It was a mixed week for US equity indexes, with net weekly changes ranging from +1.5% (R2K), +0.6% (Nasdaq comp', Trans), -0.1% (Dow), -0.3% (SPX), to -0.4% (NYSE comp').
Lets take our regular look at six of the main US indexes
sp'500
Nasdaq comp'
Dow
R2K
NYSE comp'
Trans
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Summary
Three US equity indexes were net higher for the week, with three net lower.
The R2K was very significantly higher, whilst the NYSE comp' was moderately lower.
Weekly momentum in the Dow will be prone to turning negative w/c Feb'27th. If it happens... other indexes can be expected to follow in March.
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Looking ahead
It will be a short four day trading week, with Monday CLOSED for Washington's birthday
Earnings:
M - *CLOSED*
T - WMT, HD, MDT, TECK, FLR, TAP, COIN, PANW, SAND, RIG, FANG, PXD, CHK, CZR, TOL
W - BIDU, TJX, FVRR, WIX, OSTK, GRMN, IQ, NVDA, LUCID, U, ETSY, TDOC, APA, CTRA, BROS, RUN
T - BABA, MRNA, LNG, DPZ, W, PLNT, NKLA, NEM, YETI, SQ, CVNA, MELI, BKNG, WBD, WISH, SWN, BYND, INTU, FTCH
F - EOG
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Econ-data/events
M - *CLOSED*
T - PMI manu', PMI serv', existing home sales
W - EIA Pet' report, FOMC mins (2pm)
T - Weekly jobs, Q4 GDP (print'2)
F - Pers' income/spending, new home sales, consumer sent'.
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Final note
It was a mixed week for US equities, as whilst there was some downside, the equity bears are still not managing anything significant and sustained.
There are a few subtle signs on the daily, weekly, and monthly charts, that we've put in a key high from sp'4195. Yet... lets be clear, its nothing decisive. For that, we arguably need to see a break and hold <4K.
So long as we hold under last week's high of 4159, I'm seeing rallies as valid re-short opportunities. Any break >4160 would open the door to the 4200/300s, but that looks overly difficult.
Even Goldman are now touting another three rate hikes (I assume 25bps each), which would take rates to 5.25-5.50% as of June 14th. But what if inflation starts ticking back upward? This past week's PPI data was supportive to the notion that we will see a secondary wave upward.
What would the Fed do if headline CPI is back in the 7s, never mind anything higher?
Right now, the mainstream hacks and associated 'smart guys', are assuming the Fed halt rate hikes by mid year, and then start cutting.
What if CPI 8s or the 9s? We could expect the Fed to hike EVERY meeting - of which there are seven more this year, by 25bps. That would result in a net hike of 175bps to 6.25-6.50% as of Dec'13th.
As of the Friday close, the US 10yr yield stood at 3.82%.
Multi-month price structure is a bull flag.
Big target is psy' 5.00%... last printed in July 2007.
Above 5, its largely empty air to around 7.00%... last printed in July 1996.
Even if we only see 5.00%, the equity/capital markets would have to massively adjust.
The mainstream remain deluded of course. The usual suspects are being regularly rolled out, whether its onto CNBC, Bloomberg, or FOX Business... all touting the party line of 'the second half recovery'.
Its kinda funny in a way, as they do it every. single. year. There is no need to worry about how difficult it might be in H1, as H2 will offer a second half recovery, right?
They never really give the reasons why, or quantify what exactly they mean by such a recovery, but they tout it all the same.
Ohh, you think - as Prof' Siegel of Wharton, that the Fed will cut rates in H2 ?
Okay, then I suggest you go see what happened to equities each time the Fed cut rates.
None of this inflation or rate hike discussion has even considered any of the 'wild cards'. I'd hope you know of the main ones.
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Bonus chart....
The US 10yr/2yr spread stands at -78bps. Whilst most focus on when the spread turns negative, what actually matters is when it turns back to positive.
Many would do well to stare at the above chart for a good hour.
Notably, alarm bells were merited in Sept'2019, Feb'2007, and Nov'2000.
Right now, the spread might turn positive in April or May. If yes, then all those touting a second half recovery can be derided for what they are.... utterly clueless consensus-sheep.
In any case... enjoy the current calm, and the subdued volatility. Sooner or later... everything is going to spiral, and if you're not wearing a quality seat belt and a titanium crash helmet, it won't end well.
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Enjoy the long weekend
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*the next post on this page will likely appear 5pm EST on Tuesday, Feb'21st.
