The purpose of a bear market is to clean out all the flotsam and jetsam created by the previous bull market.
Wall Street Axiom
A review of these columns for the past year shows our emphasis that the NASD internally peaked in February, 2021. Then some 85% of NASD stocks were over their 50-day moving average. We emphasized that overweighted FANG stocks were holding up the index. Today that statistic is 13% and it fell below 10% in the last week. The WSJ reports eight stocks lead the downturn those being MSFT, AAPL, AMZN, GOOGL, META or FB, TSLA, NFLX, and Nvidia.
We reported that Consumer Staples XLP were still in an uptrend compared to Consumer Discretionary XLY. XLY has tanked from 215 to 145 since November. XLP was in an uptrend but tanked from 78 to 71 the last two days on the retail sell-off. Target TGT lost 25% of its capitalization in one day while still reporting a profit. Bear market investors are very unforgiving.
Harley Davidson shares have gapped down from 38 to 32 this week. The initial drop in marginal meme stocks has now spread to the bluer chips of HOG and TGT, expect many more to fall.
Most of the media reflects a sanguine buy the dip, in it for the long haul mentality. This column is one of the few predicting a turn of the tidal wave, a reversal of the 1932-2201 89 year bull market. If the market favorite NASD has lost 28% of value since November 2021, what could happen by November 2022 or 2023?
An internal combustion auto requires 18-49 pounds of copper. A hybrid requires 85 pounds and an EV 132 pounds. Is there that much copper in the world to build all EVs? Pardon the pun but the wheels are coming off the EV IPO craze. Startups Camoo and Lordstown both issued ‘going concern’ warnings this week. Translation, we won’t make it, out of cash.
The bottom line is that if the DJIA closes below 32,283 at May month end, the monthly trend turns down. That would forecast a lower high on whatever rebound occurs later this year.
Investors are tepidly buying bonds lowering the ten-year rate under 3%.
Gasoline now averages over $4 at the pump nationally. Energy firms want to re-hire workers laid off in the pandemic. But as predicted, Team Biden continues to do all the wrong things. Harsh regulation, sales of the strategic reserve which did nothing to lower prices, deals with Venezuela aka Cuba, and even lifting restrictions on Cuban travel are all ill-fated. A positive signal like re-starting Keystone might give the industry hope Biden wants to restore US energy independence. But I am not counting on such clear thinking.
