The covid lows were approximately 240 on the SPY (~2400 in the S&P500 Index) in March of 2020. The massive stimulus injected into the economy moved the SPY to about 400, an increase of 66% in less than 2 years. The chicken apparently has come home to roost, and the S&P as of this writing Monday morning is down 20% – calling this “BEAR” market territory. However,  this doesn’t tell the true carnage: the average stock in the Nasdaq is down 60%, yet the Nasdaq is only down 33%. The average stock in the S&P is down 40%, but the index is down only 20%. 

Why? Simply because a few huge stocks like Apple, AMZN, GOOG etc. are weighted higher causing the index to “hold up”. This is the deception of Wall Street.

Clearly the market has further to go because, again, for reasons explained since the beginning of the year, interest rates have yet to be raised by the FED. They are deeply behind the curve. This will cause deeper destruction even if they ramp up interest rates quickly. The damage has been done by the Fed. However, it doesn’t stop there. I will re-iterate — the current government represents no leadership. There is nothing being done from a fiscal standpoint to stop this issue. This applies to Energy in particular.

So what to do now ?

The systems have remained in cash successfully. Finally, some TV pundits are telling people to raise cash. This is not a contrarian call – YET. The market has very little to hold it up. We saw the fools rally at the end of May to be completely destroyed in these last 3 days. My expectation is to remain in cash until the S&P is down ~ 33% before another good look can be taken. In our case, driven by science, and my knowledge of how the science computes is that it will take several months of price stability at lower levels before a buy signal can be generated. The M2 money supply may in the end be the trigger but this remains to be seen. Currently it remains relatively high (bullish), but if the stock market goes down, this number will decline and possibly create a counter trade trigger over the summer.

As for Crypto,

I am a believer of this space — however, for now, as the stock market goes, so does Crypto currencies. Bitcoin is off today by a whopping 13%. Don’t be tempted to buy it just yet. However – technically, expressing my opinion, I felt the 24000 area is a place to take a chance however we are through that now. BTC is sitting at 23800 as of this writing. I expect these to move a little lower and no position should be taken until stocks stabilize – perhaps at the end of summer.

In the end, in January, very few people predicted this. However, a small few and our science did. I have seen the TV pundits who speak their book – to be in long, cant time the market, etc., etc. – for years – always proving to be wrong during times like this because they fear their clients leaving. I feel many are incented to not speak their mind – just their book. This is why you can’t trust them. They are NOT risk managers. They are old-fashioned, they hold to axioms that no longer exist. It’s a brave new world. Use the science!

Until next time.