Guess myself and a very few group of others had underestimated the amount of faith in this market. I had wholeheartedly felt we would see the Dow cut short of the move towards the resistance line set by the other 3 peaks preceding. Though I had left room to suggest the possibility of this happening, I did have doubts and I did voice those doubts with others, so I was wrong, and I owe gratitude to my counter parts for being fair enough with me to reasonably say, “well, maybe”.
That said, the long term perspective still reads the same. The fundamentals are still shallowing up, and the technicals, when compared to previous end-cycles have very distinctly similar patterns, if we are to truly push back from this point of resistance and engage in a massive sell off shortly after.
This time, I’d like to be a little more open and take a position that we will test the resistance line at least once more on the way day. And this is not for the sake of holding weight to the recent news on positive earnings, as anyone that truly invests knows that these earnings were only “solid” because they came close to juncture with the wall st estimates.
If we remember, however, those earnings estimates were revised downward from previous quarters, so it means nothing that we met the expectations of a market still slowing down fundamentally.
A greater crisis that I think is looming still goes back not large-cap corporate debt but the debt on personal financing, consumers and credit cards. Those are all at records. Coupling that with the Fed Reserve’s charts depicting the total money supply in “deposit accounts”, we see that those accounts are dwindling pretty hard. This loss of deposit away from the market correlated fairly when when regressed to debt repayment expectations. So, liquidity leaving the market is always negative news for future earnings.
That said, one other concern I have is with the small-cap companies. Very poor earnings growth for just under half of them, and they are more leveraged in this hour than in any point in time in the index history. I can foresee a lot of negativity in the Russell 2000. Lower earnings make it harder to find coverage on interest payments, and should anyone need to survive by refinancing, they will be doing so at markedly higher interest rates when compared to 2013-2016.
That said, the long term perspective still reads the same. The fundamentals are still shallowing up, and the technicals, when compared to previous end-cycles have very distinctly similar patterns, if we are to truly push back from this point of resistance and engage in a massive sell off shortly after.
This time, I’d like to be a little more open and take a position that we will test the resistance line at least once more on the way day. And this is not for the sake of holding weight to the recent news on positive earnings, as anyone that truly invests knows that these earnings were only “solid” because they came close to juncture with the wall st estimates.
If we remember, however, those earnings estimates were revised downward from previous quarters, so it means nothing that we met the expectations of a market still slowing down fundamentally.
A greater crisis that I think is looming still goes back not large-cap corporate debt but the debt on personal financing, consumers and credit cards. Those are all at records. Coupling that with the Fed Reserve’s charts depicting the total money supply in “deposit accounts”, we see that those accounts are dwindling pretty hard. This loss of deposit away from the market correlated fairly when when regressed to debt repayment expectations. So, liquidity leaving the market is always negative news for future earnings.
That said, one other concern I have is with the small-cap companies. Very poor earnings growth for just under half of them, and they are more leveraged in this hour than in any point in time in the index history. I can foresee a lot of negativity in the Russell 2000. Lower earnings make it harder to find coverage on interest payments, and should anyone need to survive by refinancing, they will be doing so at markedly higher interest rates when compared to 2013-2016.