Market Analysis

Straight Talk #9

The broader market has been in a trading range for the past 6 weeks. Following the June highs we’ve seen sizable corrections in small caps, banks and even the $NYSE, $SPX, $DJIA, transports and other sectors while the Nasdaq continues to race to ever more new highs with a few key stocks producing the largest make cap expansion in history.

While charts of tech stocks are stretching to ever more historic extremes $SPX has held key support at the daily 200MA and weekly 50MA as historic stimulus continues to flow through the system with likely more stimulus to come.

In context of this price action Guy Adami, Dan Nathan, and I have decided to offer an as honest and objective discussion about the bull and bear case arguments as we know how to.

Also of key note: Bank earnings are coming next week and they will be closely watched for either relief on lowered earnings expectations supportive of a potential rotation trade to lift markets higher beyond the June highs to perhaps fill the glaring open gap on $SPX near 3,300 or confirmation that the bank’s underperformance in context of yields remaining on the floor signal something amiss with the V shape recovery narrative presumed by investors as they relentlessly chase into tech stocks in complete disregard of valuations.

Since the January 2018 highs the divergence in everything in markets couldn’t be more stark:

With key tech stocks literally exploding vertically in performance:

$NDX is now the farthest disconnected from its daily 200MA and weekly 50 MA since the year 2000 with the chart showing the steepest and most one way rally since that time as well, while equal weight continues to lag dramatically:

Right at the time when $NDX has reached a key trend line with underlying components below their daily 50MAs weakening a process that has repeatedly signaled an impending correction to come:

Notable also as $NDX is reaching far above its monthly upper Bollinger band:

The chase into individual stocks in complete disregard of the historic valuation expansion is something to behold, $TSLA being one of the poster children of this time:

Blinders on and go. “Oh Jesus Christ”:

Is it sustainable? Or is the bull case which is based on earnings, valuations, debt expansion not mattering, indeed nothing mattering but liquidity the continued path forward? Or will rotation into the laggards produce the next leg up? Or will it all come crashing down? Or will we just chop in a wide tradable price range for months to come as the forces of momentum and liquidity keep battling it out with the reality of growth, valuations and a continued uncertain future?

All these questions are the basis for our discussion this week.

We hope you find this to be an as earnest, balanced and realistic discussion as you can find anywhere. As Guy said rightfully, we can’t change who we are, but only offer our honest assessments based on decades of experience with a close eye on all the things we see.

I’ll be posting a separate Market Video focusing on the latest technical implications this weekend (For those not already signed up for these videos please see link to sign up).


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Categories: Market Analysis, Opinion

32 replies »

  1. Another great show fully of interesting and enlightening thought provoking commentary. Thank you all for making the effort.

  2. The Tic Tok video was brilliant it said it all. Bulls have run amuck, but it does not matter because in the end of the video the Bull comes out unscathed. Yet the human voice must have been the Bear traders yelling Stop! Stop! Stop! AAAWWW Jesus Christ. Oh BTW the Smart Talk #9 was pretty good also, keep it up!

  3. Bonjour à tous, yesterday I listen to an analyst and they said had you invested 10000 in Amazon in 1996 it’s worth 38 million…well what company will reach 2 trillion market capitalization? I closed the books for the year…been fishing 🎣 good luck to everyone attempting to sell this market

  4. MASKS DON”T PROVIDE ANY HEALTH BENEFIT GUYS!! SCIENTICALLY BASED FINDINGS. THAT IS ONE BIG REASON INFORMED PEOPLE DO”NT WEAR THEM. STOP LISTENING TO THE MEDICAL INUSTRIAL COMPLEX.

    • Just truth, if masks don’t work, why do we wear them in surgical theatres?

      They help and having everyone wearing masks and reopening workplaces was the right answer from the beginning. The problem is there weren’t enough masks at the beginning. The cost of the economic shutdown is terminal to the country.

      How can anyone be so wrong? Geez.

      • Apples vs. Oranges gulfcoast. You’re talking surgical masks while justtruth is referring these porous masks worn by mask cult members. Justtruth is 100% correct.

    • I didn’t appreciate any capitulation. I heard and understood bilateral balanced analysis.
      Great podcast.

  5. Based on your charts, banks may have already priced in the bad news and have some catching up. This could be a buy the dip opportunity for banks.

  6. “All the sudden…”

    I don’t understand Danny “Potato Nose” Nathan’s appeal or value. He is clearly simple, and brings nothing to the table.

  7. Look 👀 everyone https://usdebtclock.org/…corporate ( unsecured) debt is 140% of GDP and stock markets trading at 152% of GDP and US debt to GDP is 140% ..dollar is vulnerable …Gold is indicative of the hemorrhaging unsustainable debt ..thank you for your weekly discussion ..💰

  8. The stock market is a “ video game 🎮 “ classic definition….hahahahahahahaha 🎮💰🎮💰🎮💰🎮💰🎮💰

  9. The choice of video clip was superb – a bull (market) being guided by its a$$….

    Thank you for another helpful Straight Talk analysis.

  10. Great podcast guys. It’s nice to hear some sanity in these crazy times! See you next week! Keep up the good work!

  11. Big banks have earnings this week. Since expectation are rock bottom, they will likely beat.(seems like that is always the case). Could send the market into a broad buying frenzy market rotation. Poor results could trigger a sell off.

    Right now, we’re in 1999 style melt up mode for the nasdaq. It comes back to the US dollar, which, if it continues to sell off, will propel the market higher and higher and higher. Unless banks derail the rally, the melt up could last for months, if it is anything like 1999. The only ‘reasonable play’ is precious metals. Expect trillions of US dollars to be released before the election. This money will find its way into stocks, gold. If you’re over-complicating things and looking for a market top, you’re doing it the wrong way. Last man standing will be gold.

    Inflation expectations are rising everywhere, this is a well known short term catalyst for stocks. This is my warning to anyone who shorts this market. Shorts covering are an engine pushing this market higher.

    The millenial day traders are right for the moment – stocks only go up.

  12. See the Big Picture, Dow Gargoyle, Busted, Bubble, Warning. All the while the QQQs are up the past three to four weeks. wow.

  13. Five extremely risky stocks pumped to their absolute zenith by the Plunge Protection Team.

    The COVID crisis actually creates huge potential headwinds for all.

    Apple is susceptible to the China War – potential loss of market share imposed either by consumers or the state, threats to supply chains, US and other international customers who are not going to rush out to buy the latest most expensive iPads as soon as they can as they are either dead, recovering physically and financially if ill, and for the majority not so affected they’ve lost their jobs, or their incomes reduced, or if not more careful now with other priorities.

    Netflix – who after months of lockdown hasn’t got it by now? Can’t be too many potential new customers. Existing ones ma cut back on the expense if their finances affected or being careful, and as they go back outside less time watching anyway. Lot’s of new alternatives. I’m also being more careful now so might go back to finding stuff for free again too…

    Amazon – I’ve got Amazon Prime, like before Covid, like everyone else, so I still pay the same as before and expect to pay the same after no matter the increase or decrease in delivery costs. Indeed, I might get rid of it after the lockdown, the TV service has become pay per view so not worth it so much now and I’ve found many other companies have drastically increased their online game and capabilities. If I want Adidas now I go to the Adidas site. Even small independent outfits have learned how to move into the online and delivery space successfully, I’d rather deal with them direct now.

    Facebook – surely anyone can do this? As for advertising, many of their advertisers are going bust as most are small locally outfits. Nobody reads the adds anymore, and as I said above retailers have become better in this pandemic to do their own direct online marketing thing online – more focused and more effective. That’s apart from all their regulatory and political issues which will grow and become more expensive. The Fed will shut them down if they dare their Libra thing – mystery plunge in the offing!!!

    Google – Again, its just a bloody search engine. I’m as pissed off as everyone else now, can no longer find what I’m looking for, directed down their rabbit holes and to advertisers and sites I don’t want. Others have done it and so easy for someone else to suddenly come up with something else.

    They were the new tech, will soon be old tech. The beauty of a time like this is that new and suppressed spirits are unleashed, just like after the last tech bubble, and new technologies and concepts will come up that will leave these in the dust. These were all about monetising the internet from the iPhone to Google. The telephone and phonebook are gone, these are just the current versions to be replaced by newer more profitable things.

    All are very basic concepts started by kids in garages and that is not the end of history. The charts show they’ve been pushed to the edge, maybe before their time, by this government induced and indoctrinated mania. At least they’re as good as the Chinese now in producing that.

  14. News event has arrived but CNBC is not covering it yet as they jumped over to Tesla news instead …CPI and core CPI both higher than estimates. Turning from deflation to inflation now. Someone must have received these numbers yesterday during the day and sold technology and the Nasdaq.

    • Inflationary period has begun. All the Fed could do now is more forward guidance meaning more hot air, BS, cheerleading etc to try to keep this market from correcting. The fed is a follower and they know that they can not go to negative rates. They’re promising to keep rates low, more QE, stimulus, etc to keep this market afloat but how soon before they eventually give in and raise rates to slow inflation. Is this week’s price action on technology a sign of pricing in inflation expectations.

      Brainard: It is time for the Fed to abandon the policy of preemptively raising rates to head off inflationary pressures and to codify this in guidance

  15. “Fingers crossed and some prayers”?!?!?!?! – whaaa?

    “I don’t see an interruption to the V-shaped recovery,” White House economic adviser Larry Kudlow told Fox News on Monday. “If there is one, I’ll be honest and factful about it. But at the moment, with our fingers crossed and some prayers, I think we’re on track for a very strong second half of the year, probably still 20% growth plus.”

  16. The Fed is out of bullets and they know it. The best the Fed can do now is jawbone (due to rising inflation), which will no longer work.

  17. A “copy paste” from an article I was reading.

    “Three separate scientific studies have all showed that COVID-19 antibodies disappear very, very rapidly. In fact, some patients no longer had detectable antibodies just weeks after originally testing positive for antibodies. What this means is that it appears that COVID-19 is very similar to many other less dangerous corona-viruses that are floating around out there. Just like there is no lasting immunity to “the common cold”, there also appears to be no lasting immunity to COVID-19. That means that no “vaccine” is going to save us, we will never get to the point of “herd immunity”, and this virus will circulate all over the globe year after year.”

    There it is…………let that circulate and reality set in to what the world’s real future holds for everyone. We are still in the first inning with this disease and it will never go away. The damage still to come for everyone will be incalculable.

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