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Bulls or Bears in Cost?


Survey buyers in June and little doubt the bears are in cost. Then we go on a 2 month rally with 18% upside for the S&P 500 (SPY) and the bulls appear to be King of the Hill. Now we’ve backslid a bit over the previous week. And the trail ahead is a little more unclear. That’s the reason 40 yr funding veteran, Steve Reitmeister, weighs in on what occurs subsequent for the inventory market and why he continues to have a bearish bias. Learn on under for extra.

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The bulls charged as much as the 200 day shifting common on Monday 8/15 after which ran out of steam. Since then, the bears have been in cost with shares falling about 200 factors from final week’s excessive.

So, who’s in cost…Bull or Bears?

And simply as importantly…how does the reply to this query have an effect on our buying and selling technique?

These important matters can be on the coronary heart of this week’s Reitmeister Whole Return commentary.

Market Commentary

Bulls will say the latest dump is nothing greater than wholesome revenue taking after a formidable 18% run up from the June backside. And that that is just a bit breather earlier than the following leg greater.

Bears will say that the previous rally was nothing greater than your typical bear market rally often known as a bear entice. And that as buyers take their heads out of their backsides they’re realizing that situations are nonetheless fairly bearish.

For instance, as if there weren’t sufficient inflationary pressures, now we uncover that here’s a worldwide drought with water ranges on main transportation rivers around the globe (just like the Yangtze in China and Rhine in Europe) are at scary low ranges.

What’s the issue?

Much less rain = unhealthy for agriculture manufacturing = decrease provide = greater costs for meals

Main waterways with decrease water = more durable to navigate = greater transportation prices.

This doesn’t assist the image for people who imagine final months barely decrease inflation readings had been an indication that we had been quickly on our option to fixing this drawback with out as a lot Fed intervention that will possible injury the financial system. The truth is, the Bloomberg Commodity Index Whole Return is surging greater. And now 11% above the July lows when buyers had been so buoyant on the concept inflation was moderating.

The nonetheless evident inflationary pressures are nonetheless a giant a part of the financial drawback that has but to wreak its full havoc on the financial system. But additionally on the value motion entrance listed here are some stats I discovered in a latest SeekingAlpha article on Bear Traps (aka Bear Market Rallies…aka Suckers Rallies).

“Bear entice? This inventory market rally echoes bear market strikes going again to the onset of the Nice Despair, in response to BofA Securities. The typical S&P 500 achieve in 43 bear market rallies of greater than 10% going again to 1929 is 17.2% over 39 buying and selling days, whereas on this case, it’s up 17.4% in 41 days, making it a “textbook” instance. This time round, 30% of the S&P’s achieve is because of simply 4 shares – Amazon (AMZN), Apple (AAPL), Microsoft (MSFT) and Tesla (TSLA) – famous strategist Michael Hartnett, including that one other danger for bulls is that whether or not the “Fed is aware of it or not, they’re nowhere close to finished.”

The proof of the above exhibits up in apparent element within the many webinars I’ve finished exhibiting the chart patterns of earlier bear markets. Painful drops adopted by sharp bounces (rinse and repeat many occasions til last capitulation backside has been discovered).

There may be just about nothing concerning the latest backside in June that appears like a capitulation backside. Which means the place all hope is misplaced and from that darkest hour a real and lasting backside has been discovered.

So who is correct about market route…bulls or bears?

For as bearish as I’m, I’ve to confess that the complete proof shouldn’t be in hand for the bears to be confirmed victorious at this second. Nevertheless, the identical is true for the bulls. They should show that the Fed can tame inflation with out overly harming the financial system. It is a excessive wire act they’ve failed out extra occasions than succeeded.

This results in the concept we’re locked in a buying and selling vary between the 100 day shifting common on the low facet at 4,086 and 4,315 which denotes the 200 day shifting common. Each transfer contained in the vary is meaningless noise.

Which means that regardless of how spectacular the rally…if contained in the vary, then nonetheless not confirmed bullish.

And now matter how intense the drop like Friday or Monday…if nonetheless within the vary, then it proves nothing for the bears.

The actual fact is that we may very well be locked on this vary for some time for the investing jury to evaluation all the important thing proof. And really that will be a logical and wholesome transfer. So do not be shocked if we’re on this vary for a number of weeks or perhaps a few months.

It is because of this that I proceed to advocate our hedged technique that’s completely constructed for vary sure conduct. The truth is, our hedge has generated a formidable +2.12% achieve since going into place Monday 8/15 all of the whereas the S&P has slipped -3.92%.

The great thing about this technique is how straightforward it’s to swing bullish or bearish when the ultimate verdict is in hand. If bearish, then dump the lengthy shares after which benefit from the good points that unfold within the inverse ETFs.

And if certainly it the bulls prevail, then do the alternative by promoting the quick positions in order that the good points from the lengthy shares are allowed to shine by means of.

Like I’ve been saying, our technique is sound. Now let the chips fall the place they might.

What To Do Subsequent?

Uncover my hedged portfolio of precisely 10 positions to assist generate good points because the market descends again right into a bear market territory.

This isn’t my first time using this technique. The truth is, I did the identical factor on the onset of the Coronavirus in March 2020 to generate a +5.13% return the identical week the market tumbled almost -15%.

If you’re absolutely satisfied this can be a bull market…then please be at liberty to disregard.

Nevertheless, if the bearish argument shared above does make you curious as to what occurs subsequent…then do take into account getting my “Bear Market Recreation Plan” that features specifics on the ten positions in my hedged portfolio.

Click on Right here to Be taught Extra >

Wishing you a world of funding success!

Steve Reitmeister…however everybody calls me Reity (pronounced “Righty”)
CEO, Inventory Information Community and Editor, Reitmeister Whole Return

SPY shares . Yr-to-date, SPY has declined -12.54%, versus a % rise within the benchmark S&P 500 index throughout the identical interval.

In regards to the Creator: Steve Reitmeister

Steve is best recognized to the StockNews viewers as “Reity”. Not solely is he the CEO of the agency, however he additionally shares his 40 years of funding expertise within the Reitmeister Whole Return portfolio. Be taught extra about Reity’s background, together with hyperlinks to his most up-to-date articles and inventory picks.


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