Daily Market News - 15th June 2022
The Charts That Matter
Looking around the market landscape over the last few months, many charts have caught my attention.
We could go all the way back to the start of the year and the failed break out in the S&P500 which kicked it all off (pro tip: it usually starts with a failed break out) but now that we’re entering a new phase in the 2022 Bear Market, there’s a few charts I think we all need to keep an eye on.
So lets take a look.
10Yr Treasury Note Yield (TNX)
In a few hours time, Jerome Powell is going to communicate the Fed response to combat inflation that’s doing it’s very best parabolic 2020 Bitcoin impression, and while the consensus is we’re going to see a 50bp hike, there are rumblings of a 75bp or an even more unlikely 100bp hike to combat rising costs.
What would that mean? How would the market react?
Well, the short answer is I have no clue and neither does anyone else. It’s a coin flip. We can all have our opinions, but until price starts moving, it’s 50/50 whether we tank or whether we rip, so the 10Yr Note is of particular interest because if it rolls over (which would be entirely logical), that would be an environment where we’d likely see some kind of more meaningful rally in stocks. Which I should say, I’d MUCH prefer.
That said, if it continues ripping higher, and the US Dollar (DXY) continues ripping higher, hopefully you’re flexible in your approach and are able to bet against the market.
Russell 2000 Small Caps (IWM)
Now let’s take a look at a good gauge of market risk appetite.
The Small Caps have been battered and are now flirting with a key technical level and back at the scene of the Covid 2020 Crash.
If this chart resolves lower, there is a very high likelihood that the rest of the market dances alongside IWM.
Dow Jones Industrials (DIA)
The Dow met our targets back in Jan and is now back to the scene of the Covid Crash, and much like the small caps, if this chart resolves lower. again, it probably gets quite bad. If we see rebounds in both the Dow and the Small Caps, I’d probably expect the market response to the Fed to be favourable and for the DXY and TNX to be taking a breather.
It’s Never A Coincidence
I’m no longer surprised when price is flirting with these key price levels when we move into these “big events”, it’s not random, it’s not a rigged market, it’s just the market, it’s always been that way.
Over the last few months, there have been areas to buy (Energy and Commodities mainly) and areas to short (anything growth Tech) but if we’re going to enter a fully fledged bear market for the next 12 months, I want to pay attention to charts, because charts remove personal bias and “hope”. It keeps things objective.
You might have picked up my letter a last week on Energy - ARTICLE HERE - If energy does roll over and stops going up, that’s also a problem in my world.
Zillow (Z)
If you are looking at betting against the market, I’ll happily share the Fundamental / Technical Criteria I’m using when communicating to clients / members.
This is 1 of the high conviction alerts sent to our clients / members on Sunday and I’ve been using the criteria in the upper right of the chart.
I know, there are LOTS of Fundamental criteria to pick the bones out of, but the metrics highlighted have been great when filtering out and choosing stocks to recommend betting against.
Clean Technical Charts to define risk, High P/E Ratios and Negative 12 Month Earnings Growth. That’s it.
These are the types of names that I expect to move a lot quicker to the down side (which is what we want).
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