I'm Bullish.
This product is to take things step-by-step but also have a medium term view. That means have a viewpoint but also respect technicals before you go nuts.
Last year I was bearish and ahead of the Fed saying they'll slam on the brakes when they were lollygagging talking about 'transitory.'
Recently they were complaining about 'wages' even though that is not their mandate and I've been talking about a Fed-flip. Inflation is dropping hard so far even if wages stayed up.
Fed Running Out Of Excuses
But wages reversed. Housing tanking. The Fed running out of excuses to not pivot hard. I mean and hard.
This is the real minutes, "Most Fed officials chose to flippantly ignore the data. Some officials considered maybe looking at the data but only if it keeps dropping hard."
So it comes down to CPI on Thursday.
Powell speaks on Tuesday and could give us a hint.
Powell in his group sessions with the Fed gets hit over the head with too much unprofessional, hardly-analytical group think. But when he's on his own (maybe like this-Tuesday) he can veer to be reasonably bullish for markets. Give that man a drink.
With CPI dropping hard month-to-month and the Fed in 5th gear on QT and rate hikes, I believe the gravity is for a lower CPI number. I believe that will get Powell to speak softly and carry a small stick, and allow markets to do their thing; go up.
Let Me Be Clear, 3.8% GDP Is NOT A Recession
The world has been expecting recession but, come on, GDP at 3.8% is a very strange recession. Recession is down quarters and you don't need to be a PhD mathematician to know that 3.8% aint a negative number. So I don't know what the world's smoking but I don't want some.
Weekly jobs and NFP are staying strong while inflation measures, CPI, ISM, now wages, are all dropping hard.
Goldilocks, Come On
I've been saying it on this service, here comes Goldilocks; a sprinkle of low inflation, strong growth and a hard Fed flip. And with the world somehow leaning to max bearishness gives us a very nice risk/reward and chance for something exciting in 2023.
What's holding up this economy? Good question. Glad you asked.
I think pandemic-hit old-school companies are normalizing. Media-grabbing-tech is hurting from having Pandemic-demand pull-forward. But the rest (and most) of the economy is getting back on its feet. That's a huge tailwind against these rate hikes, holding up the economy, surprisingly to most.
I don't want to argue with the data but better and better jobless claims and GDP tells me the momentum is good, not bad. Simple stuff. I want to stay focused on. Unlike the Fed, I very much care about the data and I remain data-dependent.
SPY 388
I said Friday pre-market that my technicals for Friday were for up, and since we had a helpful wages number I was bullish for markets Friday even though early action wasn't so great.
I also previewed SPY was in a range. But I pointed out in the update Thursday night that SPY at 388 would be bullish.
Lo and behold we should have some follow through. SPY closed almost to a 't' at 388(.08). Not bad. And I think QQQ are going to follow higher.
I think SPY is leading because of old-school doing better as I mentioned above so I want to use SPY as my lead.
That also means DIA and IWM are good too. DIA above its 200 day. DIA above 343 and I think that's a huge breakout, it can go nuts.
Things Change ALL The Time
A guy's allowed to flip. I was bearish for long enough and I think correct. I called out all those high flyer, great companies, no earnings, were way too expensive about a year ago. Now they've come down to some normalcy.
The world is changing all the time and has changed a lot.
Markets look out 9-12 months.
I think there's enough good in 9-12 months (and maybe already) that can give this very-bearish-sentiment market a great risk/reward to move higher before we get to 2024.
As you know I take it step by step and care very much about confirmational technicals.
Well weekly, a touch higher would be nice, but I think we have enough for confirmational technicals, at least shorter term. And we'll take it step by step.
PS I am ignoring all the Fed reaction to Fridays numbers because they have no idea until they and we know that CPI number. They may know it before us.
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