We have to have a positive day to break the downtrend.
Do you see that "W" that's forming for the month – broken W's are bad – you can see a broken W in February, that foretold of more selling to come. Broken W's mean that the prior bounce (the middle of the "W") was strong resistance and, after having some more time to think about it – still no one considers it a good price.
That's all charts are, they are tracks that tell you where investors have been – not where they are going. What I'm telling you is how TA people interpret the charts and that does tell us where they are going and TA people, unfortunately, rule the market so I guess charts can tell us where things are going – but not for the reasons TA people think.
If I'm in church, for example, and I notice that the word "Amen" causes the congregation to all say "Amen" after the Preacher, then I can draw the conclusion that reading the word "Amen" makes humans shout it out. In real-world testing that theory would fall apart but, in the church, my logic would seem rock-solid and I would think I am a very clever behaviorist. That's because I stumbled upon a specific cause and effect relationship, drew an inaccurate conclusion based on very little evidence and stuck to it because it seemed to be working – even though I was pretty much wrong about the whole thing. Welcome to Technical Analysis!
We'd better pray the S&P can get back over our weak bounce line (4,160) next week. Notice we have a rising MACD and, if we waste that, we will be WISHING that 3,840 is support. We didn't want to take the chance with our Member Portfolios so we enhanced our hedges in the Short-Term Portfolio (STP) on a day the Long-TermPortfolio (LTP) gained $200,000. Yes, you can have it both ways if you pay attention to our 5% Rule™!
Personal Spending was up 0.9% in March but, unfortunately, Personal Income was up 0.4% so Consumers are falling further and further behind and getting more and more into debt trying to keep up with inflation. Our Corporate Masters don't care, as long as their customers keep spending but they will whine to Congress the second those customers miss a payment – because who could have seen that coming?
Inflation, of course, contines to rage out of control and you know and I know and even the Fed knows that a 0.5% Rate Hike is not going to stop this yet on June 15th, that is the Fed's "plan" and the meeting after that is July 27th – so another Holiday with crazy prices and then no more meetings until September 21st – with another holiday weekend come and gone.
It sounds like we have a lot of holidays but really it's the Fed that doesn't have many meetings and, so far, they are doing AS LITTLE AS POSSILBE to get things under control. That's because, as we discussed in Wednesday's Webinar, raising rates will raise the Deficit while inflation will grow GDP, hopefully faster than the deficit grows (10% this year) so our Debt to GDP ratio will eventually shrink. We will also pay the $32Tn we already owe back in grossly devalued currency – so inflation is the winning play – no matter what the Fed tells you.
We get Consumer Sentiment at 10 am and, next week, we have Consumer Confidence (no, I don't know the difference) along with Chicago PMI and Case-Shiller on Tuesday then it's PMI, ISM, Construction Spending, Productivity and Non-Farm Payrolls, so lots of Economic fun ahead!
Enjoy your holiday weekend!
– Phil
