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00:00:00Hello, everyone. It's Stephen Whiteside here from the
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00:00:02uptrend.com with this weekend's edition of Stock Market Timeing Television.
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00:00:07Well, we had another very volatile
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00:00:09week and we're not expecting that to change anytime soon.
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00:00:13Well, it's been over a year
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00:00:15now, since we started talking about what the Fed was going to do.
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00:00:18We knew they were going to raise interest rates to fight inflation, and the result
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00:00:22of that would be lower stock market prices and a recession.
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00:00:26Well, we've got some of the lower stock market prices.
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00:00:30We don't have the recession
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00:00:31and inflation has not been wrestled to the ground just yet.
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00:00:36So during this period, there's lots of
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00:00:38mixed signals out there and there's a lot of people that don't learn from history.
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00:00:42And that's probably the biggest problem that we have because during
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00:00:47this rate tightening cycle, some of the sectors that don't do well are the ones
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00:00:50that are seeing the most activity at the moment.
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00:00:54And during a rate tightening cycle, the sectors that do the worst are utilities,
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00:00:57real estate, consumer discretionary, financials, and technology.
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00:01:02And what do you know?
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00:01:03Well, the stocks that are in the most actively traded right now, when you look
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00:01:07at the dollar volume, it is all technology stocks.
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00:01:11So people, even though they know
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00:01:13that lower stock market prices are coming, a recession is coming, they're willing to
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00:01:18take a risk right now and try to drive these stock prices higher.
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00:01:23Now, when I talk about mixed signals, of course, some of the things that we watch
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00:01:27to see if a recession is coming or if recession is over.
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00:01:31One of the ones I like to watch is the Baltic Dry index.
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00:01:33This is the cost of moving dry goods around the world.
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00:01:36And you can see over the past couple of weeks, we've been moving higher.
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00:01:40So does that mean that the worst is over and the world is about to start to recover
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00:01:46economically, well, what if you looked at the price of copper?
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00:01:49Now, you can see as the stock market was rising over the past couple of months, so
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00:01:54was the price of copper, which just rolled over this week.
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00:01:57So we're back on a sell signal.
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00:01:58If you watch copper as an economic barometer, that's not a good sign.
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00:02:04Now, another global economic barometer is the price of crude oil.
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00:02:09And if we're looking at crude oil, crude oil has made a new low for this move.
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00:02:13We peaked back in May of last year and we've been trending lower ever since.
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00:02:17We were looking to see if the fall lows
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00:02:19would hold and they certainly did not this week.
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00:02:21And so here we are.
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00:02:23We're back at prices we haven't seen since
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00:02:24early 2022 and may continue to move lower from here.
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00:02:29Looking for support maybe at the lows from late 2021.
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00:02:33We'll just have to wait and see.
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00:02:35Now, a more localized economic barometer is the price of lumber.
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00:02:39And again, it peaked at the start of 2022 and has been trending lower ever since.
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00:02:45We got a couple of pops, but they didn't last very long.
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00:02:48And here we are. We traded up into the channel last week,
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00:02:51but this does not look like the start of any major trend to the upside.
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00:02:57So a lot of mixed signals out there.
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00:03:00Now, during a rate tightening cycle, the market is fully
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00:03:04ready to accept the fact that some stocks are not going to make it.
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00:03:08And it's easy to tell if you look at a particular sector, the worst performing
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00:03:12stock is just put on a list of stocks that probably won't make it.
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00:03:16But sometimes there's stocks that just collapse and the market wasn't
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00:03:20anticipating it, and those are called Black Swan events.
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00:03:24A lot of people think that what's happened over the past two weeks in the US regional
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00:03:28banking sector is a Bflypaperlack Swan event.
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00:03:31There's a lot of people out there that
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00:03:32we're betting against this sector for a while.
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00:03:36The way the stock market works is it's not a problem until it's a problem.
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00:03:41And there's lots of stocks out there that
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00:03:42have problems, but if the market isn't going to focus on them, then the market
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00:03:46isn't going to take vengeance on that particular stock.
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00:03:51So when we look at the regional banking
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00:03:53sector, and this is a weekly chart, you can see that once it started to
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00:03:56break down in early 2022, it just got trapped in the Flypaper
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00:03:59channel and basically treaded sideways for nearly a year.
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00:04:03Then it's just been the last two weeks that we started to break down.
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00:04:06That's where the Black Swan event comes in.
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00:04:09You can see that the market was not
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00:04:11selling these stocks off in anticipation that there would be a Black Swan event.
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00:04:17Here we've traded down, we've filled this open gap over here.
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00:04:20Wouldn't be surprised if we continue to move lower from this point.
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00:04:24Now, the market is trying to repair some of the damage.
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00:04:28They're trying to save some of the
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00:04:29stocks. And a couple of stocks in the news, the first one, First Republic,
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00:04:34the market pulled together $30 billion to infuse into this particular stock.
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00:04:40But even after that happened, the stock dropped another 32 % on Friday.
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00:04:45So I would expect that First Republic is going to continue to move lower from here.
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00:04:50Another stock that the market was really anticipating to implode was Credit Suisse.
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00:04:55And today it has been taken over, apparently, by UBS.
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00:05:01And that stock has been hit hard over the past week or so.
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00:05:04But it looks like it's buying Credit Suisse with lots of conditions.
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00:05:08I'm not sure if that's going to calm the
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00:05:10market down at all, but we'll just have to wait and see.
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00:05:13Now, the last time that we had a cluster
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00:05:15of US financial institutions falling apart was back in 2008 into 2009.
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00:05:22We had one fall apart in 2017, but if we just go back in time back
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00:05:26to 2008, you can see that we started off the year and we're heading down.
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00:05:32Here's where Bear Stearns failed.
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00:05:35Then what happened next?
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00:05:37Well, after Bear Stearns failed, the market did rally
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00:05:41and peaked a couple of months later in the middle of May and then started to come
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00:05:45right back down to retest those previous lows.
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00:05:49Here's where Countrywide failed.
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00:05:52Then a little while later, a couple of weeks later, we had Indie Mac.
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00:05:57The market is continuing to move lower.
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00:05:59Now, from that point, which was the middle
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00:06:02of July, the market started to move up and got a rally into early August where it
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00:06:08peaked, and then it started to come back down into September.
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00:06:12Here's where Leman Brothers failed.
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00:06:14You can see that even in a bad year in
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00:06:16which you've got financial failures, you do get some rallies.
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00:06:21But my last point about looking back at
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00:06:222008 is that for that year, or going back previous to that, the market,
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00:06:30the S&P 500 ETF was up at $160 and traded down below $80.
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00:06:37So that is a 50 % loss from the peak to the trough.
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00:06:41And so we haven't seen anything like that yet.
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00:06:45So I wouldn't be surprised if the market
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00:06:47can make lower lows in 2023 than it did in 2022.
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00:06:53Now, the fractional banking system that the world economy is based
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00:06:57on works really well when it works, but when it doesn't work, it doesn't work.
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00:07:02There are a lot of problems out there that
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00:07:05people are not focusing on, and it's not a problem until it's a problem.
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00:07:09Whether it's your country, your company, your currency, it doesn't matter.
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00:07:14If nobody's focused on it and nobody cares
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00:07:16about it at the present time, then just keep sailing straight ahead.
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00:07:21Now looking at the VIX, the VIX had
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00:07:22another wide bar, so another volatile week.
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00:07:25It ended the week just up 2.86 % after making a new high.
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00:07:30We're going to remain long term bearish on
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00:07:32the stock market as long as the VIX does not close below $19.21 this coming Friday.
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00:07:37If we look at the recent peaks, you can
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00:07:39see that just back in September, we were up at the 34, 38 level.
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00:07:45We haven't got there yet.
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00:07:46And then back in the early part of 2022,
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00:07:48we were up there at 37.50. So I think we have a ways to go
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00:07:52before the market finds an official bottom.
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00:07:55Looking at the daily chart of the VIX, if we close below 21.
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00:07:5941 on Monday, that would turn us short term bullish on the market.
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00:08:04And of course, that lower channel line is moving higher daily.
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00:08:07Now, we've got the DAO on a sell signal.
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00:08:10It was down Friday, had an inside day.
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00:08:13S&p 500 had an inside day.
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00:08:16We also had an inside day for the Russell 2000.
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00:08:19We saw microcaps with a new lower close on Friday.
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00:08:24The TSX had an inside day on Friday.
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00:08:27Financials, Canadian financials made a new low on Friday.
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00:08:30Us financials had a new closing low on Friday.
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00:08:34Also, we're seeing the broker dealers having a bad week.
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00:08:37Insurance companies, there's a new closing low on Friday for insurance companies.
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00:08:41So none of this looks very pretty going into Monday's trading action.
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00:08:45Now, the only thing that's working right
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00:08:46now is those technology stocks that everybody's focused on.
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00:08:50They were up by the end of the week, and it has a lot to do with semiconductors.
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00:08:56Everybody's all excited about the
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00:08:59opportunities in artificial intelligence, and that's pushing up some
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00:09:02of the chip stocks, and that's holding the Nasdaq up.
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00:09:06Now, while money was flowing out of the stock market, it was going into Bitcoin,
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00:09:10which I don't think is any safer, but it's where money went this week.
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00:09:15We also saw money go back into gold.
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00:09:17And during the week, we were looking at
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00:09:19gold and gold stocks hitting resistance, but it punched right through the
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00:09:231937 50 level and made it all the way up to $2,000 on Friday.
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00:09:28And gold stocks followed suit.
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00:09:30And of course, where's money coming from to go into gold stocks?
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00:09:33Well, it looks like it's been coming out of energy stocks.
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00:09:36So we've switched from being bullish on energy to being bullish on gold.
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00:09:41And that has not changed going into the week end.
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00:09:45So here we are.
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00:09:46We're coming into Sunday night trading.
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00:09:48Big move in the banks with UBS buying Credit Suisse.
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00:09:54I would assume that nobody's going to change positions this week.
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00:09:56We're still looking over the cliff.
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00:09:58Nobody's talked about China when we're talking about all these financial woes.
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00:10:02The Chinese banking system has not fixed
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00:10:04all of its problems, so maybe that's the next one that's going to pop up.
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00:10:09I don't know if you saw this during the week, but Saudi Arabia and Iran brokered
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00:10:13peace accord, brokered by China, not the United States, not the Europeans.
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00:10:19And so there's a lot of stuff going on in
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00:10:21the world that doesn't necessarily make the nightly news.
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00:10:23But there is a pretty good possibility that Saudi Arabia and Iran are going to
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00:10:29start selling China oil and being paid in local currency, not the US dollar.
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00:10:35And that may throw the financial markets into a tizzy.
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00:10:39Okay, folks, thank you very much for your time and attention.
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00:10:42Looking forward to another exciting week.
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00:10:44I don't think the stock market is going to be able to do much
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00:10:48on the upside this week, but we'll just have to wait and see.
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00:10:51We'll be watching the VIX closely and to see if the options traders give us
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00:10:55a heads up on what's going to happen
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00:11:06next. you. Byeyou.
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00:11:26Bye.