Cliffhanger, Sony Game Gear (1993)
Sunday Twitter Poll
(Of the last 18,000 tweets containing SPX, $SPY or $ES, those including bull or bear words extracted, then % totals of each. Started April 2022; plan to track % of times Twitter is correct compared to the following weekly close. Tracking data will be added after the first 20 weeks.)
Roadmap
As with the last few weeks, the market as a whole seems to be holding itself together - just - however increasing areas are knocking against levels that may soon break during this equity bear market.
Bear markets are affairs that can last several years so the base case if a major level is broken is that the first attempt will fail.
Equities:
A run to the downside would be healthy and provide an opportunity for an interim bounce. The 15% level was breached on the S&P and 58% of the time when that happens, the market heads past 20% before making new highs. It’s a small edge but with current valuations, it will most likely pay to frame trades expecting further equity weakness ahead.
This chart was from a few months ago, the levels still stand:
FX:
EURUSD will likely flush out the 2017 lows alongside any equity scare.
EURUSD monthly:
Although buying a break of the 2017 low on the Euro may be too much of a falling knife, with increasing global economic weakness, CAD and AUD are looking too overpriced v’s EUR so the Euro may be lining up for a run against these currencies.
Dr Copper has certainly be going the wrong way for the inflation bulls over the last few weeks. If it slices through the 2021 lows over the next few weeks, that’s as good a sign as any that the inflation trade has gone too far too fast for now and will have a hefty retrace over the next 6 months or so.
Copper weekly:
Precious Metals:
If the market falls out of bed and precious metals head lower with it, they should be on the list for a buy as market weakness + economic weakness = more government and central bank intervention = even weaker fiat.
Gold weekly:
$1800 is the obvious place; an intra-week wallop to $1680 would be a nicer spot, though later in the Bear, tickling $1300 isn’t out of the question.
Trades Update
This has moved to a free Wednesday trades record, also available (most weeks) on Substack:
Risk Index
Under 50 = bullish, over 70 = bearish, over 90 = potential correction within 6 months
Note that the current correction (or bear market….?) was signalled 8 months ago so the expectation is that the Risk Index will become increasingly bullish the longer this move down lasts.
1-year lookback:
A jump up this week due to increased weakness in bond spreads, particularly the European BTP’s, and copper and copper miners falling off to the downside. Currently looks like there is going to be a prolonged period of market weakness, even if the rallies keep making it seem like a bottom is in.
Themes to Watch
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