“Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”

~Warren Buffett

 

Good Morning,

Still can’t find the screwdriver in my office.  I am going to tape it to the wall the next time I put my hands on it.  Keeps it easy to get to so I can quickly loosen the screws on the window and get out to the ledge.  Then, there is the jumping part.

(Alarm sounding on fancy Apple iWatch). Oh, wait, I was dreaming.

Ok, I jest.

What a roller-coaster, huh?  I know this will not be greeted with pleasantries – but this is all good.  As covered for months now, trade ranges are a complex animal – and they are designed to do precisely what this one has done – make everyone upset.

The point?  In the near-term, markets make you feel like you are in the jungle hunting your prey.  How far in the jungle?  While there is never a guarantee, the data are falling into place and we are setting the stage for the final battle.

The title today says it all – Closing in on the end of this months long process.

How So?

Well, think about it – everything is coming together in the media madness:  DC unrest, experts shouting at one another about how bad the future is – for any number of reasons, debt ceilings, inflation, interest rates, more spending, budgets for this, social programs for that, Fauci data coming out from every crack and crevice – and yes, the season.

Don’t underestimate the power of that last topic.  The season is doing what it often does.  Call it the mental breakdown before the trek up the mountain to the next base camp.  LOL.  Rest assured of this – when the selling window has ended, most in the crowd will hate the market.

That sentiment is settling in deeply – and this fits nicely with the coming end to this messy window

 

Though the data won’t be released until about 2:00 tomorrow morning, I suspect we will see the same fearful settings in the latest AAII data as well.

Wasted Chatter

How many times have we heard that inflation is the worst battle ahead now?  The experts are coming out of the woodwork to tell you that oil is signaling the end of mankind as we know it (again) – and inflationary fires await all who own dollars, etc etc etc.

Yea – well, no.  A lesson in history.  How many readers recall the audacity of experts back in 2009 and 2010 telling us all that “cheap gas is bad news…?”  You might recall that we were told repeatedly that gasoline at sub-$1.50 at the pump was a clear sign that we were all in trouble – we just didn’t know it yet.

Alas, by trouble, I am thinking they meant the market was about to rise some 400%+.  That noted, at more than double that cost for gas at the pump now – guess what?  This is terrible news as well (LOL)

 

Dire indeed.  Look for the pipelines to be overwhelmed with transporting new oil discoveries.  Add that to the massive number of spigots being turned on from thousands of capped wells and you get the picture.  In commodities, it has been the same rule since the beginning of time:  high prices – fix high prices.  The opposite is true as well.

Inflation My A**

Truckloads of ink have been spilled on the fate of the US Dollar over the years.

All of it was a waste.  If I told you that the US Dollar was in nearly the same place as it was in 1987, would you be shocked?

If so, you better sit down for a minute

 

I point this out for a simple reason – do your very best to eliminate the chatter.  Inflation is almost the last thing we need to fret over as deflationary forces are taking hold that so many people are missing.  I suspect the shocker will be that earnings keep beating.  Sure, there will be some companies that need a quarter or two to adapt to higher cost pressures while supply chains are rebuilt (here in the US).

However, overall, the forces coming against costs rising for long periods – are simply too great.  An entire generation of tech savvy workers, thinkers and builders are just getting started.  This is not something that will be obvious, meaning the experts will miss it.

This will be more like arriving 5 years from now and noticing that no one even mentions inflation anymore.

Be assured of two things if major inflationary pressures were being birthed in the system:

a) the bond boys would be demanding vastly more than 1.5% rates and

b) the US Dollar would not be where it was back in 1987

Back to That Darn Trade Range

Keep in mind that the broad market has been much choppier and internally stressed in this trade range than the SP500 and NASDAQ.  Why?  Tech.

As noted many times earlier, tech is the front runner and always gets the bloody nose first on corrective windows.  The calls for the end of tech are getting louder as they always do near lows.

The NYSE Composite (the broad market indicator) is basically where it was in early April.   Remember, trade ranges are good for long-term investors but, man or man, to they test one’s patience

 

The purple band shows you the trade range – back and forth for months over the same price band.  Lots of different reasons – all the same outcome:  a standoff between the bulls and bears – leaving no one happy.  Perfect.  Washing out the massive number of accumulated stops which now very likely inhabit the price range just below this box, would not be a surprise.

The SP500, driven by tech for the most part these days tells a slightly different tune – but not by much.  Testing the previous breakout seems to be the target we are closing in on which is normal for a market getting ready to unleash a long-term trend in the other direction

 

That green band has been covered often.  But you can see how these tests of previous breakouts work like magnets over time.  Let’s not get lost in too much detail.  The larger picture is vastly more important as the underlying current driving important aspects of our economy forward.

Technical, political, economic and emotional forces are all coming together over the next few weeks.  Don’t be surprised at all if the last gasp feels a bit unsettling – ends of important selling windows almost always do.  That is not designed to scare anyone at all and, as always – we have no crystal ball.  I simply point it out because the crowd’s angst and emotional tension is obvious.

The larger the numbers, the scarier it feels.

In Closing

So far, so good.  Bullishness is almost all but extinguished.  No one thinks earnings are going to be good.  Inflation is a new monster – politics is getting worse and that is not set to improve.

Throw it all in the mix and you get back to today’s title.  As ugly and tension-filled as it can become at times, we are closing in on the intersection of these events.  The conclusion will set the stage for the next run of surprises:  to the upside.

Finally, remember that if you and I ran around and told everyone the future was bleak: we would have their full attention and they would be comfortable that we were pretty damn smart.

If, however, we told them that the next 25 years will collectively be the best and most opportunistic in our history, they would dismiss us immediately and be certain we had lost it.

Take the less traveled road…many will join you when it is obvious.

 

Until we see you again, may your journey be grand

and your legacy significant.