The Market Isn’t Dead Yet
2023.05.25 05:46
As we keep a close eye on the media and their coverage of the debt ceiling issue, it’s evident that it has a significant impact on the futures and stock markets. It’s important to stay informed and aware of the situation without giving in to fearmongering.
I want to take a rare U-turn from technical signals (after this week focusing on the Economic Modern Family) and detail options to resolve (temporarily) this current crisis.
To review the technical macro, the failed to clear the 23-month or 2-year business cycle high at 420.
The small caps or Granddad Russell 2000 () has not even come close to the 23-month Ma and is now at threat of breaking the 6–8-year business cycle lows or the 80-month MA. Even more so for Granny Retail ().
However, nothing has broken down yet. The market is both fearful and optimistic-perhaps a different way of explaining stagflation?
I learned today that there are other options to temporarily resolve the political quagmire, unless-and it seems like a ginormous unless-the White House agrees to a 2-year spending freeze.
- A short-term extension of the deadline-kicking the can.
- Senate vote or House discharge petition-Treasury then gets money to pay quarterly taxes-which funds them through the summer-kicking the can.
- The Concord Coalition (nonpartisan) takes money from Social Security-kicks the can.
- Treasury issues CONSOL bonds-no payback date but high interest rate-more dangerous kicking can.
- 14th Amendment-validity of debt unconstitutional-kicking a can be filled with legal ramifications.
- Mint a $1 trillion dollar coin-kicking a gimmicky can.
(Notes taken from Heather Long WaPo)
How are investors feeling?
Squeezed.
Today’s current environment has created a consensus of protecting and preserving capital, yet at the same time, having some money at risk for when trends emerge.
There is always a bull market somewhere, right?
And I think many will agree that the economy should not contract very much more.
But that is a whole different story than the economy can expand-which could take years.
Just look at the monthly charts of SPY IWM and XRT and their 2-year versus 6-8-year business cycles.
We are stuck in between.
ETF Summary
- S&P 500 (SPY) 23-month MA 420 Support 410 held
- Russell 2000 (IWM) 170 support – 180 resistance
- Dow (DIA) Right down to its 200-DMAand a confirmed caution phase
- Nasdaq (QQQ) Worst case-a potential reversal top on weekly chart-best case-gets thru the weekly highs
- Regional banks (KRE) Did the initial damage now sidelining
- Semiconductors (SMH) 23-month MA at 124 with just a few days left-still wonder woman
- Transportation (IYT) Like to see this hold 220 this week
- Biotechnology (IBB) 121-135 range
- Retail (XRT) 56.00 the 80-month MA while momentum is at least flatlining
