession was irresponsible.  It sucked a lot of investors into the market, people thinking just because the Fed is dropping rates it was safe to buy.
THE PROBLEM HERE IS A 29.6 P/E DOES NOT DISCOUNT THE UGLINESS OF A RECESSION.
I believe markets should be allowed to trade freely without micro-managing by any organization, especially the Fed.

TECHNICAL
Minor Support: DJIA:25,957;S&P 500:2,871;Nasdaq Comp.:7,727
Minor Resistance: DJIA:26147; S&P 500:2,891;Nasdaq Comp.:7,788

…………………………………………..
Friday   (May 7)
       I believe we are  in the early stages of a recession.
I believe the Fed will cut its fed funds rate on June 19.
I believe the market will rally sharply in response
I believe that rally will be followed by the next leg of a bear market that
started on April 23 when  the DJIA  hit  26,695 (S&P 500:2,936).
The only hope the bulls have is if all tariffs are withdrawn, unlikely. Progress on tariffs can add to a rally, but not a reversal of a bear market.
Current levels of stock prices DO NOT DISCOUNT A RECESSION. That will take a 35% + plunge from here.  Hype out of the Fed and White House can only suck investors in at inflated prices.  _BEWARE !
……………………………………………….
Thursday  (Jun 6)
The market’s rebound has broken several “technical” barriers, including a minor downtrend line and a “Head & Shoulders top,” suggesting more upside.
But, this market is tiptoeing through a minefield and anything can happen.
Good news about Tariffs can juice it even higher, bad news about the economy, indicating a recession is a better good bet than previously thought would reverse an overbought market to the downside.
These are uncharted waters, and the waters are murky at best, fraught with rip currents and rogue waves at worst.
Memories tend to be short with a 24/7 news cycle that pummels viewers with overload. It’s been 11 years since the bear savaged investors and the economy to the point only a handful of  gutsy investors were willing to buy grossly oversold stocks.
Unfortunately, many sold out at the bottom and never got back in.
I see little respect for what can happen today, and part of that is due to the fact this Fed, headed up by Jerome Powell has assured the Street it will be there to goose stocks if there is a risk of a big decline.
I don’t believe Ben Bernanke or Janet Yellen would be as much a worrywart about a 7%-8%* drop in the market to hint about a rate cut to stem the tide, or was it politics that drives him.
I believe in letting the market find its comfort level.   I think we are already in the early stages of a recession, so artificially propping up the stock market  only puts investors at greater risk.
The biggest negative facing CEOs, money managers, business owners, the consumer and investors  today is CREDIBILITY,  Too much lying at the highest levels.  How can CEOs plan when they do not know what to expect next ?
A huge price will be paid for that, and this stock market with prices simply a matter of opinion, are vulnerable.
* incorrectly referred to as S&P 500 plunge of 10.2%
……………………………………………
Wednesday   (June 5)
      Just as I have been saying, the Fed is scared stiff that a recession/bear market will be ravaging the economy and investors in 2020, a presidential election year.
      What I have a problem with is the Fed’s timing of statements about policy as the stock market is adjusting for a recession, which after 10 years and huge problems could be devastating.
It’s a deliberate and political manipulation of the stock market and stands to  suck more and more  investors in at higher levels where their portfolios will get crushed.
After a  6.7% May plunge in the S&P 500, Fed Chief Jerome Powell said Tuesday it was closely monitoring the impact of trade developments and would act as appropriate to sustain the economic expansion.
That means a rate cut and a return to Quantitative Easing (QE) if necessary.  When will they ever learn.
Lower interest rates won’t help with individual, corporate and government debt inflated to such serious levels.
Wake up ! A rate cut has preceded the last 7 recessions. The Fed cuts rates because it is trying to prevent or reduce the impact of a recession.
       The stock market must be allowed to find a level that discounts known and perceived adversity, which in this case could mean  35% to 45% plunge in  the stock market.
…………………………………….
Tuesday (June 4)
As I have been saying, since February 22, the Fed will cut rates if it looks like we are entering a recession. Yesterday St. Louis Fed President James Bullard  said a rate cut may be necessary to “re-center inflation and inflation expectations at target and also to provide some insurance in case of a sharper-than-expected slowdown.”
That’s crap ! What he is really saying is that the Fed is scared stiff we may be in a recession  next year, a presidential election  year. Forget the inflation  stuff, it’s just a smokescreen for playing politics. Inflation has been non-extent for years.
Guarding  the nation against inflation is just a justification for the Fed’s existence. They did a great job in the 2008-2009 Great Meltdown, but have been market manipulators ever since. Let the market find its own comfort level !
While a rate cut stands to trigger a rally, especially in a depressed market, it would be bad news.
Why ?
Fed rate cuts preceded the last 7 recessions going back to 1960.
It says the Fed sees a recession underway and is beginning the process of reducing its impact.
……………………………………………
 This is exactly what I have been warning about:
“Fed to Cut Rate if Economy Deteriorates Further” ( Feb.22, DJIA: 25,850)
“Fed May Cut Fed Funds rate – Why Not to Cheer” (Mar.12, DJIA:25,650)
“Raise Cash if Fed Hints at Rate Cut” (Mar. 29, DJIA: 25,877)
“A Drop in Fed Funds Rate Precedes Recessions”  Mar 28, DJIA: 25,652)
“Street Betting on Rate Cut Designed to Head Off Recession”(Apr 2, DJIA:”26,258)
:Fed Rate Cut in Attempt to Prevent Recession”  (May 28,  DJIA: 25,585)
“Fed Rate Cut Can’t Stop the Recession/Bear Market”  (May 30, DJIA: 25,126)
“MARKET ON Edge – Not Even a Fed Rate Cut June 19 Could Stop a Recession/   Bear Market”  May 31, DJIA:25,169)
………………………………
When the Fed cuts rates, June 19 or September 18, it will trigger a sharp rally. That can be risky for buyers on the news this month because there is high risk of more downside. We will have to wait until September when the market will be lower and a rally less risky.
Obviously, good news, or administration hype about tariffs would trigger buying, as well, but only delay the inevitable – recession/bear market. Too much damage has been done, too much uncertainty about what to expect next has crippled confidence.
…………………………………………………….
Monday  (June 3)
It looks like my April 24’s “Is BIG Money Selling Into the All-Time Highs Hype ?” is what happened, just when the  rest of the Street and public were buying.  Happens all the time.
This is yet another confirmation of the consistency of patterns detected by the Stock Trader’s Almanac over many years where the best months for owning stocks is November through April with May being a spoiler, as well as the following months through October.
From here I expect a downward choppy ride into fall, the extent of the swings determined by news flow and White House hype about trade, the economy, domestic and international turmoil.
I especially expect the Trump administration to downplay the current trade wars with China and others in an effort to calm the stock market.
I expect a technical bounce from the DJIA 24,530 (S&P 500: 2,725) level.  A bounce could come from a cut by the Fed in its benchmark Fed Funds rate on June 19. I doubt it would happen at the July 31 meeting since no press conference is scheduled, and there is no meeting in August. That leaves September 18, a long wait if the markets plunge and the economy’s softness worsens to crunch.
Other than special situations, buying rallies from here is risky since they will run into sellers at higher levels.   …………………………………………
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

Fed to CUT Its Funds Rate June 19 – Recession Imminent Cant’s Be Stopped -m Neither Can a Bear Market

INVESTOR’S first read.com – Daily edge before the open
DJIA: 25,720
S&P 500: 2,843
Nasdaq Comp.:7,615
Russell 2000:1,503
Friday June 7, 2019
   9:11 a.m.
………………………..
gbifr79@gmail.com
Want to buy a winner ?  Get the board game “Rummikub”
WARNING: addictive
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
       I believe we are  in the early stages of a recession.
I believe the Fed will cut its fed funds rate on June 19.
I believe the market will rally sharply in response
I believe that rally will be followed by the next leg of a bear market that
started on April 23 when  the DJIA  hit  26,695 (S&P 500:2,936).
The only hope the bulls have is if all tariffs are withdrawn, unlikely. Progress on tariffs can add to a rally, but not a reversal of a bear market.
Current levels of stock prices DO NOT DISCOUNT A RECESSION. That will take a 35% + plunge from here.  Hype out of the Fed and White House can only suck investors in at inflated prices.  _BEWARE !
TECHNICAL
Technicians only: Yesterday, I said the rebound in stocks negated a head &  shoulders top I referred to a week ago.  At the time, I warned when a head & shoulders pattern is reversed, it can lead to a sizable gain.
But, upon closer examination, and in light of deteriorating economic and political news we could be seeing a second right shoulder. Confirmation will take a week or two. 

Minor Support: DJIA:25,651;S&P 500:2,834;Nasdaq Comp.:7,615
Minor Resistance: DJIA:25,847; S&P 500:2,854 ;Nasdaq Comp.:7,649

…………………………………………..
Thursday  (Jun 6)
The market’s rebound has broken several “technical” barriers, including a minor downtrend line and a “Head & Shoulders top,” suggesting more upside.
But, this market is tiptoeing through a minefield and anything can happen.
Good news about Tariffs can juice it even higher, bad news about the economy, indicating a recession is a better good bet than previously thought would reverse an overbought market to the downside.
These are uncharted waters, and the waters are murky at best, fraught with rip currents and rogue waves at worst.
Memories tend to be short with a 24/7 news cycle that pummels viewers with overload. It’s been 11 years since the bear savaged investors and the economy to the point only a handful of  gutsy investors were willing to buy grossly oversold stocks.
Unfortunately, many sold out at the bottom and never got back in.
I see little respect for what can happen today, and part of that is due to the fact this Fed, headed up by Jerome Powell has assured the Street it will be there to goose stocks if there is a risk of a big decline.
I don’t believe Ben Bernanke or Janet Yellen would be as much a worrywart about a 7%-8%* drop in the market to hint about a rate cut to stem the tide, or was it politics that drives him.
I believe in letting the market find its comfort level.   I think we are already in the early stages of a recession, so artificially propping up the stock market  only puts investors at greater risk.
The biggest negative facing CEOs, money managers, business owners, the consumer and investors  today is CREDIBILITY,  Too much lying at the highest levels.  How can CEOs plan when they do not know what to expect next ?
A huge price will be paid for that, and this stock market with prices simply a matter of opinion, are vulnerable.
* incorrectly referred to as S&P 500 plunge of 10.2%
……………………………………………
Wednesday   (June 5)
      Just as I have been saying, the Fed is scared stiff that a recession/bear market will be ravaging the economy and investors in 2020, a presidential election year.
      What I have a problem with is the Fed’s timing of statements about policy as the stock market is adjusting for a recession, which after 10 years and huge problems could be devastating.
It’s a deliberate and political manipulation of the stock market and stands to  suck more and more  investors in at higher levels where their portfolios will get crushed.
After a  6.7% May plunge in the S&P 500, Fed Chief Jerome Powell said Tuesday it was closely monitoring the impact of trade developments and would act as appropriate to sustain the economic expansion.
That means a rate cut and a return to Quantitative Easing (QE) if necessary.  When will they ever learn.
Lower interest rates won’t help with individual, corporate and government debt inflated to such serious levels.
Wake up ! A rate cut has preceded the last 7 recessions. The Fed cuts rates because it is trying to prevent or reduce the impact of a recession.
       The stock market must be allowed to find a level that discounts known and perceived adversity, which in this case could mean  35% to 45% plunge in  the stock market.
…………………………………….
Tuesday (June 4)
As I have been saying, since February 22, the Fed will cut rates if it looks like we are entering a recession. Yesterday St. Louis Fed President James Bullard  said a rate cut may be necessary to “re-center inflation and inflation expectations at target and also to provide some insurance in case of a sharper-than-expected slowdown.”
That’s crap ! What he is really saying is that the Fed is scared stiff we may be in a recession  next year, a presidential election  year. Forget the inflation  stuff, it’s just a smokescreen for playing politics. Inflation has been non-extent for years.
Guarding  the nation against inflation is just a justification for the Fed’s existence. They did a great job in the 2008-2009 Great Meltdown, but have been market manipulators ever since. Let the market find its own comfort level !
While a rate cut stands to trigger a rally, especially in a depressed market, it would be bad news.
Why ?
Fed rate cuts preceded the last 7 recessions going back to 1960.
It says the Fed sees a recession underway and is beginning the process of reducing its impact.
……………………………………………
 This is exactly what I have been warning about:
“Fed to Cut Rate if Economy Deteriorates Further” ( Feb.22, DJIA: 25,850)
“Fed May Cut Fed Funds rate – Why Not to Cheer” (Mar.12, DJIA:25,650)
“Raise Cash if Fed Hints at Rate Cut” (Mar. 29, DJIA: 25,877)
“A Drop in Fed Funds Rate Precedes Recessions”  Mar 28, DJIA: 25,652)
“Street Betting on Rate Cut Designed to Head Off Recession”(Apr 2, DJIA:”26,258)
:Fed Rate Cut in Attempt to Prevent Recession”  (May 28,  DJIA: 25,585)
“Fed Rate Cut Can’t Stop the Recession/Bear Market”  (May 30, DJIA: 25,126)
“MARKET ON Edge – Not Even a Fed Rate Cut June 19 Could Stop a Recession/   Bear Market”  May 31, DJIA:25,169)
………………………………
When the Fed cuts rates, June 19 or September 18, it will trigger a sharp rally. That can be risky for buyers on the news this month because there is high risk of more downside. We will have to wait until September when the market will be lower and a rally less risky.
Obviously, good news, or administration hype about tariffs would trigger buying, as well, but only delay the inevitable – recession/bear market. Too much damage has been done, too much uncertainty about what to expect next has crippled confidence.
…………………………………………………….
Monday  (June 3)
It looks like my April 24’s “Is BIG Money Selling Into the All-Time Highs Hype ?” is what happened, just when the  rest of the Street and public were buying.  Happens all the time.
This is yet another confirmation of the consistency of patterns detected by the Stock Trader’s Almanac over many years where the best months for owning stocks is November through April with May being a spoiler, as well as the following months through October.
From here I expect a downward choppy ride into fall, the extent of the swings determined by news flow and White House hype about trade, the economy, domestic and international turmoil.
I especially expect the Trump administration to downplay the current trade wars with China and others in an effort to calm the stock market.
I expect a technical bounce from the DJIA 24,530 (S&P 500: 2,725) level.  A bounce could come from a cut by the Fed in its benchmark Fed Funds rate on June 19. I doubt it would happen at the July 31 meeting since no press conference is scheduled, and there is no meeting in August. That leaves September 18, a long wait if the markets plunge and the economy’s softness worsens to crunch.
Other than special situations, buying rallies from here is risky since they will run into sellers at higher levels.   …………………………………………
Friday  (May 31)
It is finally dawning on the Street we are in the early stages of a recession, and the market is overpriced.
That means the market must seek a comfort level that discounts a host of negatives its algorithms were not programmed to anticipate.
Why worry ?  All corrections in this 10-year bull market, big and small, have been followed by a recovery.
The algos weren’t programmed to anticipate the possibility the Republicans could lose the presidency and the Senate next year.
The algos weren’t programmed to anticipate the tariff debacle we are in and worsening.
The algos weren’t programmed to factor in the potential for a disaster in the Mid-East with our threat of war with Iran
The algos  didn’t anticipate a recession
The algos are clueless about the huge adverse impact the 40% tax cut for corporations will have on our nation’s ability to pay its bills in the future, especially  if our government is hit with both a shortfall in revenues from a recession as well as from the tax cuts.
If the algos that dominate so many decisions on the Street DID anticipate these issues, investors would not be at such great risk now with an overvalued market.
We are on the cusp of a 25% – 50% crunch.
CONCLUSION:
        I expect the Fed to cut its benchmark fed funds rate at its June 19 meeting in an attempt to head off a recession/bear market.
It would trigger a sharp, but short, rally followed by a big leg down in the stock market.
As I write, the algos are buying a sell off at the open. At some point, they will be tweaked to adjust to new negatives, that’s when buying will dry up and selling increase.
……………………………………………..
Thursday  (May 30)
Neither the Street, the Fed or the administration want a recession/bear market now. Worse yet, they don’t want one during 2020, a presidential election year.
That means, all three will pull out all stops to prevent a recession, so get ready for hype and even a cut in the federal funds rate by the Fed.
These efforts can trigger rebounds in the stock market, but they can’t stop the inevitable – a recession/bear market.
The economic expansion started in June 2009 after the Great Recession/Bear Market took the world to the brink of total meltdown.
The recovery has been gradual with bumps along the way, but is now showing signs of  drifting into recession.
       The problems that will be faced if this recession spirals into a mini-depression is the government has few remedies to trigger a recovery.
The Tax Cut Jobs Act gave a 40% cut to corporations but only a 1%-2% cut to individuals. Further cuts are out of the question, even in a recession .
After an overstay of QE and zero-based interest rates, the Fed has a limited number of options to employ, including cutting interest rates, which never rebounded significantly.
CONCLUSION: The stock market has been forming a major top for well over a year.  Tax cuts will prove to create major fiscal problems as they cut revenues the government needs to pay bills, and that shortfall will get worse in a recession as major programs people need are slashed.
Many investors and professionals either didn’t experience the savagery of the 2007 – 2009 recession/bear market, or don’t remember it after 10 years. The S&P 500 lost 57% of  a rebound that started in 2002 ands rose 105%.
I see this bear market giving back 35% to 55%.  It is possible we may experience two less severe recessions and bear markets like we did between January 1980 and November 1982.
The current stock market does not account for such uncertainty and is highly vulnerable to a big crunch.
Again, expect a lot of hype, lies and poor decisions.
……………………………………..
Wednesday  (May 29)
The Trump administration is highly sensitive to the direction of the stock market. With the market at risk of a major decline, we can expect  news releases projecting positive developments in trade and whatever else they can dig up.
That would  slow or temporarily halt the current plunge in stock prices.
       I believe the market is adjusting for the fact we are gradually entering a recession for which the current level of stock prices is overvalued.  Some on the Street see this; they are buying treasuries as evidenced by a plunge in interest rates.
With interest rates plunging as a result of this hurried buying, the Fed has no good reason to cut its fed funds rate except to try to head off a recession before next year’s election. Expect them to do so anyway.
At best, a fed cut would slow the intensity of the looming recession, but not prevent it.
………………………………..
       A Head & Shoulders top is forming as a result of the December 2018 rebound. It is what it looks like a left shoulder forming in February and March, a head between late March and early May and a brief  right shoulder in May. Technically, the right shoulder needs some more work to set up a plunge below the “neckline” (DJIA: 25,220, S&P 500: 2,780) and a projected plunge to DJIA 23,720 (S&P 500:2,654), and Nasdaq Comp. (7,000).
These patterns can be head fakes in which case a major rally results, but in this case where I see the case for real trouble, it’s worth respecting.
……………………………………………….
Don’t be misled by the upbeat Consumer Confidence report, which showed  47.2% of consumers polled in May thought jobs were plentiful. The good news is that they are; the bad news is the index is at an extreme suggesting confidence cannot get much better.
Historically, it has  topped out prior to the beginning of the last 7 recessions going back to 1967. The index is higher now than 6 of the last 7 recessions.
…………………………………………………
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

Use Strength to Raise Cash – Fed Sees Recession

INVESTOR’S first read.com – Daily edge before the open
DJIA: 25,539
S&P 500: 2,426
Nasdaq Comp.:7,575
Russell 2000:1,506
Thursday June 6, 2019
   8:07 a.m.
………………………..
gbifr79@gmail.com
Want to buy a winner ?  Get the board game “Rummikub”
WARNING: addictive
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The market’s rebound has broken several “technical” barriers, including a minor downtrend line and a “Head & Shoulders top,” suggesting more upside.
But, this market is tiptoeing through a minefield and anything can happen.
Good news about Tariffs can juice it even higher, bad news about the economy, indicating a recession is a better good bet than previously thought would reverse an overbought market to the downside.
These are uncharted waters, and the waters are murky at best, fraught with rip currents and rogue waves at worst.
Memories tend to be short with a 24/7 news cycle that pummels viewers with overload. It’s been 11 years since the bear savaged investors and the economy to the point only a handful of  gutsy investors were willing to buy grossly oversold stocks.
Unfortunately, many sold out at the bottom and never got back in.
I see little respect for what can happen today, and part of that is due to the fact this Fed, headed up by Jerome Powell has assured the Street it will be there to goose stocks if there is a risk of a big decline.
I don’t believe Ben Bernanke or Janet Yellen would be as much a worrywart about a 7%-8%* drop in the market to hint about a rate cut to stem the tide, or was it politics that drives him.
I believe in letting the market find its comfort level.   I think we are already in the early stages of a recession, so artificially propping up the stock market  only puts investors at greater risk.
The biggest negative facing CEOs, money managers, business owners, the consumer and investors  today is CREDIBILITY,  Too much lying at the highest levels.  How can CEOs plan when they do not know what to expect next ?
A huge price will be paid for that, and this stock market with prices simply a matter of opinion, are vulnerable.
* incorrectly referred to as S&P 500 plunge of 10.2%
……………………………………………………………
TECHNICALToday
Minor Support: DJIA:25,465;S&P 500:2,819;Nasdaq Comp.:7,558
Minor Resistance: DJIA:25,601; S&P 500:2,833;Nasdaq Comp.:7,587

…………………………………………..
Tuesday   (June 5)
      Just as I have been saying, the Fed is scared stiff that a recession/bear market will be ravaging the economy and investors in 2020, a presidential election year.
      What I have a problem with is the Fed’s timing of statements about policy as the stock market is adjusting for a recession, which after 10 years and huge problems could be devastating.
It’s a deliberate and political manipulation of the stock market and stands to  suck more and more  investors in at higher levels where their portfolios will get crushed.
After a  6.7% May plunge in the S&P 500, Fed Chief Jerome Powell said Tuesday it was closely monitoring the impact of trade developments and would act as appropriate to sustain the economic expansion.
That means a rate cut and a return to Quantitative Easing (QE) if necessary.  When will they ever learn.
Lower interest rates won’t help with individual, corporate and government debt inflated to such serious levels.
Wake up ! A rate cut has preceded the last 7 recessions. The Fed cuts rates because it is trying to prevent or reduce the impact of a recession.
       The stock market must be allowed to find a level that discounts known and perceived adversity, which in this case could mean  35% to 45% plunge in  the stock market.
…………………………………….
Monday  (June 4)
As I have been saying, since February 22, the Fed will cut rates if it looks like we are entering a recession. Yesterday St. Louis Fed President James Bullard  said a rate cut may be necessary to “re-center inflation and inflation expectations at target and also to provide some insurance in case of a sharper-than-expected slowdown.”
That’s crap ! What he is really saying is that the Fed is scared stiff we may be in a recession  next year, a presidential election  year. Forget the inflation  stuff, it’s just a smokescreen for playing politics. Inflation has been non-extent for years.
Guarding  the nation against inflation is just a justification for the Fed’s existence. They did a great job in the 2008-2009 Great Meltdown, but have been market manipulators ever since. Let the market find its own comfort level !
While a rate cut stands to trigger a rally, especially in a depressed market, it would be bad news.
Why ?
Fed rate cuts preceded the last 7 recessions going back to 1960.
It says the Fed sees a recession underway and is beginning the process of reducing its impact.
……………………………………………
 This is exactly what I have been warning about:
“Fed to Cut Rate if Economy Deteriorates Further” ( Feb.22, DJIA: 25,850)
“Fed May Cut Fed Funds rate – Why Not to Cheer” (Mar.12, DJIA:25,650)
“Raise Cash if Fed Hints at Rate Cut” (Mar. 29, DJIA: 25,877)
“A Drop in Fed Funds Rate Precedes Recessions”  Mar 28, DJIA: 25,652)
“Street Betting on Rate Cut Designed to Head Off Recession”(Apr 2, DJIA:”26,258)
:Fed Rate Cut in Attempt to Prevent Recession”  (May 28,  DJIA: 25,585)
“Fed Rate Cut Can’t Stop the Recession/Bear Market”  (May 30, DJIA: 25,126)
“MARKET ON Edge – Not Even a Fed Rate Cut June 19 Could Stop a Recession/   Bear Market”  May 31, DJIA:25,169)
………………………………
When the Fed cuts rates, June 19 or September 18, it will trigger a sharp rally. That can be risky for buyers on the news this month because there is high risk of more downside. We will have to wait until September when the market will be lower and a rally less risky.
Obviously, good news, or administration hype about tariffs would trigger buying, as well, but only delay the inevitable – recession/bear market. Too much damage has been done, too much uncertainty about what to expect next has crippled confidence.
…………………………………………………….
Monday  (June 3)
It looks like my April 24’s “Is BIG Money Selling Into the All-Time Highs Hype ?” is what happened, just when the  rest of the Street and public were buying.  Happens all the time.
This is yet another confirmation of the consistency of patterns detected by the Stock Trader’s Almanac over many years where the best months for owning stocks is November through April with May being a spoiler, as well as the following months through October.
From here I expect a downward choppy ride into fall, the extent of the swings determined by news flow and White House hype about trade, the economy, domestic and international turmoil.
I especially expect the Trump administration to downplay the current trade wars with China and others in an effort to calm the stock market.
I expect a technical bounce from the DJIA 24,530 (S&P 500: 2,725) level.  A bounce could come from a cut by the Fed in its benchmark Fed Funds rate on June 19. I doubt it would happen at the July 31 meeting since no press conference is scheduled, and there is no meeting in August. That leaves September 18, a long wait if the markets plunge and the economy’s softness worsens to crunch.
Other than special situations, buying rallies from here is risky since they will run into sellers at higher levels.   …………………………………………
Friday  (May 31)
It is finally dawning on the Street we are in the early stages of a recession, and the market is overpriced.
That means the market must seek a comfort level that discounts a host of negatives its algorithms were not programmed to anticipate.
Why worry ?  All corrections in this 10-year bull market, big and small, have been followed by a recovery.
The algos weren’t programmed to anticipate the possibility the Republicans could lose the presidency and the Senate next year.
The algos weren’t programmed to anticipate the tariff debacle we are in and worsening.
The algos weren’t programmed to factor in the potential for a disaster in the Mid-East with our threat of war with Iran
The algos  didn’t anticipate a recession
The algos are clueless about the huge adverse impact the 40% tax cut for corporations will have on our nation’s ability to pay its bills in the future, especially  if our government is hit with both a shortfall in revenues from a recession as well as from the tax cuts.
If the algos that dominate so many decisions on the Street DID anticipate these issues, investors would not be at such great risk now with an overvalued market.
We are on the cusp of a 25% – 50% crunch.
CONCLUSION:
        I expect the Fed to cut its benchmark fed funds rate at its June 19 meeting in an attempt to head off a recession/bear market.
It would trigger a sharp, but short, rally followed by a big leg down in the stock market.
As I write, the algos are buying a sell off at the open. At some point, they will be tweaked to adjust to new negatives, that’s when buying will dry up and selling increase.
……………………………………………..
Thursday  (May 30)
Neither the Street, the Fed or the administration want a recession/bear market now. Worse yet, they don’t want one during 2020, a presidential election year.
That means, all three will pull out all stops to prevent a recession, so get ready for hype and even a cut in the federal funds rate by the Fed.
These efforts can trigger rebounds in the stock market, but they can’t stop the inevitable – a recession/bear market.
The economic expansion started in June 2009 after the Great Recession/Bear Market took the world to the brink of total meltdown.
The recovery has been gradual with bumps along the way, but is now showing signs of  drifting into recession.
       The problems that will be faced if this recession spirals into a mini-depression is the government has few remedies to trigger a recovery.
The Tax Cut Jobs Act gave a 40% cut to corporations but only a 1%-2% cut to individuals. Further cuts are out of the question, even in a recession .
After an overstay of QE and zero-based interest rates, the Fed has a limited number of options to employ, including cutting interest rates, which never rebounded significantly.
CONCLUSION: The stock market has been forming a major top for well over a year.  Tax cuts will prove to create major fiscal problems as they cut revenues the government needs to pay bills, and that shortfall will get worse in a recession as major programs people need are slashed.
Many investors and professionals either didn’t experience the savagery of the 2007 – 2009 recession/bear market, or don’t remember it after 10 years. The S&P 500 lost 57% of  a rebound that started in 2002 ands rose 105%.
I see this bear market giving back 35% to 55%.  It is possible we may experience two less severe recessions and bear markets like we did between January 1980 and November 1982.
The current stock market does not account for such uncertainty and is highly vulnerable to a big crunch.
Again, expect a lot of hype, lies and poor decisions.
……………………………………..
Wednesday  (May 29)
The Trump administration is highly sensitive to the direction of the stock market. With the market at risk of a major decline, we can expect  news releases projecting positive developments in trade and whatever else they can dig up.
That would  slow or temporarily halt the current plunge in stock prices.
       I believe the market is adjusting for the fact we are gradually entering a recession for which the current level of stock prices is overvalued.  Some on the Street see this; they are buying treasuries as evidenced by a plunge in interest rates.
With interest rates plunging as a result of this hurried buying, the Fed has no good reason to cut its fed funds rate except to try to head off a recession before next year’s election. Expect them to do so anyway.
At best, a fed cut would slow the intensity of the looming recession, but not prevent it.
………………………………..
       A Head & Shoulders top is forming as a result of the December 2018 rebound. It is what it looks like a left shoulder forming in February and March, a head between late March and early May and a brief  right shoulder in May. Technically, the right shoulder needs some more work to set up a plunge below the “neckline” (DJIA: 25,220, S&P 500: 2,780) and a projected plunge to DJIA 23,720 (S&P 500:2,654), and Nasdaq Comp. (7,000).
These patterns can be head fakes in which case a major rally results, but in this case where I see the case for real trouble, it’s worth respecting.
……………………………………………….
Don’t be misled by the upbeat Consumer Confidence report, which showed  47.2% of consumers polled in May thought jobs were plentiful. The good news is that they are; the bad news is the index is at an extreme suggesting confidence cannot get much better.
Historically, it has  topped out prior to the beginning of the last 7 recessions going back to 1967. The index is higher now than 6 of the last 7 recessions.
…………………………………………………
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

Fed Trades In What Little Credibility It Has Left With”Hint” of Rate Cut After 10% Plunge in S&P 500

INVESTOR’S first read.com – Daily edge before the open
DJIA: 25,332
S&P 500: 2,803
Nasdaq Comp.:7,527
Russell 2000:1,508
Wednesday June 5, 2019
   8:55 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Just as I have been saying, the Fed is scared stiff that a recession/bear market will be ravaging the economy and investors in 2020, a presidential election year.
      What I have a problem with is the Fed’s timing of statements about policy as the stock market is adjusting for a recession, which after 10 years and huge problems could be devastating.
It’s a deliberate and political manipulation of the stock market and stands to  suck more and more  investors in at higher levels where their portfolios will get crushed.
After a  10.2% May plunge in the S&P 500, Fed Chief Jerome Powell said Tuesday it was closely monitoring the impact of trade developments and would act as appropriate to sustain the economic expansion.
That means a rate cut and a return to Quantitative Easing (QE) if necessary.  When will they ever learn.
Lower interest rates won’t help with individual, corporate and government debt inflated to such serious levels.
Wake up ! A rate cut has preceded the last 7 recessions. The Fed cuts rates because it is trying to prevent or reduce the impact of a recession.
       The stock market must be allowed to find a level that discounts known and perceived adversity, which in this case could mean  35% to 45% plunge in  the stock market.
……………………………………………………………
TECHNICALToday
      Fed Chief Powell’s comments yesterday about the Fed coming to the economy’s rescue chased shorts and pulled buyers into the market with gains in the averages exceeding 2%.
The euphoria will spill over to today’s
open and may carry further in days  to come, especially if there is  a break on tariffs.
Investors should be concerned that, aside from propping the markets up after a 10% drop, the Fed is really worried about a recession in 2020.
I think we are already in the early stages of a recession, and believe it will get ugly as all the excesses and political blundering in recent years takes a nasty toll.
This may be the last chance for investors to increase a cash reserve, something I have been urging for months at much higher levels.
       It appears the Street simply doesn’t want the party to end, a mentality present at all market tops, but this one especially since the Bull is 10 years old.
……………………………………………………….
Minor Support: DJIA:25,300;S&P 500:2,791;Nasdaq Comp.:7,495
Minor Resistance: DJIA:25,437; S&P 500:2,811;Nasdaq Comp.:7,547

…………………………………………..
Monday  (June 4)
As I have been saying, since February 22, the Fed will cut rates if it looks like we are entering a recession. Yesterday St. Louis Fed President James Bullard  said a rate cut may be necessary to “re-center inflation and inflation expectations at target and also to provide some insurance in case of a sharper-than-expected slowdown.”
That’s crap ! What he is really saying is that the Fed is scared stiff we may be in a recession  next year, a presidential election  year. Forget the inflation  stuff, it’s just a smokescreen for playing politics. Inflation has been non-extent for years.
Guarding  the nation against inflation is just a justification for the Fed’s existence. They did a great job in the 2008-2009 Great Meltdown, but have been market manipulators ever since. Let the market find its own comfort level !
While a rate cut stands to trigger a rally, especially in a depressed market, it would be bad news.
Why ?
Fed rate cuts preceded the last 7 recessions going back to 1960.
It says the Fed sees a recession underway and is beginning the process of reducing its impact.
……………………………………………
 This is exactly what I have been warning about:
“Fed to Cut Rate if Economy Deteriorates Further” ( Feb.22, DJIA: 25,850)
“Fed May Cut Fed Funds rate – Why Not to Cheer” (Mar.12, DJIA:25,650)
“Raise Cash if Fed Hints at Rate Cut” (Mar. 29, DJIA: 25,877)
“A Drop in Fed Funds Rate Precedes Recessions”  Mar 28, DJIA: 25,652)
“Street Betting on Rate Cut Designed to Head Off Recession”(Apr 2, DJIA:”26,258)
:Fed Rate Cut in Attempt to Prevent Recession”  (May 28,  DJIA: 25,585)
“Fed Rate Cut Can’t Stop the Recession/Bear Market”  (May 30, DJIA: 25,126)
“MARKET ON Edge – Not Even a Fed Rate Cut June 19 Could Stop a Recession/   Bear Market”  May 31, DJIA:25,169)
………………………………
When the Fed cuts rates, June 19 or September 18, it will trigger a sharp rally. That can be risky for buyers on the news this month because there is high risk of more downside. We will have to wait until September when the market will be lower and a rally less risky.
Obviously, good news, or administration hype about tariffs would trigger buying, as well, but only delay the inevitable – recession/bear market. Too much damage has been done, too much uncertainty about what to expect next has crippled confidence.
…………………………………………………….
Monday  (June 3)
It looks like my April 24’s “Is BIG Money Selling Into the All-Time Highs Hype ?” is what happened, just when the  rest of the Street and public were buying.  Happens all the time.
This is yet another confirmation of the consistency of patterns detected by the Stock Trader’s Almanac over many years where the best months for owning stocks is November through April with May being a spoiler, as well as the following months through October.
From here I expect a downward choppy ride into fall, the extent of the swings determined by news flow and White House hype about trade, the economy, domestic and international turmoil.
I especially expect the Trump administration to downplay the current trade wars with China and others in an effort to calm the stock market.
I expect a technical bounce from the DJIA 24,530 (S&P 500: 2,725) level.  A bounce could come from a cut by the Fed in its benchmark Fed Funds rate on June 19. I doubt it would happen at the July 31 meeting since no press conference is scheduled, and there is no meeting in August. That leaves September 18, a long wait if the markets plunge and the economy’s softness worsens to crunch.
Other than special situations, buying rallies from here is risky since they will run into sellers at higher levels.   …………………………………………

 

Friday  (May 31)
It is finally dawning on the Street we are in the early stages of a recession, and the market is overpriced.
That means the market must seek a comfort level that discounts a host of negatives its algorithms were not programmed to anticipate.
Why worry ?  All corrections in this 10-year bull market, big and small, have been followed by a recovery.
The algos weren’t programmed to anticipate the possibility the Republicans could lose the presidency and the Senate next year.
The algos weren’t programmed to anticipate the tariff debacle we are in and worsening.
The algos weren’t programmed to factor in the potential for a disaster in the Mid-East with our threat of war with Iran
The algos  didn’t anticipate a recession
The algos are clueless about the huge adverse impact the 40% tax cut for corporations will have on our nation’s ability to pay its bills in the future, especially  if our government is hit with both a shortfall in revenues from a recession as well as from the tax cuts.
If the algos that dominate so many decisions on the Street DID anticipate these issues, investors would not be at such great risk now with an overvalued market.
We are on the cusp of a 25% – 50% crunch.
CONCLUSION:
        I expect the Fed to cut its benchmark fed funds rate at its June 19 meeting in an attempt to head off a recession/bear market.
It would trigger a sharp, but short, rally followed by a big leg down in the stock market.
As I write, the algos are buying a sell off at the open. At some point, they will be tweaked to adjust to new negatives, that’s when buying will dry up and selling increase.
……………………………………………..
Thursday  (May 30)

      Neither the Street, the Fed or the administration want a recession/bear market now. Worse yet, they don’t want one during 2020, a presidential election year.
That means, all three will pull out all stops to prevent a recession, so get ready for hype and even a cut in the federal funds rate by the Fed.
These efforts can trigger rebounds in the stock market, but they can’t stop the inevitable – a recession/bear market.
The economic expansion started in June 2009 after the Great Recession/Bear Market took the world to the brink of total meltdown.
The recovery has been gradual with bumps along the way, but is now showing signs of  drifting into recession.
       The problems that will be faced if this recession spirals into a mini-depression is the government has few remedies to trigger a recovery.
The Tax Cut Jobs Act gave a 40% cut to corporations but only a 1%-2% cut to individuals. Further cuts are out of the question, even in a recession .
After an overstay of QE and zero-based interest rates, the Fed has a limited number of options to employ, including cutting interest rates, which never rebounded significantly.
CONCLUSION: The stock market has been forming a major top for well over a year.  Tax cuts will prove to create major fiscal problems as they cut revenues the government needs to pay bills, and that shortfall will get worse in a recession as major programs people need are slashed.
Many investors and professionals either didn’t experience the savagery of the 2007 – 2009 recession/bear market, or don’t remember it after 10 years. The S&P 500 lost 57% of  a rebound that started in 2002 ands rose 105%.
I see this bear market giving back 35% to 55%.  It is possible we may experience two less severe recessions and bear markets like we did between January 1980 and November 1982.
The current stock market does not account for such uncertainty and is highly vulnerable to a big crunch.
Again, expect a lot of hype, lies and poor decisions.
……………………………………..
Wednesday  (May 29)
The Trump administration is highly sensitive to the direction of the stock market. With the market at risk of a major decline, we can expect  news releases projecting positive developments in trade and whatever else they can dig up.
That would  slow or temporarily halt the current plunge in stock prices.
       I believe the market is adjusting for the fact we are gradually entering a recession for which the current level of stock prices is overvalued.  Some on the Street see this; they are buying treasuries as evidenced by a plunge in interest rates.
With interest rates plunging as a result of this hurried buying, the Fed has no good reason to cut its fed funds rate except to try to head off a recession before next year’s election. Expect them to do so anyway.
At best, a fed cut would slow the intensity of the looming recession, but not prevent it.
………………………………..
       A Head & Shoulders top is forming as a result of the December 2018 rebound. It is what it looks like a left shoulder forming in February and March, a head between late March and early May and a brief  right shoulder in May. Technically, the right shoulder needs some more work to set up a plunge below the “neckline” (DJIA: 25,220, S&P 500: 2,780) and a projected plunge to DJIA 23,720 (S&P 500:2,654), and Nasdaq Comp. (7,000).
These patterns can be head fakes in which case a major rally results, but in this case where I see the case for real trouble, it’s worth respecting.
……………………………………………….
Don’t be misled by the upbeat Consumer Confidence report, which showed  47.2% of consumers polled in May thought jobs were plentiful. The good news is that they are; the bad news is the index is at an extreme suggesting confidence cannot get much better.
Historically, it has  topped out prior to the beginning of the last 7 recessions going back to 1967. The index is higher now than 6 of the last 7 recessions.
…………………………………………………
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

Choppy Until Fall – Buying Rallies Risky

INVESTOR’S first read.com – Daily edge before the open
DJIA: 24,815
S&P 500: 2,752
Nasdaq Comp.:7,453
Russell 2000:1,465
Monday June 3, 2019
   8:49 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
      It looks like my April 24’s “Is BIG Money Selling Into the All-Time Highs Hype ?” is what happened, just when the  rest of the Street and public were buying.  Happens all the time.
This is yet another confirmation of the consistency of patterns detected by the Stock Trader’s Almanac over many years where the best months for owning stocks is November through April with May being a spoiler, as well as the following months through October.
From here I expect a downward choppy ride into fall, the extent of the swings determined by news flow and White House hype about trade, the economy, domestic and international turmoil.
I especially expect the Trump administration to downplay the current trade wars with China and others in an effort to calm the stock market.
I expect a technical bounce from the DJIA 24,530 (S&P 500: 2,725) level.  A bounce could come from a cut by the Fed in its benchmark Fed Funds rate on June 19. I doubt it would happen at the July 31 meeting since no press conference is scheduled, and there is no meeting in August. That leaves September 18, a long wait if the markets plunge and the economy’s softness worsens to crunch.
Other than special situations, buying rallies from here is risky since they will run into sellers at higher levels.   …………………………………………
TECHNICALToday
Minor Support: DJIA:24,690;S&P 500:2,738;Nasdaq Comp.:7,415
Minor Resistance: DJIA:24,917; S&P 500:2,751; Nasdaq Comp.:7,461

…………………………………………..
Friday  (May 31)
It is finally dawning on the Street we are in the early stages of a recession, and the market is overpriced.
That means the market must seek a comfort level that discounts a host of negatives its algorithms were not programmed to anticipate.
Why worry ?  All corrections in this 10-year bull market, big and small, have been followed by a recovery.
The algos weren’t programmed to anticipate the possibility the Republicans could lose the presidency and the Senate next year.
The algos weren’t programmed to anticipate the tariff debacle we are in and worsening.
The algos weren’t programmed to factor in the potential for a disaster in the Mid-East with our threat of war with Iran
The algos  didn’t anticipate a recession
The algos are clueless about the huge adverse impact the 40% tax cut for corporations will have on our nation’s ability to pay its bills in the future, especially  if our government is hit with both a shortfall in revenues from a recession as well as from the tax cuts.
If the algos that dominate so many decisions on the Street DID anticipate these issues, investors would not be at such great risk now with an overvalued market.
We are on the cusp of a 25% – 50% crunch.
CONCLUSION:
        I expect the Fed to cut its benchmark fed funds rate at its June 19 meeting in an attempt to head off a recession/bear market.
It would trigger a sharp, but short, rally followed by a big leg down in the stock market.
As I write, the algos are buying a sell off at the open. At some point, they will be tweaked to adjust to new negatives, that’s when buying will dry up and selling increase.
……………………………………………..
Thursday  (May 30)

      Neither the Street, the Fed or the administration want a recession/bear market now. Worse yet, they don’t want one during 2020, a presidential election year.
That means, all three will pull out all stops to prevent a recession, so get ready for hype and even a cut in the federal funds rate by the Fed.
These efforts can trigger rebounds in the stock market, but they can’t stop the inevitable – a recession/bear market.
The economic expansion started in June 2009 after the Great Recession/Bear Market took the world to the brink of total meltdown.
The recovery has been gradual with bumps along the way, but is now showing signs of  drifting into recession.
       The problems that will be faced if this recession spirals into a mini-depression is the government has few remedies to trigger a recovery.
The Tax Cut Jobs Act gave a 40% cut to corporations but only a 1%-2% cut to individuals. Further cuts are out of the question, even in a recession .
After an overstay of QE and zero-based interest rates, the Fed has a limited number of options to employ, including cutting interest rates, which never rebounded significantly.
CONCLUSION: The stock market has been forming a major top for well over a year.  Tax cuts will prove to create major fiscal problems as they cut revenues the government needs to pay bills, and that shortfall will get worse in a recession as major programs people need are slashed.
Many investors and professionals either didn’t experience the savagery of the 2007 – 2009 recession/bear market, or don’t remember it after 10 years. The S&P 500 lost 57% of  a rebound that started in 2002 ands rose 105%.
I see this bear market giving back 35% to 55%.  It is possible we may experience two less severe recessions and bear markets like we did between January 1980 and November 1982.
The current stock market does not account for such uncertainty and is highly vulnerable to a big crunch.
Again, expect a lot of hype, lies and poor decisions.
……………………………………..
Wednesday  (May 29)
The Trump administration is highly sensitive to the direction of the stock market. With the market at risk of a major decline, we can expect  news releases projecting positive developments in trade and whatever else they can dig up.
That would  slow or temporarily halt the current plunge in stock prices.
       I believe the market is adjusting for the fact we are gradually entering a recession for which the current level of stock prices is overvalued.  Some on the Street see this; they are buying treasuries as evidenced by a plunge in interest rates.
With interest rates plunging as a result of this hurried buying, the Fed has no good reason to cut its fed funds rate except to try to head off a recession before next year’s election. Expect them to do so anyway.
At best, a fed cut would slow the intensity of the looming recession, but not prevent it.
………………………………..
       A Head & Shoulders top is forming as a result of the December 2018 rebound. It is what it looks like a left shoulder forming in February and March, a head between late March and early May and a brief  right shoulder in May. Technically, the right shoulder needs some more work to set up a plunge below the “neckline” (DJIA: 25,220, S&P 500: 2,780) and a projected plunge to DJIA 23,720 (S&P 500:2,654), and Nasdaq Comp. (7,000).
These patterns can be head fakes in which case a major rally results, but in this case where I see the case for real trouble, it’s worth respecting.
……………………………………………….
Don’t be misled by the upbeat Consumer Confidence report, which showed  47.2% of consumers polled in May thought jobs were plentiful. The good news is that they are; the bad news is the index is at an extreme suggesting confidence cannot get much better.
Historically, it has  topped out prior to the beginning of the last 7 recessions going back to 1967. The index is higher now than 6 of the last 7 recessions.
……………………………………………………..
Tuesday  (May 28)

The economy has been slowly edging into recession. While the Fed denies it, I expect it to cut its benchmark fed funds rate later in the year to try to head off a recession  before the 2020 Presidential Election.
A cut would prompt a sharp rally until the question is asked, why did they do it ?
At that point, odds favor the correction would continue, probably into a bear market.
The market will  be mixed at the open.  If a rally begins, it should encounter resistance  above Dow 25,736, S&P 500: 2,837, and Nasdaq Comp.: 7,678.  Sellers appear to show up on rallies. Unless the Bulls can gain the upper hand, expect the slump that started in mid-May to continue, even gain momentum.
……………………………………….
      Last week I described why highly respected economist, A. Gary Shilling, believes we are in a recession. Included in his reasoning are a slippage in consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production, and commercial and industrial loans, an inverting of the yield curve, the prospect for declines in Q2 and Q3 GDP, and an uncomfortably high level of individual, corporate and government debt, a historically  high ratio of publicly owned nonfinancial debt to assets, including speculative-grade and unrated firms, and disastrous fiscal policies caused by the 2017 tax cut jobs act that gave individuals a small cut but gave corporations a 40% cut.
We will get a better read on the economy this week with key reports being, Consumer Confidence (10:00 a.m.),  Thursday Corporate Profits (8:30), Pending Home Sales (10:00 a.m.) and Consumer Sentiment Friday (10:00 a.m.).
Housing has been a drag on the economy, but the Fed’s policy ease  in January has helped with a sharp drop in mortgage rates. House on my street have sold within days and at higher prices than expected.
…………………………………………………
      Last week I described why highly respected economist, A. Gary Shilling, believes we are in a recession. Included in his reasoning are a slippage in consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production, and commercial and industrial loans, an inverting of the yield curve, the prospect for declines in Q2 and Q3 GDP, and an uncomfortably high level of individual, corporate and government debt, a historically  high ratio of publicly owned nonfinancial debt to assets, including speculative-grade and unrated firms, and disastrous fiscal policies caused by the 2017 tax cut jobs act that gave individuals a small cut but gave corporations a 40% cut.
We will get a better read on the economy this week with key reports being, Consumer Confidence (10:00 a.m.),  Thursday Corporate Profits (8:30), Pending Home Sales (10:00 a.m.) and Consumer Sentiment Friday (10:00 a.m.).
Housing has been a drag on the economy, but the Fed’s policy ease  in January has helped with a sharp drop in mortgage rates. House on my street have sold within days and at higher prices than expected.
…………………………………………
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

 

 

Market on Edge – Not Even a Fed Rate Cut June 19 Could Stop Recession/Bear Market

INVESTOR’S first read.com – Daily edge before the open
DJIA: 25,169
S&P 500: 2,788
Nasdaq Comp.:7,567
Russell 2000:1,585
Friday, May 31, 2019
   9:09 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
It is finally dawning on the Street we are in the early stages of a recession, and the market is overpriced.
That means the market must seek a comfort level that discounts a host of negatives its algorithms were not programmed to anticipate.
Why worry ?  All corrections in this 10-year bull market, big and small, have been followed by a recovery.
The algos weren’t programmed to anticipate the possibility the Republicans could lose the presidency and the Senate next year.
The algos weren’t programmed to anticipate the tariff debacle we are in and worsening.
The algos weren’t programmed to factor in the potential for a disaster in the Mid-East with our threat of war with Iran
The algos  didn’t anticipate a recession
The algos are clueless about the huge adverse impact the 40% tax cut for corporations will have on our nation’s ability to pay its bills in the future, especially  if our government is hit with both a shortfall in revenues from a recession as well as from the tax cuts.
If the algos that dominate so many decisions on the Street DID anticipate these issues, investors would not be at such great risk now with an overvalued market.
We are on the cusp of a 25% – 50% crunch.
CONCLUSION:
        I expect the Fed to cut its benchmark fed funds rate at its June 19 meeting in an attempt to head off a recession/bear market.
It would trigger a sharp, but short, rally followed by a big leg down in the stock market.
As I write, the algos are buying a sell off at the open. At some point, they will be tweaked to adjust to new negatives, that’s when buying will dry up and selling increase.
…………………………………………
TECHNICAL:
Minor Support: DJIA:24,576;S&P 500:2,721;Nasdaq Comp.:7,385
Minor Resistance: DJIA:25,017; S&P 500:2,771; Nasdaq Comp.:7,503
This resistance is the point where a rally after the sell off will run into a wall.

…………………………………………..
Thursday  (May 30)

      Neither the Street, the Fed or the administration want a recession/bear market now. Worse yet, they don’t want one during 2020, a presidential election year.
That means, all three will pull out all stops to prevent a recession, so get ready for hype and even a cut in the federal funds rate by the Fed.
These efforts can trigger rebounds in the stock market, but they can’t stop the inevitable – a recession/bear market.
The economic expansion started in June 2009 after the Great Recession/Bear Market took the world to the brink of total meltdown.
The recovery has been gradual with bumps along the way, but is now showing signs of  drifting into recession.
       The problems that will be faced if this recession spirals into a mini-depression is the government has few remedies to trigger a recovery.
The Tax Cut Jobs Act gave a 40% cut to corporations but only a 1%-2% cut to individuals. Further cuts are out of the question, even in a recession .
After an overstay of QE and zero-based interest rates, the Fed has a limited number of options to employ, including cutting interest rates, which never rebounded significantly.
CONCLUSION: The stock market has been forming a major top for well over a year.  Tax cuts will prove to create major fiscal problems as they cut revenues the government needs to pay bills, and that shortfall will get worse in a recession as major programs people need are slashed.
Many investors and professionals either didn’t experience the savagery of the 2007 – 2009 recession/bear market, or don’t remember it after 10 years. The S&P 500 lost 57% of  a rebound that started in 2002 ands rose 105%.
I see this bear market giving back 35% to 55%.  It is possible we may experience two less severe recessions and bear markets like we did between January 1980 and November 1982.
The current stock market does not account for such uncertainty and is highly vulnerable to a big crunch.
Again, expect a lot of hype, lies and poor decisions.
……………………………………..
Wednesday  (May 29)
The Trump administration is highly sensitive to the direction of the stock market. With the market at risk of a major decline, we can expect  news releases projecting positive developments in trade and whatever else they can dig up.
That would  slow or temporarily halt the current plunge in stock prices.
       I believe the market is adjusting for the fact we are gradually entering a recession for which the current level of stock prices is overvalued.  Some on the Street see this; they are buying treasuries as evidenced by a plunge in interest rates.
With interest rates plunging as a result of this hurried buying, the Fed has no good reason to cut its fed funds rate except to try to head off a recession before next year’s election. Expect them to do so anyway.
At best, a fed cut would slow the intensity of the looming recession, but not prevent it.
………………………………..
       A Head & Shoulders top is forming as a result of the December 2018 rebound. It is what it looks like a left shoulder forming in February and March, a head between late March and early May and a brief  right shoulder in May. Technically, the right shoulder needs some more work to set up a plunge below the “neckline” (DJIA: 25,220, S&P 500: 2,780) and a projected plunge to DJIA 23,720 (S&P 500:2,654), and Nasdaq Comp. (7,000).
These patterns can be head fakes in which case a major rally results, but in this case where I see the case for real trouble, it’s worth respecting.
……………………………………………….
Don’t be misled by the upbeat Consumer Confidence report, which showed  47.2% of consumers polled in May thought jobs were plentiful. The good news is that they are; the bad news is the index is at an extreme suggesting confidence cannot get much better.
Historically, it has  topped out prior to the beginning of the last 7 recessions going back to 1967. The index is higher now than 6 of the last 7 recessions.
……………………………………………………..
Tuesday  (May 28)

The economy has been slowly edging into recession. While the Fed denies it, I expect it to cut its benchmark fed funds rate later in the year to try to head off a recession  before the 2020 Presidential Election.
A cut would prompt a sharp rally until the question is asked, why did they do it ?
At that point, odds favor the correction would continue, probably into a bear market.
The market will  be mixed at the open.  If a rally begins, it should encounter resistance  above Dow 25,736, S&P 500: 2,837, and Nasdaq Comp.: 7,678.  Sellers appear to show up on rallies. Unless the Bulls can gain the upper hand, expect the slump that started in mid-May to continue, even gain momentum.
……………………………………….
      Last week I described why highly respected economist, A. Gary Shilling, believes we are in a recession. Included in his reasoning are a slippage in consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production, and commercial and industrial loans, an inverting of the yield curve, the prospect for declines in Q2 and Q3 GDP, and an uncomfortably high level of individual, corporate and government debt, a historically  high ratio of publicly owned nonfinancial debt to assets, including speculative-grade and unrated firms, and disastrous fiscal policies caused by the 2017 tax cut jobs act that gave individuals a small cut but gave corporations a 40% cut.
We will get a better read on the economy this week with key reports being, Consumer Confidence (10:00 a.m.),  Thursday Corporate Profits (8:30), Pending Home Sales (10:00 a.m.) and Consumer Sentiment Friday (10:00 a.m.).
Housing has been a drag on the economy, but the Fed’s policy ease  in January has helped with a sharp drop in mortgage rates. House on my street have sold within days and at higher prices than expected.
…………………………………………………

Monday (May 28)
The economy has been slowly edging into recession. While the Fed denies it, I expect it to cut its benchmark fed funds rate later in the year to try to head off a recession  before the 2020 Presidential Election.
A cut would prompt a sharp rally until the question is asked, why did they do it ?
At that point, odds favor the correction would continue, probably into a bear market.
The market will  be mixed at the open.  If a rally begins, it should encounter resistance  above Dow 25,736, S&P 500: 2,837, and Nasdaq Comp.: 7,678.  Sellers appear to show up on rallies. Unless the Bulls can gain the upper hand, expect the slump that started in mid-May to continue, even gain momentum.
……………………………………….
      Last week I described why highly respected economist, A. Gary Shilling, believes we are in a recession. Included in his reasoning are a slippage in consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production, and commercial and industrial loans, an inverting of the yield curve, the prospect for declines in Q2 and Q3 GDP, and an uncomfortably high level of individual, corporate and government debt, a historically  high ratio of publicly owned nonfinancial debt to assets, including speculative-grade and unrated firms, and disastrous fiscal policies caused by the 2017 tax cut jobs act that gave individuals a small cut but gave corporations a 40% cut.
We will get a better read on the economy this week with key reports being, Consumer Confidence (10:00 a.m.),  Thursday Corporate Profits (8:30), Pending Home Sales (10:00 a.m.) and Consumer Sentiment Friday (10:00 a.m.).
Housing has been a drag on the economy, but the Fed’s policy ease  in January has helped with a sharp drop in mortgage rates. House on my street have sold within days and at higher prices than expected.
…………………………………………………….
Friday (May24)
Street Needs to Trash Algos….and “Think”
About Recession/Bear Market
The thing a lot of investors and professionals on the Street know is that bad stuff happens, the market takes a hit then recovers.  What they don’t know (or remember) is that bad  stuff can keep happening relentlessly pounding stocks down beyond the ouch point to the “I can’t stand it anymore point” where everyone is afraid to buy or worse yet just sell out, thinking the market will go lower.
        It has been a long time since the last bear market (2007 – 2009) when  the S&P500 dropped 58% in face of a global meltdown.
Since then, a lot of the Street’s decision process has been relegated to computer algorithms.  While that reduces human emotions from the process, it removes the ability of people to anticipate and respond to changing events here and abroad.
Bad stuff CAN continue to happen.  There were four recessions and four  bear markets between 1970 and 1981 a period that was marred by Mid-East war, the OPEC Oil Embargo, the energy crisis, stagflation (low growth/high inflation, double digit interest rates, military coups, AND the Watergate scandal resulting in the resignation of President Nixon.
Anyone paying attention has to realize we are currently faced with the potential for more than one debilitating event to happen.  President Trump is at risk of impeachment (or resignation), governance of our country is chaotic with a number of constitutional crises likely, war with Iran is possible, an extension of our 10 year old economy/bull market is  unlikely, and individual, corporate and government debt is a precarious levels.
I think we are in a bear market and on the cusp of a recession. I also think we are mired in a political crisis that will be highly disruptive.
Depending on how all these things unwind, we could be face with one huge
recession/bear market, or several mini recession/bear markets.
…………………………………………
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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fed Rate Cut Can’t Stop Recession/Bear Market

INVESTOR’S first read.com – Daily edge before the open
DJIA: 25,126
S&P 500: 2,783
Nasdaq Comp.:7,547
Russell 2000:1,490
Thursday, May 30, 2019
   9:09 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
TODAY:
Neither the Street, the Fed or the administration want a recession/bear market now. Worse yet, they don’t want one during 2020, a presidential election year.
That means, all three will pull out all stops to prevent a recession, so get ready for hype and even a cut in the federal funds rate by the Fed.
These efforts can trigger rebounds in the stock market, but they can’t stop the inevitable – a recession/bear market.
The economic expansion started in June 2009 after the Great Recession/Bear Market took the world to the brink of total meltdown.
The recovery has been gradual with bumps along the way, but is now showing signs of  drifting into recession.
       The problems that will be faced if this recession spirals into a mini-depression is the government has few remedies to trigger a recovery.
The Tax Cut Jobs Act gave a 40% cut to corporations but only a 1%-2% cut to individuals. Further cuts are out of the question, even in a recession .
After an overstay of QE and zero-based interest rates, the Fed has a limited number of options to employ, including cutting interest rates, which never rebounded significantly.
CONCLUSION: The stock market has been forming a major top for well over a year.  Tax cuts will prove to create major fiscal problems as they cut revenues the government needs to pay bills, and that shortfall will get worse in a recession as major programs people need are slashed.
Many investors and professionals either didn’t experience the savagery of the 2007 – 2009 recession/bear market, or don’t remember it after 10 years. The S&P 500 lost 57% of  a rebound that started in 2002 ands rose 105%.
I see this bear market giving back 35% to 55%.  It is possible we may experience two less severe recessions and bear markets like we did between January 1980 and November 1982.
The current stock market does not account for such uncertainty and is highly vulnerable to a big crunch.
Again, expect a lot of hype, lies and poor decisions.
 …………………………………………
TECHNICAL:
Minor Support: DJIA:25,236;S&P 500:2,797;Nasdaq Comp.:7,567
Minor Resistance: DJIA:; S&P 500:; Nasdaq Comp.:
This is resistance to a rally after a sell off.

…………………………………………..
The Trump administration is highly sensitive to the direction of the stock market. With the market at risk of a major decline, we can expect  news releases projecting positive developments in trade and whatever else they can dig up.
That would  slow or temporarily halt the current plunge in stock prices.
       I believe the market is adjusting for the fact we are gradually entering a recession for which the current level of stock prices is overvalued.  Some on the Street see this; they are buying treasuries as evidenced by a plunge in interest rates.
With interest rates plunging as a result of this hurried buying, the Fed has no good reason to cut its fed funds rate except to try to head off a recession before next year’s election. Expect them to do so anyway.
At best, a fed cut would slow the intensity of the looming recession, but not prevent it.
………………………………..
       A Head & Shoulders top is forming as a result of the December 2018 rebound. It is what it looks like a left shoulder forming in February and March, a head between late March and early May and a brief  right shoulder in May. Technically, the right shoulder needs some more work to set up a plunge below the “neckline” (DJIA: 25,220, S&P 500: 2,780) and a projected plunge to DJIA 23,720 (S&P 500:2,654), and Nasdaq Comp. (7,000).
These patterns can be head fakes in which case a major rally results, but in this case where I see the case for real trouble, it’s worth respecting.
……………………………………………….
Don’t be misled b y the upbeat Consumer Confidence report, which showed  47.2% of consumers polled in May thought jobs were plentiful. The good news is that they are; the bad news is the index is at an extreme suggesting confidence cannot get much better.
Historically, it has  topped out prior to the beginning of the last 7 recessions going back to 1967. The index is higher now than 6 of the last 7 recessions.
……………………………………………………..
Monday (May 28)
The economy has been slowly edging into recession. While the Fed denies it, I expect it to cut its benchmark fed funds rate later in the year to try to head off a recession  before the 2020 Presidential Election.
A cut would prompt a sharp rally until the question is asked, why did they do it ?
At that point, odds favor the correction would continue, probably into a bear market.
The market will  be mixed at the open.  If a rally begins, it should encounter resistance  above Dow 25,736, S&P 500: 2,837, and Nasdaq Comp.: 7,678.  Sellers appear to show up on rallies. Unless the Bulls can gain the upper hand, expect the slump that started in mid-May to continue, even gain momentum.
……………………………………….
      Last week I described why highly respected economist, A. Gary Shilling, believes we are in a recession. Included in his reasoning are a slippage in consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production, and commercial and industrial loans, an inverting of the yield curve, the prospect for declines in Q2 and Q3 GDP, and an uncomfortably high level of individual, corporate and government debt, a historically  high ratio of publicly owned nonfinancial debt to assets, including speculative-grade and unrated firms, and disastrous fiscal policies caused by the 2017 tax cut jobs act that gave individuals a small cut but gave corporations a 40% cut.
We will get a better read on the economy this week with key reports being, Consumer Confidence (10:00 a.m.),  Thursday Corporate Profits (8:30), Pending Home Sales (10:00 a.m.) and Consumer Sentiment Friday (10:00 a.m.).
Housing has been a drag on the economy, but the Fed’s policy ease  in January has helped with a sharp drop in mortgage rates. House on my street have sold within days and at higher prices than expected.

Friday (May24)
Street Needs to Trash Algos….and “Think”
About Recession/Bear Market
The thing a lot of investors and professionals on the Street know is that bad stuff happens, the market takes a hit then recovers.  What they don’t know (or remember) is that bad  stuff can keep happening relentlessly pounding stocks down beyond the ouch point to the “I can’t stand it anymore point” where everyone is afraid to buy or worse yet just sell out, thinking the market will go lower.
        It has been a long time since the last bear market (2007 – 2009) when  the S&P500 dropped 58% in face of a global meltdown.
Since then, a lot of the Street’s decision process has been relegated to computer algorithms.  While that reduces human emotions from the process, it removes the ability of people to anticipate and respond to changing events here and abroad.
Bad stuff CAN continue to happen.  There were four recessions and four  bear markets between 1970 and 1981 a period that was marred by Mid-East war, the OPEC Oil Embargo, the energy crisis, stagflation (low growth/high inflation, double digit interest rates, military coups, AND the Watergate scandal resulting in the resignation of President Nixon.
Anyone paying attention has to realize we are currently faced with the potential for more than one debilitating event to happen.  President Trump is at risk of impeachment (or resignation), governance of our country is chaotic with a number of constitutional crises likely, war with Iran is possible, an extension of our 10 year old economy/bull market is  unlikely, and individual, corporate and government debt is a precarious levels.
I think we are in a bear market and on the cusp of a recession. I also think we are mired in a political crisis that will be highly disruptive.
Depending on how all these things unwind, we could be face with one huge
recession/bear market, or several mini recession/bear markets.
………………………………………………………………
Thursday (May 23)

Flash Crash ? Bulls Must Step in or It’s 1,200 DJIA Points Down Just for Openers.
      I said it yesterday (read below), The Street is oblivious to risk, spoiled by 10 years of Fed-fueled bull market.  We are looking at a greenstick fracture that only needs a nudge to trigger a vertical plunge to DJIA 23,500 (S&P500: 2,600 by fall.
According to A. Gary Shilling’s June INSIGHT, a recession has already started, even though housing is getting a boost from the fed-induced drop in interest rates.  Shilling is one of the nation’s most highly respected economists with a host of great calls on the economy, bond and stock market.
His 28-page INSIGHT is difficult to summarize here, just so packed with supporting analysis, charts, and graphs.
Included briefly his reasons for being bearish on the economy: the deflationary impact of tariffs, the slippage in consumer spending, a recession signal by the N.Y. Federal Reserve recession model, declines in capacity utilization, industrial production and commercial and industrial loans, an inverted yield curve,  the bubble (a peak) in the employment, unemployment numbers, the prospect for a sharp drop in Q2 and Q3 GDP, and DEBT (individual, corporate and government).
Shilling refers to the Fed’s Financial Stability Report than points to the vulnerability of corporate balance sheets “reminiscent of the subprime mortgage meltdown in the mid-2000s.”
Risks emphasized by Shilling include: a high level of complacency created by a decade of risk-taking and corporate borrowing through junk and BBB credits, as well as junk bonds and leveraged loans, extended to firms with poor credit profiles.
The ratio of debt to assets for all publicly owned nonfinancial firms, including speculative-grade and unrated firms is close to the highest levels over 20 years.
Then too, there is the disruption and devastation of the trade wars, war in the Mid-East and a disastrous fiscal policy caused by the 2017 Tax cuts that gave corporations a 40% tax cut vs. a insignificant cut for individuals in and around 1%.
Big losers in April include: auto dealers, clothing stores, health and personal care, electronics and appliance.
OK, that’s a brief summary that should open eyes.
CONCLUSION: No one likes a bear, but warnings are necessary to help investors avoid taking big hits to their portfolios.
We are on the threshold of a nasty crunch in stock prices, possibly a bear market.  The usual snapback in stock prices this time may not happen. At some point, in a bear market, there is no immediate rebound until the market has bottomed out after  a drop of 35% -50%.
Our country has huge problems, most created in the last two years. Expect the Trump administration to release whatever  positive projections it can dig up to reverse the downtrend in stock prices.  Take it with a grain of salt.
…………………………………………
Wednesday  (May 23)
Only An Algorithm Can Be This Naïve
Before algorithms dominated the Street’s decision process, humans pondered current and foreseeable events to get a feel for whether stocks were over or undervalued.  They tracked a host of indicators, but also  used their instincts based on years of experience to come to conclusions.
Algos track a host of indicators, probably a lot more than the human brain can track, but where the human brain excels is the ability to weigh in on the unknown.
Currently, the market is ignoring a number of critical  factors that could vastly affect the overall perception of what stocks are worth.
The big one is the prospect of the disruption of an impeachment process and uncertainty of the 2020 presidential election. Add to that, a looming recession and bear market, trade wars, war, and an overvalued market and you have enough to keep anyone awake at night.
What is driving stock prices today is not the tangible value, a dividend return, but rather the expectation  stocks will keep rising in value somewhat in line with the growth in earnings and companies buying back their own stock, but mostly because institutions have nowhere else to invest.
This is all well and good as long as we don’t hit a prolonged losing streak where a lot of bad stuff hits the fan relentlessly pounding stocks and investor confidence down.
        It happened in the 1970 and early 1980s where four recessions and five bear markets  in 11 years combined with war, Watergate/impeachment, stagflation, the OPEC oil embargo hammered stocks relentlessly driving the price/earnings ratio for the S&P 500 below 8X (1980).
Stuff happens, and this stock market is ignoring how bad things can get, mostly because computers can’t be programmed for the unthinkable, and also because few analysts/money managers weren’t around in the 1970/1980’s.
Since so many Street  algo decisions are based on the same indicators, they will eventually get a sell at the same time and whoosh – a flash crash of 12%-18% before anyone can say “ouch.” Instead of an immediate rebound we get another leg down as new negatives hit the market.
The best computer in the world is the human brain, not the fastest, not the ability to process zillions of things, but the best to ponder possibilities not yet quantifiable.

Cash will be king some day. It doesn’t have to be 100%, but enough to protect an investor in line with their tolerance for risk.
………………………………………………..
Tuesday   (May 20)
Look for an attempt to rebound today. There is formidable overhead supply that will limit the upside barring unexpected good news. Nasdaq stocks are under pressure, what are all the bees going to do if the Queen dies ?
The big picture is clouded, but  many on the Street don’t see it, or let’s say they haven’t tweaked their algos to respect what often happens in late stage bull markets – news that progressively gets worse, bit by bit.
        Does anyone who is paying attention think for a moment angst about the future, near and longer term, won’t surge past the  ouch point  to the I can’t stand it anymore level where investors break ranks and bail out.
This will get ugly, very ugly. Project into the future, can the Street simply ignore total chaos at the highest levels of our government ?
The Street wants to party all night.  That’s not how it works, not how it has ever worked, especially when the managers of money think we are in  a new era where recessions don’t happen not with the Fed quick to prevent troubles.
The Fed’s quiver of quick fixes is empty.  Yes, I expect a cut in the Fed funds rate, but they did that prior to the last three recessions.
Right now the Fed is a eunuch. They’ll try, clearly they don’t want a recession in an election year.  But they can’t stop the looming  chaos in confidence that is just around the corner, multiple constitutional crises.
Warning: Beware of a rally failure. Chasing the rally at the open is risky.
……………………………………………………………..
Wednesday (May 15)
Ask yourself two questions.
Is a bear market possible beginning in the next 6 months ?
Is a recession starting within the next 9 months possible ?
If your answer is no to both, think again, or risk getting blindsided.
No one  is bearish and that is bearish. The Street is blinded by the euphoria of a 10-year old bull market, propped up by an administration-friendly Fed, which may just cut its benchmark interest rate to head off a recession in time for the 2020 elections.
Bear markets begin ahead of recessions, the lead time varies from several months to a year. I don’t see the next bear market beginning slowly, since most analysts/money managers track the same indicators plug them into an algo and wait for an answer.  Aside from free-thinkers who will anticipate problems in advance, most on the Street will get a defer purchase/sell signal at the same time and whoosh down the market goes giving anyone with no cash reserve a chance to react.
       My message here is, establish a cash reserve of 30% and ignore the temptation to go all-in, because no one knows when the plug will be pulled. Worst case, an opportunity to make a little more is lost, but a flash crash leading to a bear market does not lead to two years of more getting back  one’s losses.
We have had ugly corrections in recent years, all but one were flash crashes.
Apr./May 2011 the S&P plunged 12.6% in 8 days
Aug. 2011:  –  15.8% in 6 days
Jly./Aug. 2015:   – 11.5% in 18 days
Dec. 2015/Jan.:  –  12.9% in 13 days
Jan/Feb. 2018:  -11.8% in 10 days
Oct./Dec. 2018: – 20.2% over 3 months
All were followed by recoveries. The difference with a bear market will be, new negatives will hit the market after a sharp plunge and at the point when it is ready to rebound. That’s when a second leg begins leading to lower lows and ultimately a decline of 35% – 48%, or so.
In most cases, the bear will be accompanied by a recession and a rush by the Fed to trigger a recovery with lower interest rates and pumping money into the economy.   But rates are still low and the ability of the Fed to pump money into the economy limited this time, so a recovery stands to take longer.
………………………………………………………..

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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bounce Possible After Early Sell Off, But Recession Looms

INVESTOR’S first read.com – Daily edge before the open
DJIA: 25,347
S&P 500: 2,802
Nasdaq Comp.:7,607
Russell 2000:1,504
Wednesday, May 29, 2019
   9:05 a.m.
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Summary:
TODAY:
The Trump administration is highly sensitive to the direction of the stock market. With the market at risk of a major decline, we can expect  news releases projecting positive developments in trade and whatever else they can dig up.
That would  slow or temporarily halt the current plunge in stock prices.
       I believe the market is adjusting for the fact we are gradually entering a recession for which the current level of stock prices is overvalued.  Some on the Street see this; they are buying treasuries as evidenced by a plunge in interest rates.
With interest rates plunging as a result of this hurried buying, the Fed has no good reason to cut its fed funds rate except to try to head off a recession before next year’s election. Expect them to do so anyway.
At best, a fed cut would slow the intensity of the looming recession, but not prevent it.
………………………………..
       A Head & Shoulders top is forming as a result of the December 2018 rebound. It is what it looks like a left shoulder forming in February and March, a head between late March and early May and a brief  right shoulder in May. Technically, the right shoulder needs some more work to set up a plunge below the “neckline” (DJIA: 25,220, S&P 500: 2,780) and a projected plunge to DJIA 23,720 (S&P 500:2,654), and Nasdaq Comp. (7,000).
These patterns can be head fakes in which case a major rally results, but in this case where I see the case for real trouble, it’s worth respecting.
……………………………………………….
Don’t be misled b y the upbeat Consumer Confidence report, which showed  47.2% of consumers polled in May thought jobs were plentiful. The good news is that they are; the bad news is the index is at an extreme suggesting confidence cannot get much better.
Historically, it has  topped out prior to the beginning of the last 7 recessions going back to 1967. The index is higher now than 6 of the last 7 recessions.
    …………………………………………
TECHNICAL:
Minor Support: DJIA:24,963;S&P 500:2,760;Nasdaq Comp.:7,477
Minor Resistance: DJIA:25,316; S&P 500:2,796; Nasdaq Comp.:7,586
This is resistance to a rally after a sell off.

…………………………………………..
Monday (May 28)
The economy has been slowly edging into recession. While the Fed denies it, I expect it to cut its benchmark fed funds rate later in the year to try to head off a recession  before the 2020 Presidential Election.
A cut would prompt a sharp rally until the question is asked, why did they do it ?
At that point, odds favor the correction would continue, probably into a bear market.
The market will  be mixed at the open.  If a rally begins, it should encounter resistance  above Dow 25,736, S&P 500: 2,837, and Nasdaq Comp.: 7,678.  Sellers appear to show up on rallies. Unless the Bulls can gain the upper hand, expect the slump that started in mid-May to continue, even gain momentum.
……………………………………….
      Last week I described why highly respected economist, A. Gary Shilling, believes we are in a recession. Included in his reasoning are a slippage in consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production, and commercial and industrial loans, an inverting of the yield curve, the prospect for declines in Q2 and Q3 GDP, and an uncomfortably high level of individual, corporate and government debt, a historically  high ratio of publicly owned nonfinancial debt to assets, including speculative-grade and unrated firms, and disastrous fiscal policies caused by the 2017 tax cut jobs act that gave individuals a small cut but gave corporations a 40% cut.
We will get a better read on the economy this week with key reports being, Consumer Confidence (10:00 a.m.),  Thursday Corporate Profits (8:30), Pending Home Sales (10:00 a.m.) and Consumer Sentiment Friday (10:00 a.m.).
Housing has been a drag on the economy, but the Fed’s policy ease  in January has helped with a sharp drop in mortgage rates. House on my street have sold within days and at higher prices than expected.

Friday (May24)
Street Needs to Trash Algos….and “Think”
About Recession/Bear Market
The thing a lot of investors and professionals on the Street know is that bad stuff happens, the market takes a hit then recovers.  What they don’t know (or remember) is that bad  stuff can keep happening relentlessly pounding stocks down beyond the ouch point to the “I can’t stand it anymore point” where everyone is afraid to buy or worse yet just sell out, thinking the market will go lower.
        It has been a long time since the last bear market (2007 – 2009) when  the S&P500 dropped 58% in face of a global meltdown.
Since then, a lot of the Street’s decision process has been relegated to computer algorithms.  While that reduces human emotions from the process, it removes the ability of people to anticipate and respond to changing events here and abroad.
Bad stuff CAN continue to happen.  There were four recessions and four  bear markets between 1970 and 1981 a period that was marred by Mid-East war, the OPEC Oil Embargo, the energy crisis, stagflation (low growth/high inflation, double digit interest rates, military coups, AND the Watergate scandal resulting in the resignation of President Nixon.
Anyone paying attention has to realize we are currently faced with the potential for more than one debilitating event to happen.  President Trump is at risk of impeachment (or resignation), governance of our country is chaotic with a number of constitutional crises likely, war with Iran is possible, an extension of our 10 year old economy/bull market is  unlikely, and individual, corporate and government debt is a precarious levels.
I think we are in a bear market and on the cusp of a recession. I also think we are mired in a political crisis that will be highly disruptive.
Depending on how all these things unwind, we could be face with one huge
recession/bear market, or several mini recession/bear markets.
………………………………………………………………
Thursday (May 23)

Flash Crash ? Bulls Must Step in or It’s 1,200 DJIA Points Down Just for Openers.
      I said it yesterday (read below), The Street is oblivious to risk, spoiled by 10 years of Fed-fueled bull market.  We are looking at a greenstick fracture that only needs a nudge to trigger a vertical plunge to DJIA 23,500 (S&P500: 2,600 by fall.
According to A. Gary Shilling’s June INSIGHT, a recession has already started, even though housing is getting a boost from the fed-induced drop in interest rates.  Shilling is one of the nation’s most highly respected economists with a host of great calls on the economy, bond and stock market.
His 28-page INSIGHT is difficult to summarize here, just so packed with supporting analysis, charts, and graphs.
Included briefly his reasons for being bearish on the economy: the deflationary impact of tariffs, the slippage in consumer spending, a recession signal by the N.Y. Federal Reserve recession model, declines in capacity utilization, industrial production and commercial and industrial loans, an inverted yield curve,  the bubble (a peak) in the employment, unemployment numbers, the prospect for a sharp drop in Q2 and Q3 GDP, and DEBT (individual, corporate and government).
Shilling refers to the Fed’s Financial Stability Report than points to the vulnerability of corporate balance sheets “reminiscent of the subprime mortgage meltdown in the mid-2000s.”
Risks emphasized by Shilling include: a high level of complacency created by a decade of risk-taking and corporate borrowing through junk and BBB credits, as well as junk bonds and leveraged loans, extended to firms with poor credit profiles.
The ratio of debt to assets for all publicly owned nonfinancial firms, including speculative-grade and unrated firms is close to the highest levels over 20 years.
Then too, there is the disruption and devastation of the trade wars, war in the Mid-East and a disastrous fiscal policy caused by the 2017 Tax cuts that gave corporations a 40% tax cut vs. a insignificant cut for individuals in and around 1%.
Big losers in April include: auto dealers, clothing stores, health and personal care, electronics and appliance.
OK, that’s a brief summary that should open eyes.
CONCLUSION: No one likes a bear, but warnings are necessary to help investors avoid taking big hits to their portfolios.
We are on the threshold of a nasty crunch in stock prices, possibly a bear market.  The usual snapback in stock prices this time may not happen. At some point, in a bear market, there is no immediate rebound until the market has bottomed out after  a drop of 35% -50%.
Our country has huge problems, most created in the last two years. Expect the Trump administration to release whatever  positive projections it can dig up to reverse the downtrend in stock prices.  Take it with a grain of salt.
…………………………………………
Wednesday  (May 23)
Only An Algorithm Can Be This Naïve
Before algorithms dominated the Street’s decision process, humans pondered current and foreseeable events to get a feel for whether stocks were over or undervalued.  They tracked a host of indicators, but also  used their instincts based on years of experience to come to conclusions.
Algos track a host of indicators, probably a lot more than the human brain can track, but where the human brain excels is the ability to weigh in on the unknown.
Currently, the market is ignoring a number of critical  factors that could vastly affect the overall perception of what stocks are worth.
The big one is the prospect of the disruption of an impeachment process and uncertainty of the 2020 presidential election. Add to that, a looming recession and bear market, trade wars, war, and an overvalued market and you have enough to keep anyone awake at night.
What is driving stock prices today is not the tangible value, a dividend return, but rather the expectation  stocks will keep rising in value somewhat in line with the growth in earnings and companies buying back their own stock, but mostly because institutions have nowhere else to invest.
This is all well and good as long as we don’t hit a prolonged losing streak where a lot of bad stuff hits the fan relentlessly pounding stocks and investor confidence down.
        It happened in the 1970 and early 1980s where four recessions and five bear markets  in 11 years combined with war, Watergate/impeachment, stagflation, the OPEC oil embargo hammered stocks relentlessly driving the price/earnings ratio for the S&P 500 below 8X (1980).
Stuff happens, and this stock market is ignoring how bad things can get, mostly because computers can’t be programmed for the unthinkable, and also because few analysts/money managers weren’t around in the 1970/1980’s.
Since so many Street  algo decisions are based on the same indicators, they will eventually get a sell at the same time and whoosh – a flash crash of 12%-18% before anyone can say “ouch.” Instead of an immediate rebound we get another leg down as new negatives hit the market.
The best computer in the world is the human brain, not the fastest, not the ability to process zillions of things, but the best to ponder possibilities not yet quantifiable.

Cash will be king some day. It doesn’t have to be 100%, but enough to protect an investor in line with their tolerance for risk.
………………………………………………..
Tuesday   (May 20)
Look for an attempt to rebound today. There is formidable overhead supply that will limit the upside barring unexpected good news. Nasdaq stocks are under pressure, what are all the bees going to do if the Queen dies ?
The big picture is clouded, but  many on the Street don’t see it, or let’s say they haven’t tweaked their algos to respect what often happens in late stage bull markets – news that progressively gets worse, bit by bit.
        Does anyone who is paying attention think for a moment angst about the future, near and longer term, won’t surge past the  ouch point  to the I can’t stand it anymore level where investors break ranks and bail out.
This will get ugly, very ugly. Project into the future, can the Street simply ignore total chaos at the highest levels of our government ?
The Street wants to party all night.  That’s not how it works, not how it has ever worked, especially when the managers of money think we are in  a new era where recessions don’t happen not with the Fed quick to prevent troubles.
The Fed’s quiver of quick fixes is empty.  Yes, I expect a cut in the Fed funds rate, but they did that prior to the last three recessions.
Right now the Fed is a eunuch. They’ll try, clearly they don’t want a recession in an election year.  But they can’t stop the looming  chaos in confidence that is just around the corner, multiple constitutional crises.
Warning: Beware of a rally failure. Chasing the rally at the open is risky.
……………………………………………………………..
Wednesday (May 15)
Ask yourself two questions.
Is a bear market possible beginning in the next 6 months ?
Is a recession starting within the next 9 months possible ?
If your answer is no to both, think again, or risk getting blindsided.
No one  is bearish and that is bearish. The Street is blinded by the euphoria of a 10-year old bull market, propped up by an administration-friendly Fed, which may just cut its benchmark interest rate to head off a recession in time for the 2020 elections.
Bear markets begin ahead of recessions, the lead time varies from several months to a year. I don’t see the next bear market beginning slowly, since most analysts/money managers track the same indicators plug them into an algo and wait for an answer.  Aside from free-thinkers who will anticipate problems in advance, most on the Street will get a defer purchase/sell signal at the same time and whoosh down the market goes giving anyone with no cash reserve a chance to react.
       My message here is, establish a cash reserve of 30% and ignore the temptation to go all-in, because no one knows when the plug will be pulled. Worst case, an opportunity to make a little more is lost, but a flash crash leading to a bear market does not lead to two years of more getting back  one’s losses.
We have had ugly corrections in recent years, all but one were flash crashes.
Apr./May 2011 the S&P plunged 12.6% in 8 days
Aug. 2011:  –  15.8% in 6 days
Jly./Aug. 2015:   – 11.5% in 18 days
Dec. 2015/Jan.:  –  12.9% in 13 days
Jan/Feb. 2018:  -11.8% in 10 days
Oct./Dec. 2018: – 20.2% over 3 months
All were followed by recoveries. The difference with a bear market will be, new negatives will hit the market after a sharp plunge and at the point when it is ready to rebound. That’s when a second leg begins leading to lower lows and ultimately a decline of 35% – 48%, or so.
In most cases, the bear will be accompanied by a recession and a rush by the Fed to trigger a recovery with lower interest rates and pumping money into the economy.   But rates are still low and the ability of the Fed to pump money into the economy limited this time, so a recovery stands to take longer.
………………………………………………………..

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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fed Rate Cut in Attempt to Prevent Recession ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 25,585
S&P 500: 2,826
Nasdaq Comp.:7,637
Russell 2000:1,514
Tuesday, May 28, 2019
   9:09 a.m.
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gbifr79@gmail.com
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Summary:
TODAY:
       The economy has been slowly edging into recession. While the Fed denies it, I expect it to cut its benchmark fed funds rate later in the year to try to head off a recession  before the 2020 Presidential Election.
A cut would prompt a sharp rally until the question is asked, why did they do it ?
At that point, odds favor the correction would continue, probably into a bear market.
The market will  be mixed at the open.  If a rally begins, it should encounter resistance  above Dow 25,736, S&P 500: 2,837, and Nasdaq Comp.: 7,678.  Sellers appear to show up on rallies. Unless the Bulls can gain the upper hand, expect the slump that started in mid-May to continue, even gain momentum.
……………………………………….
      Last week I described why highly respected economist, A. Gary Shilling, believes we are in a recession. Included in his reasoning are a slippage in consumer spending, the deflationary impact of tariffs, declines in capacity utilization, industrial production, and commercial and industrial loans, an inverting of the yield curve, the prospect for declines in Q2 and Q3 GDP, and an uncomfortably high level of individual, corporate and government debt, a historically  high ratio of publicly owned nonfinancial debt to assets, including speculative-grade and unrated firms, and disastrous fiscal policies caused by the 2017 tax cut jobs act that gave individuals a small cut but gave corporations a 40% cut.
We will get a better read on the economy this week with key reports being, Consumer Confidence (10:00 a.m.),  Thursday Corporate Profits (8:30), Pending Home Sales (10:00 a.m.) and Consumer Sentiment Friday (10:00 a.m.).
Housing has been a drag on the economy, but the Fed’s policy ease  in January has helped with a sharp drop in mortgage rates. House on my street have sold within days and at higher prices than expected.
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TECHNICAL:
Expect the administration to release whatever it can scrounge up to stabilize the stock market. The most likely one would be a positive outlook about tariffs.  Don’t buy it.  Even if tariffs were abandoned, there are plenty of problems. The Street needs to trash the algos and “think” about what is happening now and what could happen in the future. That can’t be programmed in a computer.
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Minor Support: DJIA:25,456;S&P 500:2,816;Nasdaq Comp.:7,601
Minor Resistance: DJIA;25,736; S&P 500:2,837; Nasdaq Comp.:7,602

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Friday (May24)
Street Needs to Trash Algos….and “Think”
About Recession/Bear Market
The thing a lot of investors and professionals on the Street know is that bad stuff happens, the market takes a hit then recovers.  What they don’t know (or remember) is that bad  stuff can keep happening relentlessly pounding stocks down beyond the ouch point to the “I can’t stand it anymore point” where everyone is afraid to buy or worse yet just sell out, thinking the market will go lower.
        It has been a long time since the last bear market (2007 – 2009) when  the S&P500 dropped 58% in face of a global meltdown.
Since then, a lot of the Street’s decision process has been relegated to computer algorithms.  While that reduces human emotions from the process, it removes the ability of people to anticipate and respond to changing events here and abroad.
Bad stuff CAN continue to happen.  There were four recessions and four  bear markets between 1970 and 1981 a period that was marred by Mid-East war, the OPEC Oil Embargo, the energy crisis, stagflation (low growth/high inflation, double digit interest rates, military coups, AND the Watergate scandal resulting in the resignation of President Nixon.
Anyone paying attention has to realize we are currently faced with the potential for more than one debilitating event to happen.  President Trump is at risk of impeachment (or resignation), governance of our country is chaotic with a number of constitutional crises likely, war with Iran is possible, an extension of our 10 year old economy/bull market is  unlikely, and individual, corporate and government debt is a precarious levels.
I think we are in a bear market and on the cusp of a recession. I also think we are mired in a political crisis that will be highly disruptive.
Depending on how all these things unwind, we could be face with one huge
recession/bear market, or several mini recession/bear markets.
………………………………………………………………
Thursday (May 23)

Flash Crash ? Bulls Must Step in or It’s 1,200 DJIA Points Down Just for Openers.
      I said it yesterday (read below), The Street is oblivious to risk, spoiled by 10 years of Fed-fueled bull market.  We are looking at a greenstick fracture that only needs a nudge to trigger a vertical plunge to DJIA 23,500 (S&P500: 2,600 by fall.
According to A. Gary Shilling’s June INSIGHT, a recession has already started, even though housing is getting a boost from the fed-induced drop in interest rates.  Shilling is one of the nation’s most highly respected economists with a host of great calls on the economy, bond and stock market.
His 28-page INSIGHT is difficult to summarize here, just so packed with supporting analysis, charts, and graphs.
Included briefly his reasons for being bearish on the economy: the deflationary impact of tariffs, the slippage in consumer spending, a recession signal by the N.Y. Federal Reserve recession model, declines in capacity utilization, industrial production and commercial and industrial loans, an inverted yield curve,  the bubble (a peak) in the employment, unemployment numbers, the prospect for a sharp drop in Q2 and Q3 GDP, and DEBT (individual, corporate and government).
Shilling refers to the Fed’s Financial Stability Report than points to the vulnerability of corporate balance sheets “reminiscent of the subprime mortgage meltdown in the mid-2000s.”
Risks emphasized by Shilling include: a high level of complacency created by a decade of risk-taking and corporate borrowing through junk and BBB credits, as well as junk bonds and leveraged loans, extended to firms with poor credit profiles.
The ratio of debt to assets for all publicly owned nonfinancial firms, including speculative-grade and unrated firms is close to the highest levels over 20 years.
Then too, there is the disruption and devastation of the trade wars, war in the Mid-East and a disastrous fiscal policy caused by the 2017 Tax cuts that gave corporations a 40% tax cut vs. a insignificant cut for individuals in and around 1%.
Big losers in April include: auto dealers, clothing stores, health and personal care, electronics and appliance.
OK, that’s a brief summary that should open eyes.
CONCLUSION: No one likes a bear, but warnings are necessary to help investors avoid taking big hits to their portfolios.
We are on the threshold of a nasty crunch in stock prices, possibly a bear market.  The usual snapback in stock prices this time may not happen. At some point, in a bear market, there is no immediate rebound until the market has bottomed out after  a drop of 35% -50%.
Our country has huge problems, most created in the last two years. Expect the Trump administration to release whatever  positive projections it can dig up to reverse the downtrend in stock prices.  Take it with a grain of salt.
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Wednesday  (May 23)
Only An Algorithm Can Be This Naïve
Before algorithms dominated the Street’s decision process, humans pondered current and foreseeable events to get a feel for whether stocks were over or undervalued.  They tracked a host of indicators, but also  used their instincts based on years of experience to come to conclusions.
Algos track a host of indicators, probably a lot more than the human brain can track, but where the human brain excels is the ability to weigh in on the unknown.
Currently, the market is ignoring a number of critical  factors that could vastly affect the overall perception of what stocks are worth.
The big one is the prospect of the disruption of an impeachment process and uncertainty of the 2020 presidential election. Add to that, a looming recession and bear market, trade wars, war, and an overvalued market and you have enough to keep anyone awake at night.
What is driving stock prices today is not the tangible value, a dividend return, but rather the expectation  stocks will keep rising in value somewhat in line with the growth in earnings and companies buying back their own stock, but mostly because institutions have nowhere else to invest.
This is all well and good as long as we don’t hit a prolonged losing streak where a lot of bad stuff hits the fan relentlessly pounding stocks and investor confidence down.
        It happened in the 1970 and early 1980s where four recessions and five bear markets  in 11 years combined with war, Watergate/impeachment, stagflation, the OPEC oil embargo hammered stocks relentlessly driving the price/earnings ratio for the S&P 500 below 8X (1980).
Stuff happens, and this stock market is ignoring how bad things can get, mostly because computers can’t be programmed for the unthinkable, and also because few analysts/money managers weren’t around in the 1970/1980’s.
Since so many Street  algo decisions are based on the same indicators, they will eventually get a sell at the same time and whoosh – a flash crash of 12%-18% before anyone can say “ouch.” Instead of an immediate rebound we get another leg down as new negatives hit the market.
The best computer in the world is the human brain, not the fastest, not the ability to process zillions of things, but the best to ponder possibilities not yet quantifiable.

Cash will be king some day. It doesn’t have to be 100%, but enough to protect an investor in line with their tolerance for risk.
………………………………………………..
Tuesday   (May 20)
Look for an attempt to rebound today. There is formidable overhead supply that will limit the upside barring unexpected good news. Nasdaq stocks are under pressure, what are all the bees going to do if the Queen dies ?
The big picture is clouded, but  many on the Street don’t see it, or let’s say they haven’t tweaked their algos to respect what often happens in late stage bull markets – news that progressively gets worse, bit by bit.
        Does anyone who is paying attention think for a moment angst about the future, near and longer term, won’t surge past the  ouch point  to the I can’t stand it anymore level where investors break ranks and bail out.
This will get ugly, very ugly. Project into the future, can the Street simply ignore total chaos at the highest levels of our government ?
The Street wants to party all night.  That’s not how it works, not how it has ever worked, especially when the managers of money think we are in  a new era where recessions don’t happen not with the Fed quick to prevent troubles.
The Fed’s quiver of quick fixes is empty.  Yes, I expect a cut in the Fed funds rate, but they did that prior to the last three recessions.
Right now the Fed is a eunuch. They’ll try, clearly they don’t want a recession in an election year.  But they can’t stop the looming  chaos in confidence that is just around the corner, multiple constitutional crises.
Warning: Beware of a rally failure. Chasing the rally at the open is risky.
………………………………………………………
Monday (May 20)
A three day rally that recouped a bit more than half of May’s
5% loss ran into a wall Friday raising the possibility of a test of  last Monday’s S&P500 low of 2801.
Today’s market will start on the downside which should attract buyers unless they have retreated to the sidelines, fearful of an escalation of war with Iran and uneasy about the inability of the U.S. to strike a trade deal with China.
The DJIA and S&P 500 have traced out triple tops (Nasdaq a double top) going back to January 2018 indicating  an unwillingness of the Street to reach for stocks.
In the interim, we had a three month (Oct./Dec.) 20% correction which was quickly reversed by the Fed’s policy change from raising interest rates to a no action mode.
If humans rather than algorithms  made more buy/sell decisions, this market would sell lower in face of  mounting problems here and abroad.
This decision process has been responsible for the flash crash phenom which features sudden plunges of  12% to 20% in 6 to 18 days.
As long as those losses are recouped quickly, investors are safe, however if the next one leads to a 35% – 50% bear market the Street’s indifference to risk is devastating to portfolios.
Since the Fed’s quiver of tools for stimulating a recovery is limited, a new bull market stands to take a long time to develop.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The S&P 500 was up 66% at this point in the Obama administration compared with a gain of 24% at the same point under Donald Trump.
……………………………………………………………..

Wednesday (May 15)
Ask yourself two questions.
Is a bear market possible beginning in the next 6 months ?
Is a recession starting within the next 9 months possible ?
If your answer is no to both, think again, or risk getting blindsided.
No one  is bearish and that is bearish. The Street is blinded by the euphoria of a 10-year old bull market, propped up by an administration-friendly Fed, which may just cut its benchmark interest rate to head off a recession in time for the 2020 elections.
Bear markets begin ahead of recessions, the lead time varies from several months to a year. I don’t see the next bear market beginning slowly, since most analysts/money managers track the same indicators plug them into an algo and wait for an answer.  Aside from free-thinkers who will anticipate problems in advance, most on the Street will get a defer purchase/sell signal at the same time and whoosh down the market goes giving anyone with no cash reserve a chance to react.
       My message here is, establish a cash reserve of 30% and ignore the temptation to go all-in, because no one knows when the plug will be pulled. Worst case, an opportunity to make a little more is lost, but a flash crash leading to a bear market does not lead to two years of more getting back  one’s losses.
We have had ugly corrections in recent years, all but one were flash crashes.
Apr./May 2011 the S&P plunged 12.6% in 8 days
Aug. 2011:  –  15.8% in 6 days
Jly./Aug. 2015:   – 11.5% in 18 days
Dec. 2015/Jan.:  –  12.9% in 13 days
Jan/Feb. 2018:  -11.8% in 10 days
Oct./Dec. 2018: – 20.2% over 3 months
All were followed by recoveries. The difference with a bear market will be, new negatives will hit the market after a sharp plunge and at the point when it is ready to rebound. That’s when a second leg begins leading to lower lows and ultimately a decline of 35% – 48%, or so.
In most cases, the bear will be accompanied by a recession and a rush by the Fed to trigger a recovery with lower interest rates and pumping money into the economy.   But rates are still low and the ability of the Fed to pump money into the economy limited this time, so a recovery stands to take longer.
………………………………………………………..

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 116 months, the second longest on record and  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 hit a low of 3.7 percent in November, jumped to 3.9 percent in December and to 4.0 percent in January. Now, averages include months below and above 3.8. What’s more, we won’t know when the current recession if we have one begins because that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) long after the fact.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 119 months is four 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.
>The current economic expansion has lasted 123 months. That’s 65 months (2.1x) longer than the average expansion (58.4 months) going back to 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 3.8 Months.
> 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.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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.