Is It Really that Bad?
If you wanna get a laugh from your family, friends or co-workers today, I’ve got a sure-fire way you can get at least a small grin from even the most cynical and humorless person you know…
Tell ‘em you’re bullish on stocks.
Seriously. Stop ten strangers on the street and tell each one that this moment in time, today, is a good time to buy stocks and I bet eight of those ten strangers laugh out loud, right in your face. And I bet the other two look at you with that annoying mix of concern and pity while they hand you a couple bucks for a taxi back to whatever psych ward you just escaped from…
I’m sure you’re already starting to think I might be a couple of sandwiches short of a picnic for even suggesting there might be something positive about the current stock market environment.
After all, we’ve got a full blown credit crunch on our hands – lending is drying up, thereby cutting off the lifeblood of the economy: liquidity…
We have an emerging crisis in commercial real estate, which is an immediate threat to regional banks…
We have a Fed that is threatening 3 more rate hikes. And hedge funds have taken a record level of short positions on Treasury bonds that will pay off if rates do indeed go higher…
We’ve got a Congress that seems eager to play chicken with the country’s debt ceiling…
More layoffs have been announced at Disney (NYSE: DIS) and Meta (NASDAQ: META). And Tucker Carlson even got canned!
The world is clearly going to hell in bucket…
A Turn for the Worse?
It’s only been a couple weeks since both the Consumer Price Index (CPI) and Producer Price Index (PPI) came in weaker than expected, suggesting that finally the Fed was getting the upper hand in its fight against inflation.
That, in turn, led to one of those rare moments when economists and strategists alike all agreed: one more quarter-point rate hike at the May Fed meeting and that’ll be it.
Of course the markets rallied – lower inflation and no more rate hikes is the tonic for much of what ails the economy and stock market right now.
But those good vibes seem long gone, don’t they?
A trader/colleague of mine called the current market environment a “lull,” which is a perfect description of where we’re at. The Fed is in its quiet period before the next FOMC meeting May 2-3. And most companies are in a quiet period before they report earnings…
So investors and the financial media are left on their own to create the narrative behind the stock market’s action – or lack thereof. And that’s pretty much never good…
Because the same rule that drives the “regular” news also drives the financial media. That is: “if it bleeds, it leads.” And that’s exactly what we are seeing right now, the financial media is dominated by a seemingly inexhaustible supply of negative headlines.
The best thing any investor or trader can do right now is ignore the noise from the financial media and focus on what the stock market is actually doing…
A Look at the Chart
Here’s the 6-month chart for the S&P 500. It’s pretty basic….
The rising blue line is the trendline, drawn from the October 2022 lows. It is very likely that those October lows were the bear market lows, because…
Note the purple arrow. It is pointing out where the 50-day moving average (purple line) crossed above the 200-day moving average. This is known as a “golden cross” and it is confirmation that a new bull market has started.
Now, we can clearly see where the S&P 500 dropped below its rising trendline (blue line) during the mini-banking crisis in early March. We can also clearly see that the Index reclaimed that trendline a few weeks later, in the final days of March.
This is all bullish action. Despite the surge in negative headlines and the Fed’s conflicting statements about interest rates before the current “quiet period” forced it to shut its yap, the S&P 500 has dutifully tracked its rising trendline higher…
At the end of last week, over the weekend and today, the negative headlines have dominated. And look what it’s gotten us – three days of sideways action, denoted by those last three glyphs on the chart…
The S&P 500 is simply taking a little breather, consolidating the strong gains it’s made over the last month.
This week, the financial media will finally have something worthwhile to talk about, when we get earnings from Amazon (NASDAQ: AMZN), both Googles (NASDAQ: GOOG), (NASDAQ: GOOGL), Microsoft (NASDAQ: MSFT) and Meta (NASDAQ: META).
And then next week, we’ll hear from the Fed.
Yep, I think we got some upside coming. And I’m still long Schwab (NASDAQ: SCHW)…
That’s it for me today, take care and I’ll talk to you on Wednesday…
Briton Ryle
Chief Investment Strategist
brit.ryle@protradertoday.com
Facebook: https://www.facebook.com/ProTraderToday
Twitter: https://twitter.com/BritonRyle
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