“Based on my own personal experience – both as an investor in recent years and an expert witness in years past – rarely do more than three or four variables really count. Everything else is noise.”

~Martin Whitman

 

Good Afternoon,

The summer haze is taking its time in clearing.  Volumes remain lower than normal and air pockets are evident as seen yesterday and on Friday.  The “concerns” are flying in the headlines as we go from one problem to another.  The milli-second that the inflation data came in lighter than expected, overnight retail sales data from China came in very light as well.

This morning, bright and early, the headlines were filled with the “Slowdown in China” and any stock selling anything retail in China is getting shellacked today.  Classic examples of the mental mayhem which takes place as markets wait for the real data that moves elements along.

There, I am afraid we will watch these antics until we get to the later stages of September and early October.  Then, we will have set the stage exactly as a long-term investor would prefer it:  kicking off the next earnings season with very low expectations and concerns about the ability to continue forward.  This tends to be vastly better than rallying with excitement into the opening days of Q3 reports.

A Review

As we covered throughout summer, trade ranges serve a purpose.  They build a foundation for what’s next.  The longer they last and get tested, the better the breakout is afterward.   This summer, while no significant “swoon” was forced upon us, the internal churn was evident for anyone watching.

Sometimes pictures tell a better story…let’s check the major averages on charts:

…first the Dow Jone

 

With all the gnashing of teeth over the summer and into September, note we are where we were in the first week of May…basically 4 months ago.

…next the NYSE Composit

 

One will notice pretty quickly that the same general structure is present in the broad market – trade range, listless and back to where we were in early May.

Oddly enough, the Nasdaq and S&P look a lot alike as well while we witness more and more of the top 500 stocks in the market become Tech – or tech-related.  No surprise there.

The S&P 500 first..

 

The S&P 500 has held up a bit better due to tech and explosive demand of same.  Note the two blue boxes highlight the tiered trade range since earlier in the year.  While the S&P has only returned to where we were in the latter weeks of July my hunch is that the red highlighted area is where we spend the rest of September formulating a solid test of this trade range.

…and finally, the NAS

 

As one can see, after underperforming thru late April to early May of this year, the summer saw Tech “catch-up” and join the crowd.  As such, the chop has been a little less and we are seeing prices just begin to test that breakout.

I would suspect here that Tech remains the stronger index as we go through this window.  Once we get past the next few weeks, I would not be surprised to see Tech leading again.

All in all, the great news – as highlighted a couple times already – sentiment is doing precisely what you want done

 

We are very, very close to seeing the 20’s as noted and yet we are a mere 3ish% off the all-time highs.  While I would love to see the low 20’s or teens before this window closes, the point is clear:  this is NOT an overly-bullish investor crowd.

Housing Forces Still Misunderstood

Under the chuckle of the day, notice the images and comments on housing from CNBC yesterday.  Finally, they are understanding the coming shortfall in housing.  The good news?  They are way, way short on their expected shortfall LOL

 

 

And finally under the same subject, amazing how housing demand rises when available supply increases.   Just this morning, another CNBC headline announced

 

Come on, you have to admit – this stuff can be funny sometimes.

So, net-net, the last 4 months of reports eliciting grave concerns from experts over ” falling demand” were a) dead wrong and b) a waste of your time.

Demogronomics® allows us to all be confident and patient – with one simple fact:  People Make Markets® and because of our very beneficial demographics, our best years are just ahead.

Embrace the choppy churning windows like now.  Do not let the daily fear-chatter scare you away from the solid structure powering us all forward.

 

Until we see you again, may your journey be grand

and your legacy significant.