Fed to Hype Rate Cut, Administration to Hype Trade Progress, Brief Rally ? Nimble Traders Only

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,078
S&P 500: 2,887
Nasdaq Comp.:7,785
Russell 2000:1,479
Thursday,  October 3, 2019
 9:08 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
What’s happening with the economy should not have surprised the Street. The early signs of recession have been there for many months and reported here  daily.
This plunge should not surprise the Street.  With the DJIA at 26,820 on Monday, Sept. 30  I headlined, “Ignore Fed and Administration Hype, ..adding  Cash reserve of 80%”
Why would I go to that extreme – 80% cash ?
We all know the Fed will shortly announce more rate cuts, the Administration and/or Street will hype  progress on trade and trigger a rally.
However, at some point, their efforts to prop the market will fail and then it will be straight down.  Why risk it ?

Investors must be prepared for the stock market and political environment to enter a very dark period where a bear market can take the major market averages down 35% – 60%. The severity of the bear market depends on what new negatives hit the market as it is tumbling.
The Street is spoiled by a 10-year bull market. They want to keep partying.
But, the Street is mesmerized by a giant “myth.”
The Myth
-that economies grow forever.
-that lessons from the Great Recessions were learned – can’t happen again.
-that stock markets always recover quickly from bear markets
-that the current excessive stock market valuations will last forever
-that the Fed will come to the rescue when the stock market takes a big hit.
-that single digit P/Es will never return.
-that untethered chaos, civil and political unrest, and violence are not possible in the U.S..
This can get ugly, real ugly. All that is needed is for one or several major institutions to break ranks and sell, others to follow.

The upside is, all this carnage will produce an unprecedented  buying opportunity. Investors must be prepared for it, even if they must leave the party before “last call.”
I issued my bear market bottom “BUY” on March 10, 2009 as the DJIA at 6,800. I would like to do that again when all this unwinds.

IMPORTANT NEWS TODAY
The current plunge in stock prices was triggered by  Tuesday’s report  for Septembers’ ISM manufacturers’ index which plunged the most since the Great Recession  (2007-2009).
That was manufacturing,  today at  9:45 a.m. we get the PMI “Services”  report and at 10 a.m. today we get the ISM Non-Manufacturing “Services” report, significant since they cover a greater sector of our economy. Bad reports would confirm a recession and hammer stocks. Also at 10 o’clock we get Factory Orders, which should stink.
……………………………………………………………………..
TOP ECONOMIST STATES REASONS FOR RECESSION 

I have tracked A. Gary Shilling for decades and believe him to be one of the nation’s leading economists based on an incredible record for forecasting accuracy.
    Shilling’s October  INSIGHT listed reasons why RECESSION is underway now. To mention a few:

-OECD has slashed economic forecasts.
-N.Y. and Cleveland Fed model outputs have reached recession levels.
-Capital spending is falling
Transportation stocks  continue to drop. Transports tend to lead industrials in signaling trouble since materials need to be shipped before they are turned into  finished products.
Trade wars are causing business caution.
-Treasury yield curve is inverted.
-Corporate profits are sliding.
-The Fed is losing its battle against disinflation.
Consumer spending alone is holding back a full-blown recession.
-Growth of nonfarm payrolls and weekly earnings continue to slide, as well as consumer confidence.
Purchasing Managers’ index (PMI) for manufacturing has dropped below 50 signaling contraction.
-A low manufacturing capacity utilization is discouraging capital expansion.
-Eurozone and U.K. on edge of recession, China’s growth slowing.
-Shiller’s cyclically adjusted P/E  (28.9) is 71% above long-term average (16.9).

…………………………………………………………
Minor Support: DJIA:25,797; S&P 500:2,857; Nasdaq Comp.:7,697
Minor Resistance: DJIA:26,295; S&P 500:2,901; Nasdaq Comp.:7,827
………………………………………………………….

Wed. Oct. 2  “Ignore Fed and Administration Hype”
Yesterday’s abrupt reversal and crunch is an example how vulnerable this overpriced market is. I think it was more a matter of buyers walking away when the ISM report hit, than overwhelming selling.  That’ll come at lower levels when doubts and fear mount.
        We had the same freefall in late July/early August. No one wants the bull market to end and will stay as long as possible, but are quick to run for cover when it looks like a bear market or severe correction will strike.
There is sizable support between DJIA: 25,500 and 26,200’ S&P 500:2,850 – 2,920; and Nasdaq Comp.:7,770 – 7,830.
That’s where buyers showed up in August. That band of support will be broken at some point.
Conclusion
:  Expect one or several sharp rallies to be triggered by optimistic comments by the Fed, the Administration, the Street.
The Fed will promise or hint at lower interest rates, the Administration will claim progress in trades talks, and the Street will forecast an earnings rebound in 2020.
We are dealing with something we have not dealt with for 45 years – a dysfunctional government as impeachment proceedings move forward.
This is NOT something the Street’s algorithms were programmed for.  Expect these algos to be tweaked in coming weeks and that stands to be for less buying as well as some selling.
The whole idea here is to prop the market up and delay a recession until after the 2020 election.   Nonsense !  We  are in the early stages of a recession, it will get worse next year.
Confidence drives stock prices.  Confidence will take a huge hit in coming months, and that will eventually take a huge toll on stock prices.
TECHNICAL: There will be the typical knee-jerk buying reaction by institutions  today, but yesterday’s surprise plunge was a jolt to confidence. Playing rallies here is for the nimblest of traders.
……………………………………………………

Wed. Oct. 2  “Bull/Bear Tug of War to be Resolved Soon”    

So far, impeachment proceedings have not dented the veneer of the Street’s bullishness.
Richard Nixon was re-elected a bit more than three months after the first signs of wrongdoings by his administration, the arrest of five men trying to bug  the Democratic National Committee’s Watergate hotel and office complex offices.
A bear market started two months later, one that lopped 50% off of the S&P 500 Index.
Nixon resigned August 8, 1974 before he could be impeached. A recession (Nov. 1973-Mar. 1975), the Yom Kippur War (Oct.1973) and OPEC oil embargo (Oct. 1973-Mar. 1974) contributed to the market’s demise.
What we are face here is similar in that a recession and bear market loom, but far different, far more divisive and far more injurious to investor confidence with impeachment proceedings underway.
Once things start to unravel, there is no stopping the carnage until the plunge has run its course.  Negative news is relentless, putting a lid on rally attempts and driving prices lower.
The big difference today is so much of the decision process is computerized, which means no change in the balance between bulls and bears until the algos are re-programmed.
That will happen as fear and reality mount.
Bottom Line:  The Bulls are desperately trying to hold the line. Even if the market breaks above minor resistance (DJIA: 27,020, S&P 500: 3,000), there is another line of resistance a little above that (DJIA:27,300, S&P 500: 3,008). TECHNICAL
 Sad to say, but IMHO the Fed and Administration have surrendered their credibility with an inconsistent and  flow of information.  Be wary of press releases from  either. They are designed to prop the market, which will plunge without the hype.  The Fed  has lost its clout about rates and why would China cave to trade concessions with Trump’s power sapped by the prospect of impeachment ?
………………………………………………….
The Street tends to shrug off a lot of things that could end up hammering stock prices: war, recession, a bear market resulting from overvalued stocks facing an earnings recession that can be worsened by a recession, and now the potential for the impeachment of the nation’s president.
That’s what a 10-year long bull market can do to the people who benefitted the most – corporate management and Wall Street.
       At some point, the BIG money will hit the silk and it will be straight down  12% to 16% before investors can say ouch.  That’s just the first leg down.
That’s because the Fed, Street and Administration have propped this market up with hype about the economy and the magic of interest rate cuts !
Investors are being conned !  There are no new eras ! Bear markets happen !
All it takes is for several major institutions to break ranks and sell and others will follow.
The impact will be instantaneous as computer algos, mostly programmed to track the same bullish metrics, will get the sell at the same time.
The hype will continue in an attempt to prop the market hopefully through 2020 election year.
Impeachment a real  possibility, and that will lead to more divisiveness and  stifle consumer and investor confidence.
This one has the potential to get real ugly.
Stock markets recover from bear markets, so why not wait it out ?
For one, over the last 46 years we have had three bear markets with the S&P 500 dropping 50%.  Many investors got shaken out near the bottom not to return until long after the  market lows. Those who held on didn’t see portfolios regain losses for years.
Depending on one’s tolerance for risk, a cash reserve of 80% is justified.
………………………………………………………………

Friday Sept. 27 “Street’s Arrogance to Risk to Precede  the Fall ?”
Naturally, current events surrounding Donald Trump and the prospects for  the U.S. House initiating impeachment proceedings  flashes back to the early 1970s when President Nixon was the subject of the same thing.
Nixon took office in Jan. 1969. Incidents leading to the House Judiciary Committee passing three articles of impeachment: obstruction of Justice, abuse of power and contempt of Congress were filed  on July 27, 1974. On August 8, 1974, President Nixon resigned, but was later pardoned by President Ford.
Perhaps the formation of the White House “plumbers” unit in the fall of 1971, intended to plug leaks in the White House set the stage for a series of shocking events between the White House and  Congress and the press, including the formation of the  Senate Watergate committee, high level resignations, coverups, payoffs, erasures of tapes, the “Saturday Night Massacre”, and a Supreme Court ruling.
Ironically, Nixon was re-elected on November 11, 1974.
A bear market (1/1/73 – 10/4/74)  intervened taking  the S&P 500 down 50%; a recession started  in November 1973 and ended in March 1975.
Contributing to this chaotic era was the Yom Kippur War (Oct 6 -26) and OPEC’s oil embargo (Oct. 1973 – Mar. 1974) and a four-fold increase in the price of oil.   Wild stuff !
Just how this will play out this time in uncertain. We are in the early stages of a recession, which the Fed acknowledges and is responding to with rate cuts.
A bear market may have already started, and who knows, maybe another mid-east oil crisis if war breaks out between the U.S. and Iran.
The market is historically overpriced. The prudent thing to do here is to have a healthy cash reserve (30% to 85%) depending on one’s tolerance for risk.
The new normal for corrections is the flash crash, a near vertical plunge in prices as highly leveraged institutions stop buying, worse yet – start selling with the result being a 12% – 16% plunge followed shortly after by a failed attempt to rebound, then another huge plunge.
So far, the Street is ignoring the risk, perhaps in denial after being spoiled by a 10-year bull market.

TECHNICAL 
Today’s market will start on the upside with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
While impeachment is grabbing the headlines, the bulls are hoping for good news on U.S./China trade talks October 10.
………………………………………………….
Thursday Sept. 26  “Market  Takes a Pretty Good Punch, but……”
     Looks like a jousting match between Trade talks and impeachment proceedings  to determine which dominates the direction of stocks.
      While there is  enough weakness in certain economic  indicators to warn of recession, the Street doesn’t care (yet).
All recessions to date have been accompanied by bear markets.
Expect news releases about improved U.S./China trade prospects anytime the market slides down. Absent that, the Fed will step in to stabilize the market, it’s the new norm.
The other side of the coin is the market will respond to bad news on trade, as well .  For some reason, the Shanghai Composite stock index dropped sharply yesterday, which may suggest  uncertainty about upcoming  U.S/China trade talks.
      The market is demonstrating it can take a pretty good punch what with recession talk, trade uncertainty and now impeachment.
But
at some point, the market will keep going down. It will happen out of nowhere, because the Street’s algos will get a sell all at the same time and whoooosh.
      What to do depends on one’s tolerance for risk. Anyone needing funds from their investment account near-term better have a healthy cash reserve. Senior citizens not in a position to ride out a bear market should also have a good cash reserve.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
…………………………………………………………..

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Ignore Fed and Administration Hype

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,573
S&P 500: 2,940
Nasdaq Comp.:7,958
Russell 2000:
Wednesday,  October 2, 2019
 9:08 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Yesterday’s abrupt reversal and crunch is an example how vulnerable this overpriced market is. I think it was more a matter of buyers walking away when the ISM report hit, than overwhelming selling.  That’ll come at lower levels when doubts and fear mount.
        We had the same freefall in late July/early August. No one wants the bull market to end and will stay as long as possible, but are quick to run for cover when it looks like a bear market or severe correction will strike.
There is sizable support between DJIA: 25,500 and 26,200’ S&P 500:2,850 – 2,920; and Nasdaq Comp.:7,770 – 7,830.
That’s where buyers showed up in August. That band of support will be broken at some point.
Conclusion
:  Expect one or several sharp rallies to be triggered by optimistic comments by the Fed, the Administration, the Street.
The Fed will promise or hint at lower interest rates, the Administration will claim progress in trades talks, and the Street will forecast an earnings rebound in 2020.
We are dealing with something we have not dealt with for 45 years – a dysfunctional government as impeachment proceedings move forward.
This is NOT something the Street’s algorithms were programmed for.  Expect these algos to be tweaked in coming weeks and that stands to be for less buying as well as some selling.
The whole idea here is to prop the market up and delay a recession until after the 2020 election.   Nonsense !  We  are in the early stages of a recession, it will get worse next year.
Confidence drives stock prices.  Confidence will take a huge hit in coming months, and that will eventually take a huge toll on stock prices.
TECHNICAL: There will be the typical knee-jerk buying reaction by institutions  today, but yesterday’s surprise plunge was a jolt to confidence. Playing rallies here is for the nimblest of traders.

…………………………………………………………
Minor Support: DJIA:26,306; S&P 500:2,923; Nasdaq Comp.:7,953
Minor Resistance: DJIA:26,628; S&P 500:2,956; Nasdaq Comp.:8,050
………………………………………………………….

Wed. Oct. 2  “Bull/Bear Tug of War to be Resolved Soon”    

So far, impeachment proceedings have not dented the veneer of the Street’s bullishness.
Richard Nixon was re-elected a bit more than three months after the first signs of wrongdoings by his administration, the arrest of five men trying to bug  the Democratic National Committee’s Watergate hotel and office complex offices.
A bear market started two months later, one that lopped 50% off of the S&P 500 Index.
Nixon resigned August 8, 1974 before he could be impeached. A recession (Nov. 1973-Mar. 1975), the Yom Kippur War (Oct.1973) and OPEC oil embargo (Oct. 1973-Mar. 1974) contributed to the market’s demise.
What we are face here is similar in that a recession and bear market loom, but far different, far more divisive and far more injurious to investor confidence with impeachment proceedings underway.
Once things start to unravel, there is no stopping the carnage until the plunge has run its course.  Negative news is relentless, putting a lid on rally attempts and driving prices lower.
The big difference today is so much of the decision process is computerized, which means no change in the balance between bulls and bears until the algos are re-programmed.
That will happen as fear and reality mount.
Bottom Line:  The Bulls are desperately trying to hold the line. Even if the market breaks above minor resistance (DJIA: 27,020, S&P 500: 3,000), there is another line of resistance a little above that (DJIA:27,300, S&P 500: 3,008). TECHNICAL
 Sad to say, but IMHO the Fed and Administration have surrendered their credibility with an inconsistent and  flow of information.  Be wary of press releases from  either. They are designed to prop the market, which will plunge without the hype.  The Fed  has lost its clout about rates and why would China cave to trade concessions with Trump’s power sapped by the prospect of impeachment ?

Monday Sept. 30  “Ignore Fed and Administration Hype, Cash 80%”
The Street tends to shrug off a lot of things that could end up hammering stock prices: war, recession, a bear market resulting from overvalued stocks facing an earnings recession that can be worsened by a recession, and now the potential for the impeachment of the nation’s president.
That’s what a 10-year long bull market can do to the people who benefitted the most – corporate management and Wall Street.
       At some point, the BIG money will hit the silk and it will be straight down  12% to 16% before investors can say ouch.  That’s just the first leg down.
That’s because the Fed, Street and Administration have propped this market up with hype about the economy and the magic of interest rate cuts !
Investors are being conned !  There are no new eras ! Bear markets happen !
All it takes is for several major institutions to break ranks and sell and others will follow.
The impact will be instantaneous as computer algos, mostly programmed to track the same bullish metrics, will get the sell at the same time.
The hype will continue in an attempt to prop the market hopefully through 2020 election year.
Impeachment a real  possibility, and that will lead to more divisiveness and  stifle consumer and investor confidence.
This one has the potential to get real ugly.
Stock markets recover from bear markets, so why not wait it out ?
For one, over the last 46 years we have had three bear markets with the S&P 500 dropping 50%.  Many investors got shaken out near the bottom not to return until long after the  market lows. Those who held on didn’t see portfolios regain losses for years.
Depending on one’s tolerance for risk, a cash reserve of 80% is justified.
………………………………………………………………

Friday Sept. 27 “Street’s Arrogance to Risk to Precede  the Fall ?”
Naturally, current events surrounding Donald Trump and the prospects for  the U.S. House initiating impeachment proceedings  flashes back to the early 1970s when President Nixon was the subject of the same thing.
Nixon took office in Jan. 1969. Incidents leading to the House Judiciary Committee passing three articles of impeachment: obstruction of Justice, abuse of power and contempt of Congress were filed  on July 27, 1974. On August 8, 1974, President Nixon resigned, but was later pardoned by President Ford.
Perhaps the formation of the White House “plumbers” unit in the fall of 1971, intended to plug leaks in the White House set the stage for a series of shocking events between the White House and  Congress and the press, including the formation of the  Senate Watergate committee, high level resignations, coverups, payoffs, erasures of tapes, the “Saturday Night Massacre”, and a Supreme Court ruling.
Ironically, Nixon was re-elected on November 11, 1974.
A bear market (1/1/73 – 10/4/74)  intervened taking  the S&P 500 down 50%; a recession started  in November 1973 and ended in March 1975.
Contributing to this chaotic era was the Yom Kippur War (Oct 6 -26) and OPEC’s oil embargo (Oct. 1973 – Mar. 1974) and a four-fold increase in the price of oil.   Wild stuff !
Just how this will play out this time in uncertain. We are in the early stages of a recession, which the Fed acknowledges and is responding to with rate cuts.
A bear market may have already started, and who knows, maybe another mid-east oil crisis if war breaks out between the U.S. and Iran.
The market is historically overpriced. The prudent thing to do here is to have a healthy cash reserve (30% to 85%) depending on one’s tolerance for risk.
The new normal for corrections is the flash crash, a near vertical plunge in prices as highly leveraged institutions stop buying, worse yet – start selling with the result being a 12% – 16% plunge followed shortly after by a failed attempt to rebound, then another huge plunge.
So far, the Street is ignoring the risk, perhaps in denial after being spoiled by a 10-year bull market.

TECHNICAL 
Today’s market will start on the upside with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
While impeachment is grabbing the headlines, the bulls are hoping for good news on U.S./China trade talks October 10.
………………………………………………….
Thursday Sept. 26  “Market  Takes a Pretty Good Punch, but……”
     Looks like a jousting match between Trade talks and impeachment proceedings  to determine which dominates the direction of stocks.
      While there is  enough weakness in certain economic  indicators to warn of recession, the Street doesn’t care (yet).
All recessions to date have been accompanied by bear markets.
Expect news releases about improved U.S./China trade prospects anytime the market slides down. Absent that, the Fed will step in to stabilize the market, it’s the new norm.
The other side of the coin is the market will respond to bad news on trade, as well .  For some reason, the Shanghai Composite stock index dropped sharply yesterday, which may suggest  uncertainty about upcoming  U.S/China trade talks.
      The market is demonstrating it can take a pretty good punch what with recession talk, trade uncertainty and now impeachment.
But
at some point, the market will keep going down. It will happen out of nowhere, because the Street’s algos will get a sell all at the same time and whoooosh.
      What to do depends on one’s tolerance for risk. Anyone needing funds from their investment account near-term better have a healthy cash reserve. Senior citizens not in a position to ride out a bear market should also have a good cash reserve.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
…………………………………………………………..
Wednesday Sept. 25 “Street Doesn’t Care About Impeachment, Just Trade.”
   Axios reports the Street wants a trade deal, more importantly it points out that the S&P 500 has risen 3% month  to date, all the while U.S. Treasury prices have fallen (yields risen) suggesting an increased investor appetite for risk.
To-date, U.S. equity ETFs have seen  an $18 billion inflow of money while bond ETFs have experienced a slowing in new funds.
This pattern reverses much of what happened earlier in the year when equity ETFs  (excepting February) were hit with net selling and bond ETFs net buying.
What’s going on ?
It could be the Street is front-running the Stock Trader’s Almanac’s  “Best Six Months” (November – April), a highly consistent, time-tested pattern for market timing – buy November 1 – sell April 30.
The pattern is challenged by three issues – a trade deal or not, recession, and  the move by the U.S. House to impeach  President Trump.
      Good news/bad news on a U.S./China trade deal has triggered short-term buying and selling, but political news has little impact except for big buying when Trump was elected in anticipation of lower taxes and deregulation.
      The U.S. House is only in the preliminary stages of deciding if it will pursue impeachment of Trump, so I doubt  this news will have much impact near-term.
Global recession is real, but the U.S. economy is taking its time to make the slide.  Acceleration of that trend would tip the market into a full-fledged bear market or nasty correction.
What does all this mean ?
You know the answer – have a major cash reserve even though odds favor higher prices via institutional buying ahead of the “Best Six Months.”
When this overpriced/ aging bull market cracks it will do so without warning.
……………………………………………
Tuesday Sept. 24  “So Far, Market Has Gone Nowhere in 20 Months”
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued 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 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

Bulls/Bears Tug of War To Be Resolved Soon

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,916
S&P 500: 2,976
Nasdaq Comp.:7,999
Russell 2000:1,523
Tuesday,  October 1, 2019
 9:08 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
So far, impeachment proceedings have not dented the veneer of the Street’s bullishness.
Richard Nixon was re-elected a bit more than three months after the first signs of wrongdoings by his administration, the arrest of five men trying to bug  the Democratic National Committee’s Watergate hotel and office complex offices.
A bear market started two months later, one that lopped 50% off of the S&P 500 Index.
Nixon resigned August 8, 1974 before he could be impeached. A recession (Nov. 1973-Mar. 1975), the Yom Kippur War (Oct.1973) and OPEC oil embargo (Oct. 1973-Mar. 1974) contributed to the market’s demise.
What we are face here is similar in that a recession and bear market loom, but far different, far more divisive and far more injurious to investor confidence with impeachment proceedings underway.
Once things start to unravel, there is no stopping the carnage until the plunge has run its course.  Negative news is relentless, putting a lid on rally attempts and driving prices lower.
The big difference today is so much of the decision process is computerized, which means no change in the balance between bulls and bears until the algos are re-programmed.
That will happen as fear and reality mount.
Bottom Line:  The Bulls are desperately trying to hold the line. Even if the market breaks above minor resistance (DJIA: 27,020, S&P 500: 3,000), there is another line of resistance a little above that (DJIA:27,300, S&P 500: 3,008). TECHNICAL
 Sad to say, but IMHO the Fed and Administration have surrendered their credibility with an inconsistent and  flow of information.  Be wary of press releases from  either. They are designed to prop the market, which will plunge without the hype.  The Fed  has lost its clout about rates and why would China cave to trade concessions with Trump’s power sapped by the prospect of impeachment ?
……………………………………………………………
Minor Support: DJIA:26,897; S&P 500:2.973; Nasdaq Comp.:7,951
Minor Resistance: DJIA:26,967; S&P 500:2,977; Nasdaq Comp.:9,039
………………………………………………………….

Monday Sept. 30  “Ignore Fed and Administration Hype, Cash 80%”
The Street tends to shrug off a lot of things that could end up hammering stock prices: war, recession, a bear market resulting from overvalued stocks facing an earnings recession that can be worsened by a recession, and now the potential for the impeachment of the nation’s president.
That’s what a 10-year long bull market can do to the people who benefitted the most – corporate management and Wall Street.
       At some point, the BIG money will hit the silk and it will be straight down  12% to 16% before investors can say ouch.  That’s just the first leg down.
That’s because the Fed, Street and Administration have propped this market up with hype about the economy and the magic of interest rate cuts !
Investors are being conned !  There are no new eras ! Bear markets happen !
All it takes is for several major institutions to break ranks and sell and others will follow.
The impact will be instantaneous as computer algos, mostly programmed to track the same bullish metrics, will get the sell at the same time.
The hype will continue in an attempt to prop the market hopefully through 2020 election year.
Impeachment a real  possibility, and that will lead to more divisiveness and  stifle consumer and investor confidence.
This one has the potential to get real ugly.
Stock markets recover from bear markets, so why not wait it out ?
For one, over the last 46 years we have had three bear markets with the S&P 500 dropping 50%.  Many investors got shaken out near the bottom not to return until long after the  market lows. Those who held on didn’t see portfolios regain losses for years.
Depending on one’s tolerance for risk, a cash reserve of 80% is justified.
………………………………………………………………

Friday Sept. 27 “Street’s Arrogance to Risk to Precede  the Fall ?”
Naturally, current events surrounding Donald Trump and the prospects for  the U.S. House initiating impeachment proceedings  flashes back to the early 1970s when President Nixon was the subject of the same thing.
Nixon took office in Jan. 1969. Incidents leading to the House Judiciary Committee passing three articles of impeachment: obstruction of Justice, abuse of power and contempt of Congress were filed  on July 27, 1974. On August 8, 1974, President Nixon resigned, but was later pardoned by President Ford.
Perhaps the formation of the White House “plumbers” unit in the fall of 1971, intended to plug leaks in the White House set the stage for a series of shocking events between the White House and  Congress and the press, including the formation of the  Senate Watergate committee, high level resignations, coverups, payoffs, erasures of tapes, the “Saturday Night Massacre”, and a Supreme Court ruling.
Ironically, Nixon was re-elected on November 11, 1974.
A bear market (1/1/73 – 10/4/74)  intervened taking  the S&P 500 down 50%; a recession started  in November 1973 and ended in March 1975.
Contributing to this chaotic era was the Yom Kippur War (Oct 6 -26) and OPEC’s oil embargo (Oct. 1973 – Mar. 1974) and a four-fold increase in the price of oil.   Wild stuff !
Just how this will play out this time in uncertain. We are in the early stages of a recession, which the Fed acknowledges and is responding to with rate cuts.
A bear market may have already started, and who knows, maybe another mid-east oil crisis if war breaks out between the U.S. and Iran.
The market is historically overpriced. The prudent thing to do here is to have a healthy cash reserve (30% to 85%) depending on one’s tolerance for risk.
The new normal for corrections is the flash crash, a near vertical plunge in prices as highly leveraged institutions stop buying, worse yet – start selling with the result being a 12% – 16% plunge followed shortly after by a failed attempt to rebound, then another huge plunge.
So far, the Street is ignoring the risk, perhaps in denial after being spoiled by a 10-year bull market.

TECHNICAL 
Today’s market will start on the upside with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
While impeachment is grabbing the headlines, the bulls are hoping for good news on U.S./China trade talks October 10.
………………………………………………….
Thursday Sept. 26  “Market  Takes a Pretty Good Punch, but……”
     Looks like a jousting match between Trade talks and impeachment proceedings  to determine which dominates the direction of stocks.
      While there is  enough weakness in certain economic  indicators to warn of recession, the Street doesn’t care (yet).
All recessions to date have been accompanied by bear markets.
Expect news releases about improved U.S./China trade prospects anytime the market slides down. Absent that, the Fed will step in to stabilize the market, it’s the new norm.
The other side of the coin is the market will respond to bad news on trade, as well .  For some reason, the Shanghai Composite stock index dropped sharply yesterday, which may suggest  uncertainty about upcoming  U.S/China trade talks.
      The market is demonstrating it can take a pretty good punch what with recession talk, trade uncertainty and now impeachment.
But
at some point, the market will keep going down. It will happen out of nowhere, because the Street’s algos will get a sell all at the same time and whoooosh.
      What to do depends on one’s tolerance for risk. Anyone needing funds from their investment account near-term better have a healthy cash reserve. Senior citizens not in a position to ride out a bear market should also have a good cash reserve.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
…………………………………………………………..
Wednesday Sept. 25 “Street Doesn’t Care About Impeachment, Just Trade.”
   Axios reports the Street wants a trade deal, more importantly it points out that the S&P 500 has risen 3% month  to date, all the while U.S. Treasury prices have fallen (yields risen) suggesting an increased investor appetite for risk.
To-date, U.S. equity ETFs have seen  an $18 billion inflow of money while bond ETFs have experienced a slowing in new funds.
This pattern reverses much of what happened earlier in the year when equity ETFs  (excepting February) were hit with net selling and bond ETFs net buying.
What’s going on ?
It could be the Street is front-running the Stock Trader’s Almanac’s  “Best Six Months” (November – April), a highly consistent, time-tested pattern for market timing – buy November 1 – sell April 30.
The pattern is challenged by three issues – a trade deal or not, recession, and  the move by the U.S. House to impeach  President Trump.
      Good news/bad news on a U.S./China trade deal has triggered short-term buying and selling, but political news has little impact except for big buying when Trump was elected in anticipation of lower taxes and deregulation.
      The U.S. House is only in the preliminary stages of deciding if it will pursue impeachment of Trump, so I doubt  this news will have much impact near-term.
Global recession is real, but the U.S. economy is taking its time to make the slide.  Acceleration of that trend would tip the market into a full-fledged bear market or nasty correction.
What does all this mean ?
You know the answer – have a major cash reserve even though odds favor higher prices via institutional buying ahead of the “Best Six Months.”
When this overpriced/ aging bull market cracks it will do so without warning.
……………………………………………
Tuesday Sept. 24  “So Far, Market Has Gone Nowhere in 20 Months”
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued 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 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

Ignore Fed and Administration Hype, Cash 80%

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,820
S&P 500: 2,961
Nasdaq Comp.:2,939
Russell 2000:1,520
Monday,  September 30, 2019
 9:14 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
The Street tends to shrug off a lot of things that could end up hammering stock prices: war, recession, a bear market resulting from overvalued stocks facing an earnings recession that can be worsened by a recession, and now the potential for the impeachment of the nation’s president.
That’s what a 10-year long bull market can do to the people who benefitted the most – corporate management and Wall Street.
       At some point, the BIG money will hit the silk and it will be straight down  12% to 16% before investors can say ouch.  That’s just the first leg down.
That’s because the Fed, Street and Administration have propped this market up with hype about the economy and the magic of interest rate cuts !
Investors are being conned !  There are no new eras ! Bear markets happen !
All it takes is for several major institutions to break ranks and sell and others will follow.
The impact will be instantaneous as computer algos, mostly programmed to track the same bullish metrics, will get the sell at the same time.
The hype will continue in an attempt to prop the market hopefully through 2020 election year.
Impeachment a real  possibility, and that will lead to more divisiveness and  stifle consumer and investor confidence.
This one has the potential to get real ugly.
Stock markets recover from bear markets, so why not wait it out ?
For one, over the last 46 years we have had three bear markets with the S&P 500 dropping 50%.  Many investors got shaken out near the bottom not to return until long after the  market lows. Those who held on didn’t see portfolios regain losses for years.
Depending on one’s tolerance for risk, a cash reserve of 80% is justified

TECHNICAL
I do not like this market, even though odds are good the Fed will hype the market and/or the administration will release optimistic projections about trade. Odds are good that any rally from here will fail.  The Fed  has lost its clout about rates and why would China cave to trade concessions with Trump’s power sapped by the prospect of impeachment ?

……………………………………………………………
Minor Support: DJIA:26,626; S&P 500:2,920; Nasdaq Comp.:7,841
Minor Resistance: DJIA:26,950; S&P 500:2,973; Nasdaq Comp.:7,943
………………………………………………………….

Friday Sept. 27 “Street’s Arrogance to Risk to Precede  the Fall ?”
Naturally, current events surrounding Donald Trump and the prospects for  the U.S. House initiating impeachment proceedings  flashes back to the early 1970s when President Nixon was the subject of the same thing.
Nixon took office in Jan. 1969. Incidents leading to the House Judiciary Committee passing three articles of impeachment: obstruction of Justice, abuse of power and contempt of Congress were filed  on July 27, 1974. On August 8, 1974, President Nixon resigned, but was later pardoned by President Ford.
Perhaps the formation of the White House “plumbers” unit in the fall of 1971, intended to plug leaks in the White House set the stage for a series of shocking events between the White House and  Congress and the press, including the formation of the  Senate Watergate committee, high level resignations, coverups, payoffs, erasures of tapes, the “Saturday Night Massacre”, and a Supreme Court ruling.
Ironically, Nixon was re-elected on November 11, 1974.
A bear market (1/1/73 – 10/4/74)  intervened taking  the S&P 500 down 50%; a recession started  in November 1973 and ended in March 1975.
Contributing to this chaotic era was the Yom Kippur War (Oct 6 -26) and OPEC’s oil embargo (Oct. 1973 – Mar. 1974) and a four-fold increase in the price of oil.   Wild stuff !
Just how this will play out this time in uncertain. We are in the early stages of a recession, which the Fed acknowledges and is responding to with rate cuts.
A bear market may have already started, and who knows, maybe another mid-east oil crisis if war breaks out between the U.S. and Iran.
The market is historically overpriced. The prudent thing to do here is to have a healthy cash reserve (30% to 85%) depending on one’s tolerance for risk.
The new normal for corrections is the flash crash, a near vertical plunge in prices as highly leveraged institutions stop buying, worse yet – start selling with the result being a 12% – 16% plunge followed shortly after by a failed attempt to rebound, then another huge plunge.
So far, the Street is ignoring the risk, perhaps in denial after being spoiled by a 10-year bull market.

TECHNICAL 
Today’s market will start on the upside with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
While impeachment is grabbing the headlines, the bulls are hoping for good news on U.S./China trade talks October 10.
………………………………………………….
Thursday Sept. 26  “Market  Takes a Pretty Good Punch, but……”
     Looks like a jousting match between Trade talks and impeachment proceedings  to determine which dominates the direction of stocks.
      While there is  enough weakness in certain economic  indicators to warn of recession, the Street doesn’t care (yet).
All recessions to date have been accompanied by bear markets.
Expect news releases about improved U.S./China trade prospects anytime the market slides down. Absent that, the Fed will step in to stabilize the market, it’s the new norm.
The other side of the coin is the market will respond to bad news on trade, as well .  For some reason, the Shanghai Composite stock index dropped sharply yesterday, which may suggest  uncertainty about upcoming  U.S/China trade talks.
      The market is demonstrating it can take a pretty good punch what with recession talk, trade uncertainty and now impeachment.
But
at some point, the market will keep going down. It will happen out of nowhere, because the Street’s algos will get a sell all at the same time and whoooosh.
      What to do depends on one’s tolerance for risk. Anyone needing funds from their investment account near-term better have a healthy cash reserve. Senior citizens not in a position to ride out a bear market should also have a good cash reserve.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
…………………………………………………………..
Wednesday Sept. 25 “Street Doesn’t Care About Impeachment, Just Trade.”
   Axios reports the Street wants a trade deal, more importantly it points out that the S&P 500 has risen 3% month  to date, all the while U.S. Treasury prices have fallen (yields risen) suggesting an increased investor appetite for risk.
To-date, U.S. equity ETFs have seen  an $18 billion inflow of money while bond ETFs have experienced a slowing in new funds.
This pattern reverses much of what happened earlier in the year when equity ETFs  (excepting February) were hit with net selling and bond ETFs net buying.
What’s going on ?
It could be the Street is front-running the Stock Trader’s Almanac’s  “Best Six Months” (November – April), a highly consistent, time-tested pattern for market timing – buy November 1 – sell April 30.
The pattern is challenged by three issues – a trade deal or not, recession, and  the move by the U.S. House to impeach  President Trump.
      Good news/bad news on a U.S./China trade deal has triggered short-term buying and selling, but political news has little impact except for big buying when Trump was elected in anticipation of lower taxes and deregulation.
      The U.S. House is only in the preliminary stages of deciding if it will pursue impeachment of Trump, so I doubt  this news will have much impact near-term.
Global recession is real, but the U.S. economy is taking its time to make the slide.  Acceleration of that trend would tip the market into a full-fledged bear market or nasty correction.
What does all this mean ?
You know the answer – have a major cash reserve even though odds favor higher prices via institutional buying ahead of the “Best Six Months.”
When this overpriced/ aging bull market cracks it will do so without warning.
……………………………………………
Tuesday Sept. 24  “So Far, Market Has Gone Nowhere in 20 Months”
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued levels.
………………………………………………..

Monday Sept. 23 “Bubble Trouble – Fed Mismanagement”
      Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
………………………………………………………………
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..

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

 

 

 

 

 

 

 

 

 

 

Street’s Arrogance to Risk to Precede the Fall ?

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,891
S&P 500: 2,977
Nasdaq Comp.:8,030
Russell 2000:1,533
Friday,  September 27, 2019
 8:49 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Naturally, current events surrounding Donald Trump and the prospects for  the U.S. House initiating impeachment proceedings  flashes back to the early 1970s when President Nixon was the subject of the same thing.
Nixon took office in Jan. 1969. Incidents leading to the House Judiciary Committee passing three articles of impeachment: obstruction of Justice, abuse of power and contempt of Congress were filed  on July 27, 1974. On August 8, 1974, President Nixon resigned, but was later pardoned by President Ford.
Perhaps the formation of the White House “plumbers” unit in the fall of 1971, intended to plug leaks in the White House set the stage for a series of shocking events between the White House and  Congress and the press, including the formation of the  Senate Watergate committee, high level resignations, coverups, payoffs, erasures of tapes, the “Saturday Night Massacre”, and a Supreme Court ruling.
Ironically, Nixon was re-elected on November 11, 1974.
A bear market (1/1/73 – 10/4/74)  intervened taking  the S&P 500 down 50%; a recession started  in November 1973 and ended in March 1975.
Contributing to this chaotic era was the Yom Kippur War (Oct 6 -26) and OPEC’s oil embargo (Oct. 1973 – Mar. 1974) and a four-fold increase in the price of oil.   Wild stuff !
Just how this will play out this time in uncertain. We are in the early stages of a recession, which the Fed acknowledges and is responding to with rate cuts.
A bear market may have already started, and who knows, maybe another mid-east oil crisis if war breaks out between the U.S. and Iran.
The market is historically overpriced. The prudent thing to do here is to have a healthy cash reserve (30% to 85%) depending on one’s tolerance for risk.
The new normal for corrections is the flash crash, a near vertical plunge in prices as highly leveraged institutions stop buying, worse yet – start selling with the result being a 12% – 16% plunge followed shortly after by a failed attempt to rebound, then another huge plunge.
So far, the Street is ignoring the risk, perhaps in denial after being spoiled by a 10-year bull market.

TECHNICAL 
Today’s market will start on the upside with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
While impeachment is grabbing the headlines, the bulls are hoping for good news on U.S./China trade talks October 10.
……………………………………………………………
Minor Support: DJIA:26,826; S&P 500:2,967; Nasdaq Comp.:7,996
Minor Resistance: DJIA:26,965; S&P 500:2,981; Nasdaq Comp.:8,053
………………………………………………………….

Thursday Sept. 26  “Market  Takes a Pretty Good Punch, but……”
     Looks like a jousting match between Trade talks and impeachment proceedings  to determine which dominates the direction of stocks.
      While there is  enough weakness in certain economic  indicators to warn of recession, the Street doesn’t care (yet).
All recessions to date have been accompanied by bear markets.
Expect news releases about improved U.S./China trade prospects anytime the market slides down. Absent that, the Fed will step in to stabilize the market, it’s the new norm.
The other side of the coin is the market will respond to bad news on trade, as well .  For some reason, the Shanghai Composite stock index dropped sharply yesterday, which may suggest  uncertainty about upcoming  U.S/China trade talks.
      The market is demonstrating it can take a pretty good punch what with recession talk, trade uncertainty and now impeachment.
But
at some point, the market will keep going down. It will happen out of nowhere, because the Street’s algos will get a sell all at the same time and whoooosh.
      What to do depends on one’s tolerance for risk. Anyone needing funds from their investment account near-term better have a healthy cash reserve. Senior citizens not in a position to ride out a bear market should also have a good cash reserve.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
…………………………………………………………..
Wednesday Sept. 25 “Street Doesn’t Care About Impeachment, Just Trade.”
   Axios reports the Street wants a trade deal, more importantly it points out that the S&P 500 has risen 3% month  to date, all the while U.S. Treasury prices have fallen (yields risen) suggesting an increased investor appetite for risk.
To-date, U.S. equity ETFs have seen  an $18 billion inflow of money while bond ETFs have experienced a slowing in new funds.
This pattern reverses much of what happened earlier in the year when equity ETFs  (excepting February) were hit with net selling and bond ETFs net buying.
What’s going on ?
It could be the Street is front-running the Stock Trader’s Almanac’s  “Best Six Months” (November – April), a highly consistent, time-tested pattern for market timing – buy November 1 – sell April 30.
The pattern is challenged by three issues – a trade deal or not, recession, and  the move by the U.S. House to impeach  President Trump.
      Good news/bad news on a U.S./China trade deal has triggered short-term buying and selling, but political news has little impact except for big buying when Trump was elected in anticipation of lower taxes and deregulation.
      The U.S. House is only in the preliminary stages of deciding if it will pursue impeachment of Trump, so I doubt  this news will have much impact near-term.
Global recession is real, but the U.S. economy is taking its time to make the slide.  Acceleration of that trend would tip the market into a full-fledged bear market or nasty correction.
What does all this mean ?
You know the answer – have a major cash reserve even though odds favor higher prices via institutional buying ahead of the “Best Six Months.”
When this overpriced/ aging bull market cracks it will do so without warning.
……………………………………………
Tuesday Sept. 24  “So Far, Market Has Gone Nowhere in 20 Months”
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued levels.
………………………………………………..

Monday Sept. 23 “Bubble Trouble – Fed Mismanagement”
      Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
………………………………………………………………
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..

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

 

 

 

 

 

 

 

 

 

Market Takes a Pretty Good Punch, but……..

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,970
S&P 500: 2,984
Nasdaq Comp.:8,077
Russell 2000:1,550
Thursday September 26, 2019
  9:11 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY: 
     Looks like a jousting match between Trade talks and impeachment proceedings  to determine which dominates the direction of stocks.
      While there is  enough weakness in certain economic  indicators to warn of recession, the Street doesn’t care (yet).
All recessions to date have been accompanied by bear markets.
Expect news releases about improved U.S./China trade prospects anytime the market slides down. Absent that, the Fed will step in to stabilize the market, it’s the new norm.
The other side of the coin is the market will respond to bad news on trade, as well .  For some reason, the Shanghai Composite stock index dropped sharply yesterday, which may suggest  uncertainty about upcoming  U.S/China trade talks.
      The market is demonstrating it can take a pretty good punch what with recession talk, trade uncertainty and now impeachment.
But
at some point, the market will keep going down. It will happen out of nowhere, because the Street’s algos will get a sell all at the same time and whoooosh.
      What to do depends on one’s tolerance for risk. Anyone needing funds from their investment account near-term better have a healthy cash reserve. Senior citizens not in a position to ride out a bear market should also have a good cash reserve.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
TECHNICAL 
Today’s market will start on the upside with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
……………………………………………………………
Minor Support: DJIA:26,906; S&P 500:2,978; Nasdaq Comp.:8,043
Minor Resistance: DJIA:27,107; S&P 500:3,003; Nasdaq Comp.:8,129
………………………………………………………….
Wednesday Sept. 25 “Street Doesn’t Care About Impeachment, Just Trade.”
   Axios reports the Street wants a trade deal, more importantly it points out that the S&P 500 has risen 3% month  to date, all the while U.S. Treasury prices have fallen (yields risen) suggesting an increased investor appetite for risk.
To-date, U.S. equity ETFs have seen  an $18 billion inflow of money while bond ETFs have experienced a slowing in new funds.
This pattern reverses much of what happened earlier in the year when equity ETFs  (excepting February) were hit with net selling and bond ETFs net buying.
What’s going on ?
It could be the Street is front-running the Stock Trader’s Almanac’s  “Best Six Months” (November – April), a highly consistent, time-tested pattern for market timing – buy November 1 – sell April 30.
The pattern is challenged by three issues – a trade deal or not, recession, and  the move by the U.S. House to impeach  President Trump.
      Good news/bad news on a U.S./China trade deal has triggered short-term buying and selling, but political news has little impact except for big buying when Trump was elected in anticipation of lower taxes and deregulation.
      The U.S. House is only in the preliminary stages of deciding if it will pursue impeachment of Trump, so I doubt  this news will have much impact near-term.
Global recession is real, but the U.S. economy is taking its time to make the slide.  Acceleration of that trend would tip the market into a full-fledged bear market or nasty correction.
What does all this mean ?
You know the answer – have a major cash reserve even though odds favor higher prices via institutional buying ahead of the “Best Six Months.”
When this overpriced/ aging bull market cracks it will do so without warning.
……………………………………………
Tuesday Sept. 24  “So Far, Market Has Gone Nowhere in 20 Months”
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued levels. 

Monday Sept. 23 “Bubble Trouble – Fed Mismanagement”
      Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
………………………………………………………………
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..
Thursday Sept. 19  “Follow the Bouncing Ball”
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
…………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

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

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

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

 

 

 

 

 

 

 

 

Street Doesn’t Care About Impeachment, Just Trade

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,807
S&P 500: 2,966
Nasdaq Comp.:7,993
Russell 2000:1,532
Wednesday September 25, 2019
  9:11 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Axios reports the Street wants a trade deal, more importantly it points out that the S&P 500 has risen 3% month  to date, all the while U.S. Treasury prices have fallen (yields risen) suggesting an increased investor appetite for risk.
To-date, U.S. equity ETFs have seen  an $18 billion inflow of money while bond ETFs have experienced a slowing in new funds.
This pattern reverses much of what happened earlier in the year when equity ETFs  (excepting February) were hit with net selling and bond ETFs net buying.
What’s going on ?
It could be the Street is front-running the Stock Trader’s Almanac’s  “Best Six Months” (November – April), a highly consistent, time-tested pattern for market timing – buy November 1 – sell April 30.
The pattern is challenged by three issues – a trade deal or not, recession, and  the move by the U.S. House to impeach  President Trump.
      Good news/bad news on a U.S./China trade deal has triggered short-term buying and selling, but political news has little impact except for big buying when Trump was elected in anticipation of lower taxes and deregulation.
      The U.S. House is only in the preliminary stages of deciding if it will pursue impeachment of Trump, so I doubt  this news will have much impact near-term.
Global recession is real, but the U.S. economy is taking its time to make the slide.  Acceleration of that trend would tip the market into a full-fledged bear market or nasty correction.
What does all this mean ?
You know the answer – have a major cash reserve even though odds favor higher prices via institutional buying ahead of the “Best Six Months.”
When this overpriced/ aging bull market cracks it will do so without warning.
      …………………………………………….
TECHNICAL
This is the 5th time in 20 months the DJIA and S&P 500 have attempted to break out and run.  The Dow Transports, NYSE Comp. and ValueLine “unweighted” Geometric Index are down over the period. The latter gives equal weight to all stocks regardless of market cap or price.
YES, with more unsubstantiated hype about trade, the market can (likely will) move higher, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
Today’s market will start mixed with algo-buys automatically nibbling at lower prices over the last  8 days, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
……………………………………………………………
Minor Support: DJIA:26,767; S&P 500:2,963; Nasdaq Comp.:7,981;
Minor Resistance: DJIA:26,925; S&P 500:2,981; Nasdaq Comp.:8,041
………………………………………………………….
Tuesday Sept. 24  “So Far, Market Has Gone Nowhere in 20 Months”
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued levels. 

Monday Sept. 23 “Bubble Trouble – Fed Mismanagement”
      Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
………………………………………………………………
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..
Thursday Sept. 19  “Follow the Bouncing Ball”
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
…………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

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

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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

So Far, Market Has Gone Nowhere in 20 Months

INVESTOR’S first read.com – Daily edge before the open
DJIA: 26,949
S&P 500: 2,991
Nasdaq Comp.:8,112
Russell 2000:1,558
Tuesday September 24, 2019
  8:05 a.m. 
………………………..
gbifr79@gmail.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

TODAY:
Aside from rebounds from corrections, the DJIA and S&P 500 have gone nowhere in 20 months !   The Market rebounded this month after a 6.8% correction in August but is once again running into sellers, this time in the DJIA 27,300 (S&P 500: 3,025) area.
It needs a major  piece of good news on trade to break out to new highs, but even that may not be enough
to trigger another leg up in the market.
The Fed waved what it thinks is its magic bull wand, but its second cut in the fed funds rate begs the question –  “why” ?
Europe continues to slide toward recession, as does U.S. manufacturing.
InvesTech Research warns of excessive valuation in the S&P 500’s Price/Sales and Price/Earnings Ratios , both well in excess of prior market tops.
Additionally InvesTech refers to the Buffett Indicator of Market cap to GDP which is close to 80% above its norm and challenging the 2000 dot-com bubble high.
      EVERYTHING I AM SEEING HERE IS PHONY – a house of cards built on subterfuge, manipulation, lies at the top, greed and delusion about values and  the economy/stock market being bullet proof from a horrendous crunch.
When the truth outs, it will be straight down 12% -16% in a Powell Minute.
What really, really frosts me is the hype by the Fed, Administration and the Street  to suck investors in at these overvalued levels.
…………………………………………….

TECHNICAL
This is the 5th time in 20 months the DJIA and S&P 500 have attempted to break out and run.  YES, with more unsubstantiated hype about trade, it can, but that only extends the market’s overvaluation. Corporate earnings are down this year and estimates for 2020 are being slashed by the Street.
Today’s market will start on a positive note, but bulls must push up beyond DJIA 27:306, S&P 500:3,021 and Nasdaq Comp. 8,243 to get the market moving upward again.
Minor Support: DJIA:; S&P 500:; Nasdaq Comp.:;
Minor Resistance: DJIA:; S&P 500:; Nasdaq Comp.:
………………………………………………………….
Monday Sept. 23 “Bubble Trouble – Fed Mismanagement”
      Well, we are back in the Fed-micro-managing  mode, which features low interest rates and possibly a return to QE.
As a rule, this is good for the stock market.
Here’s what few economists and Street pros are acknowledging.
Earlier this year, the Fed reversed its policy from one designed to prevent the economy from overheating to one of propping it up. At first this took the form of verbal promises to cut rates if needed to one of actually cutting rates twice.
PANIC !  That, or just over zealous intrusion by the Fed on the marketplace.
       This kind of stimulus is normally  employed  when the country is in a recession and the stock market in the crapper.
        So, what if the economy goes into recession ?   That has never happened without a bear market, which in this case could be a hummer, since stocks are at all-time highs and historically very over-valued.
The Fed  will not have any tools in its kit to employ the bring the economy out of recession and stocks out of a bear market.
Bottom line: longer recession and bear market.
All this attempt to keep a business expansion going has the potential to create a huge bubble in stock prices, perhaps  greater than the 2000 bubble which was followed by a 50% drop in the S&P 500 and 78% drop ion the Nasdaq Composite.
Be ever so careful here. If this bubble inflates it will be tough to resist going all in, which would simply be the human thing to do.
………………………………………………………………
Friday Sept. 20    “How Much Risk Can You Afford”
Politico’s Morning Money featured an article this morning, “Economists see sustained low growth, but no recession.
The article quoted economists  from the IMF, World Bank, central banks, rating agencies, mainstream economists, Fitch’s Global Sovereign Group, and the OECD, all giving reasons for continued growth albeit at a slower pace.
At the end, Politico adds this addendum, “Be smart: Economists almost never see recessions coming. Ahead of the global financial crisis [2007 – 2009], economic leaders from the Fed, Treasury Department and major retings agencies gave no warning of what was to come.
This time may be different.  However, the question for investors is, can they afford to be wrong after 10 years of economic growth and a bull market that is by historic standards vastly  over valued ?
The question for reasonable investors, how much risk can you afford – 10% – no sweat …..20% – “ugh”…. 30% – horrors….40% ?
Nasty corrections happen , bear markets happen, and most of the time they strike when just about  no one expects them.
……………………………………………………………..
Thursday Sept. 19  “Follow the Bouncing Ball”
Our economy is much like a golf ball bouncing on a pavement, each bounce is pronounced but recovers less than the one before it, eventually there is no bounce and you have a recession.
Determined not to let this happen, the Fed cut its fed funds rate, the second in three months,  to range between 1.75 percent and 2.09 percent, down from 2.0 percent to 2.25 percent, a clear indication it is concerned about  a recession.
Fed Chief Jerome Powell indicated additional cuts may be necessary if the U.S. economy slides further.
The economy has been a mixed bag for nine months with manufacturing in a recession but employment still strong. Consumer sentiment bounced in September from a three-year low.
Bottom line: The Fed must fear a recession to act as strongly as this, and there has never been a recession without  bear market.
It doesn’t help that the  36-member Organization for Economic Co-operation and Development just slashed its  forecasts for global growth,  warning of “entrenched uncertainty” with downside risks mounting.
CEO confidence has been in a tailspin hitting a three-year low, as reported by Axios Markets The Business Roundtable  survey of 138 CEOs recorded its biggest quarter/quarter decline since 2012.
        U.S./China trade talks will resume in coming days. Expect a lot of market-moving hype about potential progress, which will stands to produce new highs in the market, further inflating the bubble.
…………………………………………………………….
Wednesday Sept. 18  “Fed in a Quandary”

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

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

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

 

 

 

 

 

 

 

 

 

 

 

 

Bubble Trouble – Fed Mismanagement

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

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

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

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

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

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

 

 

 

 

 

 

 

 

 

 

 

How Much Risk Can You Afford ?

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

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

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

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

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

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

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

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

Negative interest rates have never proved they would stoke economic growth or stir inflationary pressures. Low interest rates punish savers and people who rely on some semblance of a return on their money. Many cannot afford to invest in the stock market.  Low interest rates adversely impact Bank profitability and in turn, lending.
What is the message here ?   Are we headed for a global depression ?
Is that why the Fed reversed its policy in January ?
The S&P 500 is attacking this area for the fourth time  in a year, each within  2.6% to  3.0% of the July 31 peak.
Stocks are historically overvalued by anywhere from 25% to 45%. No wonder why the Administration and Fed are petrified at the prospect of a bear market.
But by these efforts to avert a recession/bear market, the Administration and Fed are setting investors up for a horrendous drubbing.
The actions of the Administration and Fed are simply inflating the bubble more and more at a time stocks are  more overpriced than at any time in history, except the dot-com bubble burst in 2000 which led to a 50% drop in the S&P 500 and 78% drop in the Nasdaq Composite.
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Wednesday, Sept. 11  “What a Bubble Looks Like”
This is what a bubble looks likeWhile it can burst at any time, it expands and expands in response to news items as frantic investors panic fearing they will miss out on making more and more money……..forever and ever.
It’s just human nature to get overwhelmed with greed.  The higher the market runs the greater the drive to make more money even though markets driven by greed are hitting new highs and becoming more and more overvalued.
Odds favor the market hitting new highs in coming days in anticipation of another Fed rate cut and Administration hype about a trade deal in October.
All this will give be a field day for the press, with  news headlines sparking even more urgency by investors to  jump in with both feet with every cent they can scrape up.  With interest rates low and going lower, many investors will borrow in order to leverage their stock buys.
Signs of recession are popping up all over the place, yet the lemmings continue their panicked march to ruin.
This has  been a Fed-stoked bull market and the 25% surge since December has been all about Fed hype about interest rates capped off by one rate cut last month and another hoped for on the 18th.
        When this bubble bursts, the pop will be heard world wide, the result nothing short of  horrendous – straight down initially 12% – 18% as much of  Wall Street bails out at the same time.
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Tuesday Sept 10  “Street Marches to Tweet Hype”
      Right now, it’s all about  managing news flow, from the Administration and the Fed.  At year-end we saw Fed Chief Jerome Powell turn a plunging market around with an about face on Fed policy and rhetoric about the possibility of lower interest rates if the economy needed it. Down 20.2% in Q4, the S&P 500 surged 25.7% in four months.
At every turn, President Trump has used his tweet power on trade to stabilize  markets that appeared to be on the verge of selling off.
      His tweet power is highlighted by a JP Morgan study concluding that Trump’s tweet on markets increasingly moved markets.
Together, Trump and the Fed have managed to prop up an overvalued stock market and delay the inevitable – a recession/ bear market.
       The two know that if this market becomes unhinged, it will decline 35% -45% as all the Street’s algos are reprogrammed to raise cash.
One of the cruel characteristics of bear markets is that stocks get pummeled by a relentless string of unexpected negatives and an increasingly gloomy outlook to the future.
        Eventually, one or several selling climaxes over-discount these negatives and you have a bear market bottom, a time when no one wants to buy stocks.
That scenario is impossible for most to envision now since the Street’s investment policy is on automatic pilot – BUY.
        For many months I have warned of a recession and bear market with expected results – disbelief.  That’s what happens at bull market tops.
But it is also that investors don’t want the party to end, they’re making money, sometimes easily and want that to continue.
It is obvious why the Administration and Fed are desperately trying to hold the stock market up. For one, when this one breaks down, the plunge will  be brutal. Then too, a recession/bear market in 2020 would sink Trump’s chances of reelection.
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What No One on Wall Street Wants to Hear
>We are in the late innings of an economic expansion, so a recession is a good bet. The current expansion started in June 2009, has lasted 122 months, the longest  in history, twice as long as the average length of 11 cycles since 1945.
> Of the 10 recessions since 1950, the average time between the low point in the unemployment rate and the start of a recession was just 3.8 months.  The unemployment rate is 3.6% which was hit in May.  Technically, we won’t know when the start of the current recession is official for months after the fact, since that conclusion is  reached by the Nat’l Bureau of Economic Research (NBER) and they consider  host of economic indicators.
>Bear markets lead the beginning of recessions by 3 to 12 months.  The current bull market at 126 months is 4.2 times the average of the last 15 bulls going back to 1957
 >Nine out of the last 10 recessions have occurred with a Republican in the White House.
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George Brooks
Investor’s first read.com
A Game-On Analysis, LLC publication
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