Bear Cave 2 (Bull Allowed)

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SPX monthly:

SPX/BPSPX/VIX daily:


The Secret Life of Fed Pivots
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John P. Hussman, Ph.D.
President, Hussman Investment Trust

December 2023
Speculative bubbles collapse. I don’t know how to make that point simpler, but somehow it needs to be said. Still, attention to investor psychology – speculation versus risk-aversion – can help enormously. A market crash is nothing more than low risk-premium meeting risk-aversion. Indeed, when investors become risk-averse, they treat safe liquidity as a desirable asset rather than an inferior one, so creating more of the stuff does nothing to support stocks. That’s how the market could collapse in 2000-2002 and 2007-2009 despite aggressive and persistent Fed easing.

The yearning affection that investors hold for Fed pivots is quietly driven by the fact that nearly all the pivots occurred when the S&P 500 already stood at historically normal or depressed levels of valuation. The associated market returns were typically a function of two factors: favorable valuations, coupled with an improvement in market internals. It’s those factors – the central elements of our investment discipline – that actually correlate with favorable market outcomes.
The Secret Life of Fed Pivots - Hussman Funds

 

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SPX/QQQ daily: Day 33 of the current daily cycle, BPSPX topping pattern in play, a move above the upper BB, a move under 11.50ish for the VIX, and a few other Risk Management indicators.

Bottom Line: The odds for trading on the long-side have increased. However, I still DO NOT have a sell signal. We shall see how it plays out. The move up continues, but stretched above the 10 day MA.

 

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SPX daily and FED speak.The market sure liked the comments......

 

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For traders only:

QQQ and PSQ daily: Getting late in the cycle: I bought some PSQ..... However, everything I track using my system remains on a buy signal. When we get deep into a daily cycle I reduce or take a small short position for some Beer Money.

Filled Buy 500 PSQ Market 9.8899 11:47:32 12/13/23

 

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The Fed effect, and I'll be watching. We shall see how it all plays out. Some crazy stuff going on in DC too.

USD daily:


The U.S. Dollar
Like the U.S. dollar.

The dollar is fascinating. Some analysts consider the dollar a safe haven. Others say the dollar seems to do well when the U.S. economy is doing well.

The truth is, both camps are correct...

In many ways, the dollar is the ultimate safe haven. As the global reserve currency, it’s backed by the full might of America. That’s why during times of uncertainty, you can see the dollar strengthen quickly.

When looking for a safe haven, the U.S. has many attractive options. Whether it’s Treasuries, stocks, or just plain old cash, the U.S. has something for everyone.


Why GM’s embarrassing EV hiccup could skyrocket 1 battery firm

80,000 Americans are anxiously awaiting the delivery of their new Hummer EVs.

They’ve signed the paperwork… handed over the deposit…

But so far this year — GM has delivered just 2 electric Hummers. Two!


“This is just the tip of a $10 Trillion iceberg,” says the best-selling financial author Nomi Prins, “No automaker is safe.”

She discovered a new battery stock that could save America’s floundering EV market.

One firm using AI has unlocked a novel solution…

She calls it “Forever Lithium.”

The CEO of Jeep said: “You have to secure your supply. If not, you’re out of business.”

And one company that supplies it could mint more EV millionaires than the rise of Tesla.


On the other hand, let’s say the U.S. economy is outperforming the rest of the world by a wide margin. In such a scenario, the dollar can also strengthen.

During such a time, investors are afraid of putting their money to work in emerging markets. While emerging markets can deliver better returns, they’re also riskier. And if the global economy is lagging the U.S., then investing in the U.S. is the best move.

What about when the dollar is declining in value? That scenario happens for a couple different reasons as well.

The first is when other countries are successfully outcompeting the U.S. for investment flows. If growth prospects are considered more attractive outside the U.S., there will be less demand for the dollar.

The second scenario is when investors see weakness in the U.S. economy. This means they expect the Fed to cut interest rates to help the economy out.

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More Weakness Coming
Right now, we’re trending more closely to the second scenario, which results in dollar weakness.

The reasoning is simple. Higher rates should cool off the economy. And it’s unlikely the Fed will get the balancing act of raising rates high enough to tamp down inflation – while not sinking the economy into a recession – exactly right.

If the Fed overshoots raising rates, the economy will eventually start cooling down. At this point, the Fed will go back to its old playbook of cutting rates and printing money to help stimulate the economy.

Although more and more central banks are expected to hold rates – or even cut them – next year, the Fed is likely to be among the first to act.

This was true in the opposite direction, too. The Fed was the first major central bank to raise rates in 2022.

It was the Fed that kicked of the dollar’s period of strength in 2022. And it will be the Fed that kicks off this next period of dollar weakness.

In fact, the decline in the dollar has already started. At the beginning of October, DXY was up nearly 4% year-to-date. As of writing, DXY is now up just 0.37%.

Based on my analysis, I expect at least another 10% decline or so before the dollar stabilizes.

Happy trading,

The Dollar Decline Has Started | Jeff Clark Trader

 

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FOMC Meeting

Stocks broke bullishly out of consolidation on Friday and continued higher into Tuesday, ahead of Wednesday’s FOMC meeting.

Tuesday was day 31 for the daily cycle. That places stocks in its timing band for a daily cycle decline. As I motioned in the Weekend Report, breakouts that occur late in the daily cycle are often not sustained. Stocks are currently in a daily uptrend. Stocks will remain in its daily uptrend unless they close below the lower daily cycle band.
FOMC Meeting | Cycle Trading

 

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AGG daily: Back testing the 10 day MA.

 

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SPX daily: This has been one sweet DC - daily cycle. The move up continues.....

 

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BPSPX topping pattern: Getting close to completing...... We shall see how it handles the next daily cycle....

 

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$VIX daily: Looks to be ready for a ST bounce, and SPX is getting closer to a move down into the next DCL. We shall see how it plays out.

 

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SPX daily: The consolidation continues....

 

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AGG weekly: It's only week 5, so we are early into this IC..... I'll be watching to see how AGG handles the upper BB tag as AGG is a tad overbought. However, a pullback should be a op to add.

 

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AGG and TLT daily: It's been a really nice DC - daily cycle. One would think a pullback is coming as we move into the next DCL - daily cycle low.

 

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This will put pressure on some sectors..... We shall see if this dollar move has legs.

The explanation for this relationship is based on two well-known premises. A barrel of oil is priced in U.S. dollars across the world. When the U.S. dollar is strong, you need fewer U.S. dollars to buy a barrel of oil. When the U.S. dollar is weak, the price of oil is higher in dollar terms.

What is the relationship between gold and the dollar?
Gold prices in India and the Indian rupee's value are dependent on the U.S. dollar's value in the international market. The gold rate in the market and its relation to the U.S. dollar is inversely proportional. If there is a rise in the U.S. dollar value, gold value decreases and vice versa.


Dollar Rebound – Update

The dollar closed above the converging 10 day MA and 200 day MA on Thursday to signal that day 26 hosted the DCL. Then the dollar lost both of the 10 day MA and 200 day MA on Friday to cause the status of the daily cycle to be uncertain.

The dollar closed back above the converging 10 day MA and 200 day MA on Monday. The dollar delivered bullish follow through on Tuesday, turning the 10 day MA higher, to confirm that day 26 was the DCL. We will be watching the declining 50 day as the dollar rallies out of its DCL. How the dollar reacts to the declining 50 day MA will signal if the 3 year cycle low has been set or is it still out in front.
Dollar Rebound – Update | Cycle Trading

 

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SPX monthly charts:

 

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The SPX and the BPSPX topping pattern: It's day 25 into this daily cycle and the BPSPX is tagging the 70ish numbers. We shall see how much higher it can go.

Bottom Line: The buy signal remains in play, but the odds for a pullback into the next DCL are increasing. I still expect a back-test of the 20 day MA or lower as we move into the next DCL.

 

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SPX daily: After a very nice move off the bottoming pattern, it's now day 25 into the current daily cycle. The SPX is overbought, the topping pattern signal is in play, and the SPX looks tired. We shall see how it all plays out.

Bottom Line: Still NO SELL signal.

 

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SPX daily: The move up continues.... We shall see how the SPX handles the current overbought conditions.


Intellectually bearish
From one of the most accurate strategists on Wall Street, Hartnett: "...everyone thinks we rally into Valentine’s Day, everyone emotionally bullish, but still intellectually bearish and likely to stay that way until leadership changes".
https://themarketear.com/newsfeed

This is the Check-Engine Light of the Market
Jeff Clark | Dec 1, 2023 | Market Minute | 2 min read
Take down the tree. Turn off the lights. Put all the ornaments away.

Santa has already been to Wall Street.

Investors who are expecting even greater gifts from the stock market between now and the end of the year are setting themselves up to be disappointed.

The S&P 500 bottomed in late October at about 4150. It closed on Wednesday at 4550.

That’s nearly a 10% gain in just one month!

But the market needs fuel to keep the rally going. And it looks to me like the tank is running dry.
This is the Check-Engine Light of the Market | Jeff Clark Trader

 

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IWM weekly: All I can say is.... nice! We shall see how this IC plays out.

IWM daily: A very nice move above the 200 day MA. We shall see how the daily handles the upper BB tag.....

$VIX daily: The VIX continues to bounce around the 12.50ish area. Not much fear out there......

 

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An article from 2014 about the rate of change.

Change Your View On $$GDP | Don't Ignore This Chart! | StockCharts.com