We had a technically constructive day yesterday.
We held the Weak Retracement line at 3,840 and that then validates the 4,000 line (where we retraced from) as a firm mid-point to the S&P and, since that’s what we predicted it would be back in November – we could not be more pleased. Meanwhile, the Mainstream Media is still 70% Doom and 25% Gloom with articles like this:
- Morgan Stanley, Goldman Say Stocks Have Yet to Find a Bottom.
- Why this ugly S&P 500 streak cautions against chasing bear-market bounces
- Condition of economy ‘terrible’ as inflation hits fresh 40-year high: Investment expert
- Oil Holds Above $100 as Traders Weigh Tight Market, OPEC+ Plans
- Europe Fears Economic Fallout if Russian Gas Outage Drags On
- Food May Be the Ultimate Weapon in the 21st Century
- Earlier: US Layoffs, Hiring Freezes Are Tip of Labor Market Slowdown.
- Diverging Jobs Data Raise Questions About Labor Market Health
- Why Air Travel Is Broken
If this is the kind of news people are hearing and that shapes consensus then that consensus seeps into planning for business spending and then the Recession becomes real – even if it wasn’t before. That’s all a Recession is – an economic slowdown – generally not accompanied by runaway inflation and high commodity priced driven by demand for Goods and Services exceeding supply.
IBM, for instance, had record-high Revenues yesterday and they are down 6% ($130) despite beating bottom-line expectations. Why? Because currency fluctuations have impacted their cash-flow to $10Bn, vs $10.5Bn at the top end of their $10Bn-10.5Bn range previously forecast. IBM’s CFO, Joe Kavanaugh said that, during the second quarter, it saw “significant movement” in the U.S. dollar, which resulted in s “6-point headwind to revenue growth.”
Is this a good reason to sell IBM? No, it’s silly and we’ll be BUYING more IBM (our Stock of the Year) on this dip, though our target for our Trade of the Year was only $125 when we set the trade up in November:
Even as of yesterday’s close the $75,000 spread was “only” at net $38,800 with $36,200 (93%) left to gain if IBM can hold $125 into Jan, 2024. Originally, we paid just net $3,750 – so we’re already up 10x and very happy but we also have a more aggressive IBM play in our Long-Term Portfolio that we can now look to improve upon.
Still, IBM highlights an issue for our S&P 500 earnings since those companies make about 60% of their revenues from overseas and the strong Dollar will be a drag on all their earnings. For some, it will be offset by lower Dollar costs on overseas expenses but IBM is mainly an IP company, so they got all of the detriments and none of the benefits.
There will be lots of opportunities to buy good stocks that are down for bad reasons this quarter, so we’re going to have to pace ourselves…
We still need to get over the 50-Day Moving Average at 3,927 to be “safe”. If there is any sign of weakness the Banksters will be all over it as they haven’t been able to drive enough Retail Traders out of their positions to replace them with their High Net-Worth clients – that’s why you are hearing all these disappointing “trading revenue” comments from the IBanks though June 30th – they have been behind on calling the bottom, so now they are trying to force a new one so they can be right.