My Comments: Do you know what’s going to happen? Me neither.
Here are two very opposing opinions of what the markets will do in the coming days. If it makes you afraid, you are not alone. My only bright spot is a program that grew by over 50% in 2008. Will it do it again?
The EVERYTHING Bubble: What’s Coming Will Be Much Worse Than 2008
by Phoenix Capital… Jul 8, 2016
The amount of negative issues the markets are ignoring is staggering.
1. Italy’s banking system is on the verge of collapse. Nearly 20% of loans are non-performing (meaning garbage). This is not Greece. We’re talking about a €2 trillion banking system.
2. The US is in recession. Consensus is that all is well, but industrial production, labor market conditions, the corporate bond market, C&I Delinquencies, the Conference Board Leading Indicator, Inventory Accumulation and ISM are screaming “RECESSION.”
3. China continues to devalue the Yuan at an annualized pace of 12% year to date. This is exporting a massive wave of deflation to the West.
4. The US Dollar has begun the next leg up in its bull market. The first leg crashed Oil, commodities, and emerging markets. This leg will crater US corporate profits and stocks as well.
5. Corporations are more leveraged than they were in 2007. Meanwhile, earnings are at 2012 levels while stocks flirt with their all-time highs.
The whole mess is just like late 2007/ early 2008 all over again. Brexit was the Bear Stearns moment. Italy or Spain will likely be the Lehman moment.
The big difference between now and 2008? Central Banks have already spent $14 trillion propping the system up. And they’ve created the single biggest financial bubble in history.
S&P 500: Ready To Resume Higher; Next Stop 2300
Taylor Dart July 4, 2016
Sentiment levels are currently consistent with what is found at major market bottoms, not tops.
June 28th and 29th were consecutive 90% up volume days on the NYSE. This has only occurred 7 times in the past 50 years and forward returns are extremely bullish.
We are currently entering the two strongest consecutive months during election years, with average gains over the 2 months of 5.1%.
Despite many people labeling Brexit as a black swan, the S&P-500 is still bullish on all time frames and within 2% of all time highs.
Just a week ago today we had CNBC preparing to air its “Markets in Turmoil” special, bears were high-fiving on social media and it was near impossible to find a bull in sight. The S&P-500 SPY closed the week at 2037, and according to the bears this was the final nail in the S&P-500’s coffin. In addition to this, Nasdaq QQQ newsletter sentiment took a massive dive into bearish territory, as shown by the below chart. Monday morning opened up exactly as the bears wanted with more weakness below the psychological 2000 level, but by Monday night the bulls were out in full force. To say this week’s rally was impressive would be a huge understatement. The Brexit black swan that so many touted as being the beginning of the end for markets was completely absorbed with all of the losses erased in 4 trading days. The market closed this week at 2102 and posted the highest weekly close in over 11 months.
For those that are short the market currently I don’t know what their game plan is with Brexit being a complete non-event. Brexit and a potential June rate hike were the two big catalysts in the bears arsenal for downside this year but neither event inflicted any lasting damage on the market. I have been very bullish on the S&P-500 this year and believe this recent correction and violent recovery was extremely bullish.
Markets often find a way of shaking out the weak and impatient hands before the real move occurs, and Brexit did exactly that for us. Those that were long the market and panicked have now sold nearly 100 points below where we were Monday and will have a very hard time buying back in 5% higher. Those that were short the market that finally had their beliefs confirmed most likely did not cover as they believed a larger correction was finally underway. This correction and subsequent snapback rally has shaken out any impatient longs and trapped aggressive shorts, and in doing so, made the trade higher. I believe it is no longer a matter of if but when we will see 2200 on the S&P-500, and would not be surprised to see 2300 at some point before the year is over.