The Week On Wall Street – A Trip Back To The 70s (NYSEARCA:SPY)

Powerful Tornado And Storm With Lightning

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“In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.” – Peter Lynch

June is in the books and the first half of ’22 has come to an end. Good riddance to this tornado that has been devastating the markets. This has been the worst start to a year since 1970.

The last time equity performance was this bad Jimmy Carter was president and inflation was out of control during an energy crisis. Fast forward 50 years and investors face the same backdrop. A failed energy policy has led to an energy crisis and out-of-control inflation. It is no wonder why this has been a difficult road to navigate.

Investors are now wondering if it is time to come out of the bunker or wait until the storm clouds are co.

For the month of June

All of the major indices suffered about the same damage this month (6-8% loss). The semiconductors lost the most ground with an 18% loss and Energy which was the big winner up until June gave back 17% of its annual gain.

2nd Quarter

The NASDAQ was the weakest during the quarter (-22%) and all of the other indices suffered double-digit declines. It was a tech wreck in the quarter with the Semis (-26%) leading the way down. Energy, Commodities, and Healthcare were the outperformers only losing about 6% each.

1st Half

Year to date every major index is down more than 20% except for the DJIA which only lost 15%. At the sector level, Energy and Commodities are the only winners. Semiconductors (-36%), Consumer Discretionary (-32%), and Small Cap growth (-30%) led the way down.

In addition to the losses in the equity market, Bitcoin lost a third of its value in June and Crude oil suffered its first monthly loss this year.

In addition to the losses in the equity market, Bitcoin lost a third of its value in June and Crude oil suffered its first monthly loss this year.

Every week, I show numerous charts to illustrate key trends in the market and economy to try and make sense of whatever is going on in the market. These days, though, only one chart matters because it is the root of the inflation problem which is the primary reason stocks are being sold. The cost of “energy”, specifically prices at the pump.

The national average price of a gallon of gas approached and exceeded $5, before retreating. Not only are gas prices at record highs, but the pace has also been unprecedented. Since the COVID lows, the national average price has nearly tripled. Since Q1 2021, prices are up 122%, and this year prices are up 52% in less than six months.


Record Gasoline prices (

For just about every issue facing the market these days, gas prices are in some way related to it. High inflation stems from rising oil prices working their way into just about every aspect of the economy. Consumer sentiment is negative and at RECORD lows by just about every survey out there, but $5 for a gallon of gas and $75—$100 to fill up your tank will have that effect on consumer psychology.

The Fed has barely even started hiking rates, and there’s not even a shot that they’ll slow down unless this chart starts moving in the other direction. The belief that the FED will pause due to a weak economy with inflation still at these levels is a mindset based on hopium. I could go on and on and the train wreck that was set in motion around the globe with a failed “green energy” agenda is playing out before our eyes. This situation is something out of an investor’s control and so we are left to play the cards that are on the table.

Inflation MIGHT be at or very close to a peak BUT I’ll post a quote from Jay Powell himself.

It is going to take clear and convincing evidence that inflation pressures are abating and inflation is coming down” to ease pressure on Fed expectations.”

There should be no surprise why we are faced with this inflation issue that has hung around longer than most expected. It is the ONE FACT that no one wants to elaborate on because it’s become a political issue. That is ENERGY costs. They remain the culprit that keeps inflation embedded in the economy. On that front, since no one is mentioning it, let alone addressing it, relief from high energy costs is not in sight.

Relative to the range of the last five years, US crude oil inventories are barely above the lowest levels for the current week of the year. Backing out inventories in the Strategic Petroleum Reserve, stockpiles haven’t been this low in the prior five years. Despite surging prices, U.S. production, while rising, remains 10% below the peak of just over 13 million barrels per day. Until those production numbers start getting closer to their prior peaks, barring a big economic setback, prices are unlikely to experience a meaningful long-term pullback.

The choppiness in the stock market hasn’t made for easy trading recently, though most stocks, sectors, and indices do remain above their recent lows. While there is a chance that stocks can remain above these lows, gathering profits on the long side isn’t going to be as easy as it used to be. The markets are still searching for a viable bottom that can be trusted and until there is more evidence of that, active market participants will have to be very nimble and better get familiar with the terms “Short” and “Inverse” when adding positions.

The ongoing problem is trying to find ideas that “feel comfortable” in the tricky environment. With only 3 sectors “working” playing around in other areas of the market is going against the primary trend. We are now 13 years removed from the Financial Crisis bottom and more than two years from the COVID Crash lows. It may not necessarily be THE end, but as the New ERA strategy laid out, it’s at least the beginning of the end of easy money, and easy markets.

The Week On Wall Street

Coming into the trading week, the S&P’s 5-day rally off the lows stood at 6.6%. While the index struggled at resistance on Monday it was encouraging that we didn’t see a return of selling pressure. The S&P close at 3900 on Monday set the stage for an interesting week.

Tuesday started on an up note but ended on a sour one as a big intraday reversal wiped out gains and sent the S&P to a 2% loss. Analysts were stumbling over themselves trying to give a reason for the reversal. If you follow the technical musings of the markets it was quite evident overhead resistance ruled the price action. It is no coincidence the rally stopped where it did.

From there the equity market had a fitting end to the month of June and the first half of ’22 as the selling picked up steam. A change in the calendar gave the BULLS some relief as the indices closed out the week on a positive note.

However the one day rally couldn’t overcome the weakness and all of the indices finished the week with losses.

The Economy

Revised Q1 GDP was released and came in slightly weaker than expected at a level of -1.6% versus forecasts for a decline of 1.5%. Personal Consumption significantly missed expectations, (1.8% vs 3.1% estimate), GDP Price Index came in higher (8.2% vs 8.1%), and Core PCE was also revised higher (5.2% vs 5.1%). That spelled lower-than-expected growth and higher-than-expected inflation. Not exactly a recipe for higher stock prices.

If the Atlanta GDPNow forecast is correct the US economy is already in a recession, the report has Q2 GDP coming in at -1%.

Most of the economic data reports have been weaker than expected recently and that is what the stock market has been predicting since the beginning of this year. Now the question is are we at a bottom, OR is there more weakness and a long valley ahead? The stock market is about to let us know by its price action in the next month or so.


Consumer confidence dropped 4.5 points to 98.7 in June, weaker than expected, after the 5.4 point slide to 103.2 in May. This is the lowest since February 2021 (remember the June sentiment index from the University of Michigan survey fell to an all-time low of 50.0 on the month). All of the sub-indexes were weaker.

We’ve witnessed a steep plummet in consumer expectations that is historic, as the year-over-year change is the worst ever. It’s not just the fact that consumers have turned negative but how quickly they have done so over the past year. It is no coincidence that the change in ‘policy’ and its negative effects are now showing up in the data. It will eventually have a major impact on the economy and the stock market.

I’ve made it part of the narrative here since mid ’21 for the simple reason it is fact and it does have an impact on investing.

U.S. personal income rose 0.5% and spending increased 0.2% in May following respective gains of 0.5% and 0.6% in April. This is a 4th consecutive increase in income and a 5th straight for consumption. Wages and salaries were up 0.5% in May as well, from 0.6% in April.

The headline chain price index popped 0.6% from 0.2% previously, leaving the 12-month clip unchanged at 6.3% y/y. The core chain price index was up 0.3%, as it was in April, with the annual pace dipping to 4.7% y/y versus 4.9% y/y. The latter is a slight improvement on the Fed’s preferred measure of inflation.


U.S. Manufacturing PMI fell to near two-year lows in June amid contraction in client demand. The seasonally adjusted PMI posted 52.7 in June, down notably from 57.0 in May.

The Dallas Fed’s manufacturing index plunged 10.4 points to -17.7 in June after falling 8.4 points to -7.3 in May. That is a 25-month low. This is much weaker than expected and is the lowest since the -48.8 in May 2020. It was at 31.1 a year ago. Weakness was broad-based.

The Richmond Fed manufacturing index slumped another 10 points to -19 in June after plunging 23 points to -9 in May. This is the weakest print since May 2020. The index was at 26 a year ago.


Pending home sales bounced 0.7% to 99.9 in May, beating forecasts, after falling 4.0% to 99.2 in April. This breaks a string of 6 consecutive monthly declines after the drop in April took the index below 100 for the first time since 71.6 in April 2020. The index was at 115.6 last May. On a 12-month basis, the pace of contraction accelerated to a 12.0% y/y clip. Aside from the months around the pandemic, this is the fastest pace of erosion since 2011.

The jump in mortgage rates and the declining affordability have generally been weighing on sales. The dip in mortgage rates in May and the rise in inventory perhaps supported the unexpected improvement in sales in May, but the National Association of Realtors Yun said despite the small gain, the “housing market is clearly undergoing a transition.”

The Global Scene

Economic and consumer sentiment data from South Korea, Sweden, and the Eurozone showed a similar collapse to US economic sentiment. Eurozone consumer confidence is near record lows. In both Sweden and the Eurozone, economic activity surveys suggest a significant deceleration in the economy.

IMF Cuts Global Economic Growth Forecast

This is the second downgrade in forecasts this year. The global crisis lender said it now projects worldwide growth of 3.6% in both 2022 and 2023, a drop of 0.8 and 0.2 percentage points, respectively, from its January forecast.

PMIs from the US and around the world are consistent with elevated recession risk. Global data this week did little to reassure fears of a slowdown in economic activity that could tip into a broad recession. In addition to weak S&P Global PMI data (at 22 month lows), we saw two concerning data points from export-oriented economies.

In Korea, preliminary exports (for the first 20 days of the month) plunged a brutal 20% after seasonal adjustment, the most since April of 2020. The preliminary export data can be a bit messy, but if the full month data is anything close to this big of a drop, it’s a bad sign for global activity.

German data on business sentiment from the IFO was also very weak; while the current assessment data wasn’t too bad, the Expectations index tends to be better correlated to the forward growth rate of the German economy, and the results there were recession-level weak.

An important data point in this report centered on German electricity prices which have surged and could spur rationing later this year.


Japan’s industrial production records the biggest decline in two years. Production fell 7.2% in May (vs -0.3% market consensus).


China is now bucking the weaker trends that are forming in the global economy. China’s manufacturing PMI rebounds to the expansion zone in June. The purchasing managers’ index for China’s manufacturing sector came in at 50.2 in June, up from 49.6 in May. NBS senior statistician Zhao Qinghe;

“As the epidemic prevention and control situation in China continues to improve and policies and measures to stabilize the economy take effect at a faster pace, China’s overall economic recovery is picking up.”

The Caixin headline China General Manufacturing PMI followed the improving story, increasing from 48.1 in May to 51.7 in June, to signal the first improvement in the health of the sector for four months. The rate of increase was the strongest seen since May 2021.

Political Scene

Slow progress on major legislative items pending in Congress sets up July as a packed month for Democrats looking to advance the Bipartisan Innovation Act (BIA) economic competition bill and revive a reconciliation to the August Congressional recess. The challenge for Congressional leaders will be finding agreement on highly contentious issues under the pressure of tight majority margins and 12 full working days across the month of July.

In a statement on the bill’s progress last week, Speaker Pelosi highlighted that “Democrats have already made accommodations in the name of an agreement,” which makes a path forward more difficult. An alternative to an agreement continues to be the passage of individual pieces of the BIA (such as semiconductor grants) or the inclusion of various programs in a year-end defense funding/tax extenders bill.

Similarly, although activity on a revived reconciliation bill has picked up in recent weeks, there has not been the type of progress that would suggest a deal is close. A framework agreement could emerge in July driven by urgency around the expiration of health care subsidies later this year, but the scope of policy and path forward remains uncertain.

In my view, until some of the pressing economic issues are resolved, total gridlock on the passage of anything now would be a positive for the markets.

The G7

In a joint statement, the G7 agreed to study and discuss further the concept of price caps on Russian crude. This policy would ban purchases and more importantly ban insurance contracts on oil from that country below a set contract price. Because US and UK entities are dominant in global cargo insurance markets, this scheme is hypothetically viable, but it leaves room for Russia to skirt the price caps in a variety of ways.

In the short-term, it’s unlikely to balance global crude markets, something that can only be done through some combination of expanded OPEC+ production (unlikely; it’s not clear any material spare capacity exists even if OPEC+ could be convinced to agree on a large output increase) and signs of a policy change in the U.S. (also unlikely). Longer-term, other non-OPEC+ large-scale projects can keep the market in line, but Russia’s production will fall steadily without the technical expertise and physical equipment of Western operators who are no longer doing business in the country.

In short: there’s no obvious near-term easing on the supply side of the oil market. As for crude prices, WTI is trading between $105-$110, while gasoline futures are also up to a level that equates to about $4.70/gallon nationally. Retail gasoline prices lag futures, so the current national average is around $4.90/gallon.

Note that Russian oil sales were 20 Billion in January, and in May were 22 billion.

Food For Thought

More consequences from the “Green Nightmare”. There comes a time when a decision has to be made to do what is necessary. The EU has made such a choice now, as it is set to fire up its coal retort to keep its economy going.

It does make one wonder why drilling for oil and using pipelines to transport oil are not part of the global energy plan now. As long as this war on fossil fuels continues the outlook for reduced energy costs is grim. Ironically, it is dirty coal now that is an unintended consequence resulting from a failed green agenda.

EVs vs. Gasoline

The average cost for an EV these days is ~54k, that’s a 22% increase since last year. That compares to the average cost for a gasoline-powered vehicle of ~44k.

The initial phase of the transition to ‘green’ has been an abject failure. The proposed shift to EVs will likely continue that trend. Carmakers that are betting on all-electric fleets by 2030 might find themselves staring at overcrowded auto lots.

There is no doubt the green energy plan “will be the future” but that future isn’t today, no matter how much the politicians and greenies out there demand it. In the meantime, the “transition without a plan” brings havoc to the economy and the markets. That poor planning has the U.S. woefully behind the Eurozone and others when it comes to “charging infrastructure” with only 46,000 charging units in place today.

Capitalism and the U.S. Stock Market

Some readers wonder why I highlight anti-capitalist rhetoric as part of an investment update. Many believe these comments to be politure and shouldn’t be included in the investment picture. Nothing could be further from the TRUTH. I’m not interested in who is denigrating capitalism, I’m interested that it is being done. And so should everyone who invests in the capital markets here in the U.S. It is very much a part of investing in the stock market as it impacts the investment environment.

We are discussing capital markets in a capitalist country, The United States of America. If an individual has investments in Corporate America, it is indeed a topic that needs to be discussed from time to time. An anti-business backdrop is not conducive to keeping corporate America healthy. A healthy corporate America equates to a healthy economy. A healthy economy builds wealth in a capitalist society.

Those involved with their outcries based on pure emotion and feelings against the investment system in place, need to start to deal with what seems to be out of favor now – FACTS. Let me remind all investors here;

Capitalism has lifted more people out of poverty than ANY alternative. Those that continues to attempt to subvert this “system” needs to learn the facts about capitalism.

When speaking about the equity markets, every investment has the opportunity to create wealth. In free-market capitalism, you get to invest in whatever you want with whomever you want. No third party may hinder you, to tell you what you may trade or not trade. What that means is that every time you trade/invest, you have the ability to become wealthier.

How do we know that? Because the investment is made voluntarily. You chose to make the trade — not some government bureaucrat, politician, or antagonist. You traded your labor or something your labor had produced for something else — which, because you made the trade freely, we know you valued it more. And because you walked away from the trade with more of what you wanted before you came into the trade, we know that you became wealthier.

And whenever that wealth-producing engine is hindered, in ANY way, — when the people are not free to trade their own labor, or the product of their labor, when their consent no longer matters, or what they choose to invest in is constantly under siege we know that they are not able to make investments that would make them wealthier.

Growing wealth is what this system is about. Make no mistake about it this applies to anyone that wishes to use the opportunity that capitalism affords. From the part-time worker at McDonald’s and Amazon, to the CEO of a corporation, the opportunity is there for those that want it.

The Daily chart of the S&P 500 (SPY)

Resistance rules. The S&P rallied right to the descending trend line and fell back into what some hope will be a trading range.

S&P 500

S&P 7-1 (

The ‘best’ scenario for the Bulls is a range that attempts to carve out a bottom. The “worst’ case is a test of the may lows that fails and leads to lower prices. The trend is right there for everyone to see and there is no debate as to what direction it has taken. Picking a bottom is like picking a TOP, it’s a fool’s errand.

Investment Backdrop

On Tuesday the S&P posted a 2% loss, and was the 4th time this year that it has traded up as much as 1% intraday but finished down over 1%. A typical sign of BEAR market price action.

Investors have witnessed two very quick ~10% rallies this year that we’re unable to hold up. What the BULLS would like to see is an ability to take out resistance in rallies and hold support on pullbacks- i.e. break the downward trend that has persisted all year (continuous sequence of lower highs and lower lows). So far that hasn’t happened.

This week’s action looks like it will be the third time rallies have evaporated as soon as it approaches overhead resistance. Inflationary data will remain a large influence on the market trend. In essence, the stock market is now a slave to the inflation reports. A HOT number in mid-July and the market will react negatively, a COOL number and the market should post a strong rally.

The markets are indecisive, and that is certainly understandable now. The search for a bottom is always a slow drawn out and frustrating process. Along the way, there are plenty of starts and stops that will upset the best of plans unless one is sitting and watching.

The challenging backdrop continues.

Thank you for reading this analysis. If you enjoyed this article so far, this next section provides a quick taste of what members of my marketplace service receive in DAILY updates. If you find these weekly articles useful, you may want to join a community of SAVVY Investors that have discovered “how the market works”.

The 2022 Playbook is now “Lean and Mean”

Yes, that is correct, opportunities are condensed in Energy, Select Commodities, Healthcare, Biotech and China. The message to clients and members of my service has been the same. Stay with what is working.

Each week I revisit the “canary message” which served as a warning for the economy. The focus was on the Financials, Transports, Semiconductors, and Small Caps. I used them as a “tell” for what direction the economy was headed to help forge a near-term strategy. They sent their messages for the economy and since that day the S&P is down 15%. There will be times when the canaries appear to be revived, but, until there is a decided swing in the technical picture where rallies take out resistance levels, they continue to warn about the near-term outlook.

The recent “recommendations” in ARK Innovation (ARKK) Biotech (XBI) and China – (KWEB), (ASHR), (JD), etc. have been rewarding for investors that have followed along.

In addition, I will release a report this weekend to clients and members of my service advising them to take a look at another intermediate to longer-term trend that is just getting started. I believe it has the chance to be a big winner in the months ahead.



2022’s transportation fuel consumption is lower when compared to 2019 or 2018 and is little changed versus a year ago. I do wonder how much of that is from the impact of the “work at home” movement. At the same time, foreign demand is very high, because European consumption is being supported by US refineries.

China has also at least temporarily shut-in refining capacity amidst a focus on reducing greenhouse gas emissions and shifting to EVs. As a result, US exports of refined products are very strong historically, driving up the cost for US drivers. In the short-term, prices may be receding off record highs, but the outlook on the supply side has not improved, and market expectation-driven declines may be capricious and temporary.


Foreign OIL demand (

As far as crude goes, high prices are coming thanks to incredible discipline from oil producers during an uncertain regulatory backdrop. Surging prices for crude have helped Energy names deleverage quite dramatically; debt for Energy names is near the lowest levels since 2014. These companies are well-positioned to weather any economic storm and are in better shape than ever before. With WTI crude oil prices still north of $100/barrel and operators remaining very disciplined on the cost-front, results in cash flow generation. Valuation is also attractive at just a 10.9x P/E. This is a 43% discount on the S&P 500 P/E, which is at the lower end of its past 20-year relative P/E range.

In addition to cutting debt loads, high oil prices are letting management buy back shares and return capital via dividends. All of that cash flow is not being plunged back into capex, which hasn’t recovered at all from its decline following the COVID shock despite strong global crude demand.


Energy CAPEX (

S&P 500 Energy sector capex today is roughly one-third of what it was in 2014, so it’s no wonder that US crude production is growing so slowly; until the mindset and war on fossil fuels changes, it’s not clear how this dynamic changes.

Energy companies are in a strong fundamental position with what is a backdrop of higher oil prices acting as a tailwind for a while.


As inflation has raged and the Federal Reserve has taken a more hawkish approach toward monetary policy, homebuilders have borne the brunt of the impact as the market has razed the prices of their stocks. The Homebuilders ETF (XHB) fell into a BEARISH technical pattern in March. Recently, the S&P 500 Homebuilder group crossed the threshold of falling more than 40% below its prior record closing high from December 2021, and the group remains down more than 40% today. Since late 1989, there have only been a handful of other periods where homebuilders have experienced a 40%+ decline from a record high, including the ‘granddaddy of them all’ that began in 2005 and reached the 40% threshold in June 2006.

When it comes to market history for the group, no two periods are the same, so just because the homebuilders tended to rally following the prior 40% drawdowns doesn’t mean they will this time around. The group has reached very oversold levels, and in terms of valuations, the four stocks in the S&P 500 Homebuilder group currently trade for under 4 times this year’s estimated earnings.

The homebuilders are a perfect example of why a PE ratio should NOT be USED as a market-timing tool. While that may look attractive, those estimates are guaranteed to go lower. The question is by just how much. Historically, the group’s median P/E ratio has been roughly 13 times earnings which means that earnings could be cut by two-thirds and the group would be trading in line with its historical multiple.


Here is a sector that has quickly reversed and moved back to BULL mode. The Healthcare ETF (XLV) posted a rally that now shows the recent breakdown was probably a false move. The sector was more stable than the general market and remained above support. Healthcare is once again “working”. Big cap Pharma was a large factor in this rally and as we will see later BIOTECH is chipping in with a smart rally off the lows. Safety says to stay with the large-cap dividend pharma stocks if one is inclined to delve into this group.


This is an area I highlighted a while ago as being one of the most interesting setups that existed in this tough environment. The Biotech ETF (XBI) has held support and this rally moved the ETF above its first resistance level. The group was also stronger than the general market this past week. XBI has rallied 16% since it successfully retested that low of $64, while the S&P is flat. This setup has been rewarding for those looking for a trade and willing to take on more risk.

There are more hurdles to overcome as the group looks to stabilize after a long downtrend. A sideways pattern that builds a base in this range would set the stage for more outperformance from this group. Any activity here is reserved for the risk-oriented. However, long term investors should start to take a look at a turnaround situation that can produce handsome profits over time.


The NASDAQ and the technology ETF (XLK) are both mired in steep downtrends that are pointing to a probable test of the June lows. If they can stabilize and put in a higher low, it could be a sign that this downtrend is abating.

Semiconductors (sub-sector)

Semis started the week in a weak position and this week have totally broken down again breaching the June lows. My advice to members on June 19th was to get involved in the Semiconductor Inverse ETF (SSG). That trade has posted a gain of 8%.

The semis pose a delicate situation for the market in general. They are a group (one of my canaries) that usually dictates where Technology goes. With Technology making up a big part of the S&P it will probably determine the next move in the market as well.

International Markets

I’ve been highlighting the turnaround in the Chinese markets for well over a month and they have been outperforming, as their fundamental backdrop is improving.

On a year-to-date basis, both the S&P 500 and the KraneShares China Internet ETF (KWEB) are well in the red. However, KWEB is now outperforming SPY (-11.9% vs. -20.8%) by a considerable margin after bouncing 50% off its lows in early March.

While US markets have struggled over the last three months, Chinese equities have done well. The S&P 500 has declined 13.4%, but the KraneShares China Internet ETF has gained 10.6%, resulting in a performance spread of 24%.

More recently, since late May (5/24), KWEB has gained 36% versus a decline of 1% for SPY. KWEB has made a few higher lows over the last few months, while SPY has continued to make lower lows.

Other Chinese indices like ASHR and FXI offer similar outperformance. With China markets rallying off of lows and attempting to start making higher highs, equity market bulls are hoping KWEB and other ETFs are now leading to the upside similar to how it led to the downside.

I do not believe these moves are over. The Chinese equities I am involved with now are all showing BEARISH to BULLISH reversals. They could be in the very early stages of what could be a massive turnaround, as their fundamental backdrop is now deemed a positive tailwind. Sitting on huge gains while you watch the market struggle is always a plus, but like with any other situation, “price action” will be my guide.


Along with stocks, crypto markets were in rally mode after brutal selling earlier this month. Bitcoin rallied 2.3% then turned in a flat performance in a move that has done little to help recover big year-to-date losses. Bitcoin along with most other major cryptos has been more than cut in half since the start of the year, losing a third of its value in the month of June.

The downtrend in Bitcoin is firmly in place and for those interested in taking advantage of the downside there is a new ETF that will work well in tracking this BEAR market. The Short Bitcoin Strategy ETF (BITI). It is the opposite of the companion ETF (BITO) that plays the “long” side.

If you believe Cryptocurrencies are the last bastion of speculation, then be aware they could join the other speculative assets and return to their all-time lows. If that is the case, BTC can easily be cut in half from here.

Final Thought

Some financial market commentators tend to shrug off equity bear markets as an unreliable indicator of recession, but I find this dismissal a bit misplaced. In general, bear markets and recessions are closely tied together: since World War 2, only two periods have seen bear markets without a recession starting in short order. The two examples of periods when the S&P 500 suffered a bear market without a recession taking place at the same time: were 1966 and 1987.

In all other instances, a recession was either already underway or would start during the bear market. With the path of least resistance lower, the economy slowing, inflation high, and the Fed in tightening mode, fighting the trend is not part of my strategy.

I continue to hear analysts say dips are buying opportunities. While that might be for the true long-term investor, that is foolish advice now. I admit there are opportunities if you know where to look but what is out there is plenty of commentary based on ‘hope”. The politically correct are touting there are no signs of recession present, and inflation has probably peaked. I’ll get on that train when I see the data, and then it might be a short ride IF there are signs that inflation will be elevated for a long time. (My base case)

As far as a recession, the stock market by its poor first-half performance signaled there was trouble ahead. The next move in stock prices will tell me if this slowdown turns into a deeper trough with lower stock prices OR if the market sees stability ahead. In the interim I’ve decided to leave the “political correctness” to others. I wish them well.


Please allow me to take a moment and remind all of the readers of an important issue. I provide investment advice to clients and members of my marketplace service. Each week I strive to provide an investment backdrop that helps investors make their own decisions. In these types of forums, readers bring a host of situations and variables to the table when visiting these articles. Therefore it is impossible to pinpoint what may be right for each situation.

In different circumstances, I can determine each client’s personal situation/requirements and discuss issues with them when needed. That is impossible with readers of these articles. Therefore I will attempt to help form an opinion without crossing the line into specific advice. Please keep that in mind when forming your investment strategy.

THANKS to all of the readers that contribute to this forum to make these articles a better experience for everyone.

ENJOY the Holiday Weekend!

Best of Luck to Everyone!

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