This was a brutal week for all exchanges! This is just the beginning of what I predicted a few weeks ago. THE MARKET CORRECTION HAS BEGUN. (volume picked up on the downside across the board on the S&P 500) The first casualty of better-than-expected earnings was Netflix this week. I was beating the top and bottom lines and giving a pretty good outlook. Yet it was a sell-on-the-news situation. I expect this (sell on the news) for the high-flying techs that have made a run thus far in 2024. (no matter what they say in their earnings report). Not one will be spared in my opinion the next 90 days or so. And don’t expect new highs in those high-flying again this year. (In the long term, most of them will be OK, but maybe not all of them.) So if you’re a trader and haven’t lightened up, don’t wait until it’s too late. I don’t want to be forced to say, I told you so. Nobody benefits from that!
The key to the 2nd half is going to companies’ projections for the 2nd half of the year. So listen closely. Now is not the time to commit to new buy positions. There will be a better time. (Remember, I said that!)
The current market action is a back-and-fill. (nothing goes straight down normally unless there are extenuating circumstances such as war, pandemic assassination, etc.) This week I expect little, other than short covering. Until Friday’s PCE deflator if it comes in better than expected (most likely it will come in right on, but if lower than expected a small rally could materialize! But the big news the market is waiting for comes Wednesday July 31st. The Federal Reserve meeting and their indication of when they will lower interest rates. Currently, markets expect a September rate cut. I BELIEVE IT NEEDS TO HAPPEN NOW IN JULY lower rates are a lagging economic event, which I will explain in a later post. I believe the Federal Reserve is behind the curve! The consumer needs relief in lower interest rates. I mentioned new car sales and homes in a previous post. The numbers don’t lie!
The risk factor this week. 2nd quarter GDP numbers are to be released Thursday, July 25th. If 2nd quarter GDP numbers come in significantly under the 1.9% projected number it could create selling pressure by institutions. with the thought process the economy is slowing too fast to continue to create the earnings markets are expecting. This is why I wrote the following above . The key to the 2nd half is going to companies’ projections for the 2nd half of the year. So listen closely. Now is not the time to commit to new buy positions. There will a better time coming. (Note: remember I said that!
How much below I have no idea. ( A lower GDP number than 1.9 creates trouble further down the line in months ahead) And that risk to that is an overall shift in market psychology. Right now the market is taking good news as good news and bad news (economic slowdown) as good news. A shift in taking bad news (economic slowdown) as bad news would deepen the correction that began a few weeks ago. (remember that). Once again nothing goes straight down. Remember could of would of and should of (raised cash) never made anyone any money and you never get hurt taking a profit,
A few reasons I believe we will come in under the 1.9% GDP as expected are,new car sales are down, inventory is up, inventory of existing homes for sale has recently been ballooning and airfares are being cut (down 7% in the first quarter) To name a few. Coming out of the pandemic people were spending big (pandemic cash reserves) on vacations and big ticket concerts because they were flush with pandemic cash and the need to let loose. That has slowly begun to evaporate. THE CONSUMER IS EXHAUSTED AND NEEDS RELIEF IN LOWER RATES and so does the economy and it needs to happen sooner than later. A .25 basis cut does little to nothing. The Federal Reserve needs to begin to lower rates now otherwise the soft landing everyone was hoping for could come in as a crash landing (recession) in the first half of 2025. Or the Federal reserve will have to play catch up and lower rates by .50 basis points. Remember, I wrote that!
Quick update on my number one pick Upstart UPST.
It took a beating like the rest of the market closing at $27.79 on Friday. Market conditions moving forward (a good small cap market) will play a significant role in Upstart movement as well as the following, what the Federal Reserve says on interest rates on the 31st as well as their upcoming earnings announcement and conference call which tentatively is scheduled for August 6th 2024.
I am obviously in the camp of lower interest. Lower interest rates significantly benefit Upstart’s business. I am of the opinion,if the Federal Reserve sends a clear signal that interest rates are going lower on July 31st, it leads me further to the opinion that with lower interest rates Upstart will have a very good conference call. Which leads me to another BIG opinion.If all this happens there is a strong possibility of UPST raising forward guidance. If that happens I expect a short squeeze. The shorts will get what they deserve. And if none of it happens now it’s only a matter of when it happens. I firmly in the camp that the Federal Reserve needs to lower rates sooner
than later.