Here are some key highlights from our latest messaging herein:

Yesterday:

While Powell did indeed reiterate that there’s more upside work to do on rates, he came off far less determined on sacrificing the economy for the sake of reining in inflation.

My take from today is that the Fed is now notably more concerned with overdoing it than they were as recently as their last policy meeting… I suspect that factors such as those that have our own index signaling recession in the not-too-distant offing very much has their attention…

Wednesday:

While, given our own present assessment of general conditions, I sympathize with the notion that the Fed will be forced to soften notably (whether that means a rate cut is the question) over the next several months, if Fed members hold their ground on what they’ve been suggesting in their respective speeches, “the market” will, in the meantime, likely grow to doubt itself and succumb to the notion that valuations will need to take another leg lower, amid a stubbornly high policy rate, ongoing QT (sucking back liquidity), and disappointing corporate earnings.

Tuesday:

Before you go celebrating the higher (record breaking!) retail sales numbers for this holiday season vs last, know that we’re talking nominal, as opposed to real, terms (i.e., not counting vs counting inflation).

For example, online spending for Black Friday rose 2.4% (to a record-breaking number) compared to last year… But recall that consumer inflation (last reading) is up 6.3% (and that doesn’t count food and energy)… So, in real terms, online spending was actually down 3.9% this year… In other words, the volume of sales was, in reality, lower than last year

Overall, the National Retail Federation is estimating 6-8% growth this year vs last, so call it flat… Adobe expected yesterday (“Cyber Monday”) to beat last year’s results by 5% (i.e., a net decline, on a real basis).

Monday:

As I stressed in Friday’s video (worth watching), while we’re open to the notion that a new bull market is in the near-term offing, it’s still not our base case, per the general conditions backdrop and the technical indicators I continue to illustrate.

Another interesting setup I’ve been eyeballing as I work through my weekly exercises is the relationship between the VIX (tracks the pricing of implied volatility in SP500 options contracts) and SP500 price action itself.

The green line in the top panel below is the VIX’s spot price, the rest are 1-month to 8-month VIX futures prices. The bottom panel is the SP500’s price action over the past year:

I.e., we’re approaching some interesting, and perhaps precarious, territory…

Moving on: November’s employment data was released this morning and, well, they were good, and, well, as you’ll see below, that’s bad for stocks (recall in Wednesday’s video my bad-news-is-presently-good-news message)… Wages coming in at up 5.1% (vs 4.6% expected) — i.e., inflation pressure! — is the real culprit for the bulls this morning.

Stay tuned — our weekly economic update is on deck.

Asian equities struggled overnight, with 14 of the 16 markets we track closing lower.

Europe’s getting hammered so far this morning, with 15 of the 19 bourses we follow trading down as I type.

As are US stocks: Dow down 246 points (0.71%), SP500 down 0.89%, SP500 Equal Weight down 0.94%, Nasdaq 100 down 1.26%, Nasdaq Comp down 1.27%, Russell 2000 down 1.13%.

The VIX sits at 20.32, up 2.42%.

Oil futures are up 0.44%, gold’s down 0.94%, silver’s down 0.86%, copper futures are down 0.82% and the ag complex (DBA) is down 0.55%.

The 10-year treasury is down (yield up) and the dollar is up 0.24%.

Among our 36 core positions (excluding options hedges, cash and short-term bond ETF), only 5 — Vietnam equities, Brazil equities, Nokia, energy and oil services stocks — are in the green so far this morning. The losers are being led lower by Dutch Bros, AMD, cyber security stocks, tech stocks and Mexico equities.

Have a great day!
Marty