The United States sometimes forgets that it takes two to tango and make a deal, or for that matter, make a market.
This week is a holiday week believe it or not as the Euronext and many exchanges in Europe, even Switzerland, along with China, close for Mayday on May 1st and China May 2nd also. Then Japan, the UK and numerous others are closed on Monday May 5th which means many traders around the world will be departing on Thursday May 1st for a long weekend.
This means whatever market momentum generated for the usual month end window dressing vanishes after Wednesday and liquidity in US markets might be a tad thinner. With that in mind, let’s check out the charts and where this author thinks we might proceed potentially this week.
S&P 500
After a dead cat bounce which has been way overdue, the markets have calmed but during this bear market bounce the rally has fizzled as the commitment for a new long term move is just not there.
After this week and a potential retest of the top of the range that I called around 5600, a small consolidation should occur before rolling over once again as the 50 day moving average continues it’s march south like Sherman’s Army through Georgia.
The Bad AAPL
Apple is a great indicator not just for projecting future consumer sentiment for expensive toys, but also for a general speculative indicator of the healthy of the Mag 7 and tech in the market as a whole. With many sovereign wealth funds and large international institutions heavily invested into Apple stock, look for those participants to be more than happy to lighten up their positions to US retail bagholders as the stock rallies into it’s most recent gap and once again, its declining 50 day moving average.
SOX it to Me
The financial media will attempt again this week to convince everyone that the worst is over and that the trade deals will be cut to save the day. The SOX says “no so fast” as it is behaving just as bad as the rest of the market if not helping to lead it down harder.
It is slowly dawning on the mass media stock pumpers that this time high tech will not lead the markets out of the darkness and into the promised land.
Small Cap Hell
Small caps and those companies with extremely low margins will begin taking massive hits during May as the trade war collateral damage washes into US industrial and retail reality. Despite the proclamations that inventory is fine and nothing will be impacted to any great degree, watch the IWM as it has been and shall continue to be one of the leading indicators as to just how bad the major indices can fall.
Don’t Bank on It
The pain coming for regional and community banks this time around is going to be almost as painful as 2008 and in some cases more so as there does not seem to be any concern expressed by this administration about small local banks, only the big boys.
When the lows below 45 are taken out, then the reality will set in about the consumer’s issues with credit, BNPL, subprime auto, and of course, again, housing.
Gold Bricks
I know for my fellow goldbugs this seems potentially painful but instead of writing a full article reminding everyone to review all the crazy gyrations in the past, I’ll just post the chart below.
The Hardcore Reality: Markets are Going to Get Trucked
The Dow Transports do not lie.
As global trade crashes and burns, airlines, air cargo, railroads, and trucking are warning anyone who will listen that this is the real deal. Ignoring this aspect of the markets is a fatal mistake which will end up crushing the permabulls and shocking some of the megabears. Commerce flows and exists through logistics and transportation, not the drama queen chip and tech stocks.
Thus if we witness a further deterioration of negotiations in May the odds of a larger break than what hit in April is in the cards with a close below 12000 on the Transports almost a given. At that point, new lows will spread like a California wildfire across all of the indices as will fear that this time might well be more different than the talking heads wish to admit.
