Peculiar Position for the Market
Updated
The market is making an attempt to rally, but we will need to violate this repeating pattern if we can expect any upside from here. Otherwise, it's just another good entry for short positions. Why buy an overpriced market if holding cash would yield positive with no risk of entry or exit?
Here are some sentiment metrics and things to keep in mind, some technical and some fundamental. There's more of them but here are the ones I can immediately think of:
DXY is still rallying.
The US dollar historically loses 5% purchasing power per year, yet is seen as a safe haven. This is how overpriced the market is.
Japan, the largest purchaser of USA treasuries, is now a net seller.
Foreign bank exposure of US Treasuries is now declining as opposed to rising as in 2008.
USA cannot fund a central bank bailout via foreign purchases of treasuries as in 2008.
Some commodities are still at multi-decade lows, save for EV related markets and others which were forcefully subsidized.
Oil is rallying with a distinct lack of supply increase AND increased seasonal demand.
Because fuels are rallying, transportation costs are increasing baseline costs for every person and business.
Fertilizers and other chemicals are in short supply which increases food prices.
Some top producing food countries are now restricting imports.
The rate of home purchases is declining rapidly, mortgage rates and risky variable interest rate mortgage deals are rising.
Most of the rally in the past week was in profitless tech.
Increased USA consumer spending is solely based on increasing consumer credit card debt, rather than savings or income.
Central bank interest rates are not anywhere near the price inflation rates and are causing malinvestment to linger.
The rate of layoffs is increasing and has not met or exceeded 2020 levels.
Layoffs in the past few months were mostly in small businesses with most medium and larger ones adding employees, yet suddenly almost all of them have stopped hiring.
There is a lack of specialized skilled labor and this demand is not being met with supply.
The largest stocks have not had a serious decline.
The percentage of stocks in a downtrend has not yet met the lows of 2016, 2018, or 2020.
Cryptos have not yet dropped to their 200D MA and consolidated sideways as was the case in 2016 and 2018.
Some, but not all cryptos have just made a 30-100% rally and are selling off in a hint of downward continuation.
(VIX + VXN) has not yet met or exceeded the peaks of 2001, 2008, 2011, 2012, 2015, 2018, or 2020.
Chinese housing stocks still in a downtrend, -70% yoy, companies are failing to pay interest. This housing market is valued higher than the US stock market.
The war in Ukraine clearly is not short-term and is a catalyst for future proxy wars, central bank robbery of citizens, and wealth destruction.
Fake CPI data comes out on friday.
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Unless some of these things have a serious turnaround in the next 3-12 months, the market will not turn fundamentally bullish. Sure, we might get a suckers' rally, but until we get a huge bailout or many of these conditions improve, there is absolutely no reason to lean heavily towards risk-on and everyone MUST do their fiduciary duty of capital preservation. With that said, there is opportunity all around if you look hard enough.
Do not use your capital to price yourself into a mispriced market.
Let me know what you think!
Thanks for taking a look and don't forget to hedge your bets!
Here are some sentiment metrics and things to keep in mind, some technical and some fundamental. There's more of them but here are the ones I can immediately think of:
DXY is still rallying.
The US dollar historically loses 5% purchasing power per year, yet is seen as a safe haven. This is how overpriced the market is.
Japan, the largest purchaser of USA treasuries, is now a net seller.
Foreign bank exposure of US Treasuries is now declining as opposed to rising as in 2008.
USA cannot fund a central bank bailout via foreign purchases of treasuries as in 2008.
Some commodities are still at multi-decade lows, save for EV related markets and others which were forcefully subsidized.
Oil is rallying with a distinct lack of supply increase AND increased seasonal demand.
Because fuels are rallying, transportation costs are increasing baseline costs for every person and business.
Fertilizers and other chemicals are in short supply which increases food prices.
Some top producing food countries are now restricting imports.
The rate of home purchases is declining rapidly, mortgage rates and risky variable interest rate mortgage deals are rising.
Most of the rally in the past week was in profitless tech.
Increased USA consumer spending is solely based on increasing consumer credit card debt, rather than savings or income.
Central bank interest rates are not anywhere near the price inflation rates and are causing malinvestment to linger.
The rate of layoffs is increasing and has not met or exceeded 2020 levels.
Layoffs in the past few months were mostly in small businesses with most medium and larger ones adding employees, yet suddenly almost all of them have stopped hiring.
There is a lack of specialized skilled labor and this demand is not being met with supply.
The largest stocks have not had a serious decline.
The percentage of stocks in a downtrend has not yet met the lows of 2016, 2018, or 2020.
Cryptos have not yet dropped to their 200D MA and consolidated sideways as was the case in 2016 and 2018.
Some, but not all cryptos have just made a 30-100% rally and are selling off in a hint of downward continuation.
(VIX + VXN) has not yet met or exceeded the peaks of 2001, 2008, 2011, 2012, 2015, 2018, or 2020.
Chinese housing stocks still in a downtrend, -70% yoy, companies are failing to pay interest. This housing market is valued higher than the US stock market.
The war in Ukraine clearly is not short-term and is a catalyst for future proxy wars, central bank robbery of citizens, and wealth destruction.
Fake CPI data comes out on friday.
---------------------------------------
Unless some of these things have a serious turnaround in the next 3-12 months, the market will not turn fundamentally bullish. Sure, we might get a suckers' rally, but until we get a huge bailout or many of these conditions improve, there is absolutely no reason to lean heavily towards risk-on and everyone MUST do their fiduciary duty of capital preservation. With that said, there is opportunity all around if you look hard enough.
Do not use your capital to price yourself into a mispriced market.
Let me know what you think!
Thanks for taking a look and don't forget to hedge your bets!
Note
Another point I forgot to mention:Notice how an opportunity to sell with profit is rare in this chart, and losses are common. This is the opposite of a rising market where gains are common and buying opportunities are rare. Therefore we cannot expect longs to succeed, especially not at this point as there was a decent chance to buy a week or two ago. There is a rare opportunity to sell right now.
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