PRESCIENT COMMENTARY

Day One of a two-day session (for settle Tuesday given the StateSide holiday) begins with the Bond and Currencies slipping below their respective Neutral Zones, whilst above same are both Copper and Oil; volatility already is pushing toward moderate such that by this time tomorrow we anticipate ’twill be robust for some of the BEGOS Markets. The Gold Update cites price falling into a still deeper sleep, “conventional wisdom” pointing to “Dollar strength”: today the Dollar Index is above 110 for the first time since June 2002; (more broadly it is 33% below its all-time high of 165). At Market Trends, that for Oil is provisionally rotating to negative. August’s weaker Payrolls data and July’s Factory Orders have put a pull-back into the Econ Baro, (as presently updated for today’s Spoo pricing).

The Euro, Gold, Silver and Oil are trading at present above their Neutral Zones for today; none of the other BEGOS Markets are below same, and volatility is mostly light ahead of August’s Payrolls data. The S&P 500, whilst having developed a near-term “textbook oversold” stance, nonetheless seems bent on retesting the year’s low (3637, 17 June) even as price is currently 3967; as regularly herein noted, the broad S&P support area is 3600-3200, and given the normal seasonal negativity of September (as detailed in the current edition of the Gold Update), 3600 is rationally within the realm. Of course fundamentally, sub-3000 gets due consideration given the unsubstantial level of S&P 500 earnings especially in this rising interest rate environment. Due as well for the Econ Baro today are July’s Factory Orders.

The Euro, Gold, Silver, Copper and the Spoo all are at present trading beneath their respective Neutral Zones for today; none of the other BEGOS Markets are above same, and volatility is mostly moderate. September begins, and despite resumption of the S&P’s correction, our S&P MoneyFlow page still lacks indication of selling “fear”, and indeed the 63-day (one quarter) version suggests a loftier S&P level; of course, the historically high P/E (“live” now 35.1x) fundamentally calls for lower price levels still: at this instant with the S&P set to open down at 3934 (vs. yesterday’s 3955 settle), the key test of the 3600-3200 support area is appearing more likely; recall the 17 June low was 3637, and by Market Trends the Spoo’s is firmly negative. Among today’s metrics for the Econ Baro come August’s ISM(Mfg) Index and July’s Construction Spending.

Copper and the Spoo are the two BEGOS Markets at present above today’s Neutral Zones; the balance of the bunch are within same, and volatility is light. By Market Trends, only Oil and Copper are in linear regression uptrends: however the “Baby Blues” for the latter continue to drop as the uptrend’s consistency fades. However for the Bond, that measure (in real-time -92%) is worth watching for a move above the -80% level, after which higher prices by rule continue to ensue. For the Spoo by its Market Profile, the 4026-4060 zone appears near-term resistive; the S&P itself is building in a bit of “textbook oversold” aspect, and there is still a lack of any real fear per our S&P MoneyFlow page. Back on the Econ Baro’s calendar after a two-month “retooling” absence is the ADP Employment data for August, as is the month’s Chicago PMI.

The BEGOS Markets are comparatively quiet relative to the last couple of trading days: Gold at present is the only component outside (below) its Neutral Zone; volatility is light-to-moderate. At Market Values, the Spoo (which had been some 400 points “high”) is now back at the level of its smooth valuation line, as is Oil which had recently been some 13 points “low”; still showing somewhat extreme is the Euro as 2 points “low”. At Market Trends, the Spoo’s linear regression trend has rotated to negative, the “Baby Blues” now below their 0% axis for the first time since 08 July. And in what should be (by consensus expectations) a net-negative week for the Econ Baro, the parade of 13 incoming metrics begins today with August’s Consumer Confidence.

Save for Oil, the seven other BEGOS Markets are starting the week in the red; volatility already is moderate-to-robust. The S&P 500’s ongoing correction swiftly hoovered down through the near-term structural support of 4100s following the Fed’s hawkish tone on Friday: the lower 3900s offer some “braking zones” lest the run ensues to test the broad 3600-3200 support area. The Gold Update cites the yellow metal’s sleepy nature even as economic jitters continue to build. By Market Trends, Oil remains the sole BEGOS component whose “Baby Blues” of linear regression trend consistency are rising. The Bond, Silver and Copper are seeing the contract volume roll from September into December. And the Dollar is still making incremental highs into the area last seen in September 2002.

Today brings the Fed’s favourite gauge of inflation — the PCE’s Core reading for July — along with the month’s Personal Income/Spending data. Fed Chair Powell (90 minutes following the PCE report) gives the annual address in Wyoming. The PCE is expected to have cooled which could have further impetus for the S&P aligning with its “positive” MoneyFlow differential of recent sessions. At present, Copper is trading above its Neutral Zone for today, whilst below same are the Bond, Swiss Franc and Gold; BEGOS Markets volatility is understandably light ahead of the data and FedSpeak. By Market Ranges the EDTR for the Spoo is 60 points, a factor which looks to expand as we glide through Fed toward the seasonal negativity of September commencing next week.

Six of the eight BEGOS Markets are trading at present above their respective Neutral Zones for today; only the Bond and Oil are inside of same, and volatility is moderate. The Spoo looks to be leading the S&P into the anticipated bounce as lead by the positive MoneyFlow differential elicited by the thin selling of late; however with the S&P’s still very high P/E and recessive economic indicators, our sense is the broader-based S&P correction has yet to run its course, the 3600-3200 support zone still not tested. Too, at Market Trends, the “Baby Blues” for the Spoo continue to fall, as do they for all the other BEGOS Markets, save for Oil. The Econ Baro looks to the second reading of negative Q2 GDP as further exacerbated by the high Chain Deflator.

All eight BEGOS Markets are at present inside of today’s respective Neutral Zones, and volatility is again light-to-moderate. The resumption of the S&P’s downtrend remains quite light on MoneyFlow: indeed, the amount of money it takes to move the S&P one point is at a nine-month low; see too the MoneyFlow relative to the S&P on our MoneyFlow page, which suggests some bounce is due within the broader downtrend. At Market Trends, the Spoo’s “Baby Blues” confirmed their move below the key +80% level: of interest is that with price (presently 4129) already well down into the overall structural support of the 4100s, such support shall be broken and thus morph into resistance. On the heels of Jul’s slowing New Home Sales report, the Econ Baro today looks to Pending Home Sales as well as Durable orders.

The S&P finally unwound its 24 consecutive trading days of being “textbook overbought”; fundamentally, it remains excessively expensive, the “live” P/E at 35.8x (vs. the lifetime mean of 22.4x and a debt market with double the yield). The Euro, having slipped below $1 is the sole BEGOS Market at present below today’s Neutral Zone; volatility is light-to-moderate. Per our S&P MoneyFlow page, the renewed selling has thus far been relatively “fearless” such that we anticipate a price bounce. For the Spoo, the “line in the sand” has been reduced from 4276 to 4231 (by the Market Profile of most dominant prices traded across the past fortnight). The Dollar Index has traded up to its best level since September 2002, with Gold and Silver continuing to be strained in the balance; technically we look for Gold’s 1700s to hold and for Silver its 18s.

The Euro, Gold, Copper and the Spoo are all trading at present below their respective Neutral Zones for today; no BEGOS Market is above same, and volatility is mostly light. Despite the S&P 500’s -1.3% drop on Friday, the Index nonetheless is still tagged as “textbook overbought” through 24 consecutive trading days. Specific to the Spoo, there is near-term structural support down through much of the 4100s. Too, we’ve yet to see any materially negative sentiment via the MoneyFlow; however if the counter-trend rally to 4327.50 has been completed, the 3600-3200 support zone remains more broadly in the wings. By Market Trends, the Spoo’s “BabyBlues” appear poised to break below their +80% axis by Tuesday’s settle, a suggestion for lower price levels still to follow.

As we come into the final day of Q2 Earnings Season, the significantly over-extended Spoo is weakening, as are the Bond and the metals triumvirate; BEGOS Markets’ volatility is moderate. Yesterday the S&P completed its 23rd consecutive trading session as “textbook overbought”, the live P/E even as adjusted for the present Spoo drop now 38.1x. By Market Values, the Spoo (in real-time) shows as 299 points “high”. Silver thus far has traded as low as 19.13 (note the 17 August comment musing 19-dead), the white metal’s “Baby Blues” accelerating their fall (see Market Trends). Those for both Gold and the Bond too are notably dropping. With Gold at present 1767, price has now moved further beneath the 1779-1854 resistance zone. (More in tomorrow’s 666th edition of The Gold Update).

The Swiss Franc, Silver and Copper are at present below today’s Neutral Zones; the balance of the BEGOS Markets are within same, and volatility is light-to-moderate. Yesterday the Spoo reached its expected “low if a down day” for the first time since 14 July; Tuesday’s Spoo high of 4328 is key to monitor as potentially the top of the broader contra-trend rally; again, we’re sensitive to the 3600-3200 zone having yet to be tested, (not to mention the overvaluation of the S&P, especially in this positive interest rate environment). Silver as anticipated continues to work lower. Oil’s cac volume is rolling today from September into October. And this is the week’s final day for incoming Econ Baro metrics, including August’s Philly Fed Index along with July’s Existing Home Sales and Leading (lagging) Indicators.

The Bond, Swiss Franc, Silver, Copper and the Spoo all are trading at present beneath their respective Neutral Zones for today. Specific to Silver, her “Baby Blues” (see Market Trends) confirmed crossing below their +80 axis at yesterday’s close: that suggests lower Silver levels near-term; 19-dead is not out of range given the typical follow-through of this measure. As for the Spoo, even as ’tis down thus far today, it remains desperately over-extended: vis-à-vis its Market Value (live reading) price is 353 points above its smooth valuation line; for the S&P itself, ’tis now “textbook overbought” for 21 consecutive trading days (one month), not to mention the “live” P/E is 38.7x. The Econ Baro awaits July’s Retail Sales and June’s Business Inventories; too, come the FOMC Minutes from the 27 July Policy Statement.

Silver is at present below its Neutral Zone for today; the balance of the BEGOS Markets are within same, and volatility is mostly light. The S&P and Spoo appear as suspended in air: as we shared with our colleague here last evening, “There are no stock market positives anywhere: NONE.” ‘Tis all rather surreal, yet it reminds us of how “influential” the FinMedia can be (recession over, inflation stopped, climate change solved), and money managers seemingly believe it. For the balance who think and can still do math, the S&P by any and all measures is ridiculously overextended, and becoming more so by the day, be it measured by P/E, our Market Values page, “textbook technicals”, and low yield versus that — and more saftey — in the Bond market. September awaits… The Econ Baro today looks to Jul’s Housing Starts/Permits plus IndProd/CapUtil.

All eight BEGOS Markets begin their week in the red, those at present below the day’s Neutral Zone being the Swiss Franc and the three metals; volatility is pushing toward moderate. The Gold Update recognizes price’s fourth consecutive up week, albeit currently within the 1779-1854 resistance zone such that the upglide on below-average volume appears rather sedate. Therein as well we cite the various overvalutions of the S&P at present, including its very expensive P/E ratio and the Spoo’s extreme deviation from its Market Value, in real-time 365 points “high”. By the same measure, Gold is 51 points “high” and Oil 10 is points “low”. The Econ Baro receives August’s NY Empire State Index and the NAHB Housing Index.

As it seems we’ve oft seen of late, all eight BEGOS Markets are by this hour inside of their respective Neutral Zones; volatility is light. With respect to our S&P 500 MoneyFlow page, for the past five days, despite the Index’s having been on the rise, the Flow has not been supportive of the up move. And by the high P/E (the “live” reading at present 37.8x), Q2 Earnings Season has been coming in as one of the weakest by comparative improvement across the past several years. For the Bond, the noted drop of late in the “Baby Blues” (see Market Trends) saw price accelerate lower yesterday. The July reading of the PPI (headline number) was shinkage of -0.5%; we’ll see if this leads to a deflative for the CPI in a month’s time, although the “feel”/fact of inflation is all ’round. The Econ Baro concludes its week with Aug’s UofM Sentiment Survey, plus July’s Ex/Im Prices.

Yesterday’s stunningly zero inflation CPI headline number for July drove the Spoo up 60 points (from 4139 to 4199) in a mere four minutes. At present, ’tis at 4231, above its Neutral Zone for today, as is Copper. None of the other BEGOS Markets are below same, and volatility is again mostly light per this hour. The Spoo’s rocket-shot saved the “Baby Blues” from their dipping, and with the S&P itself now 17 days “textbook overbought”, the “live” P/E (futures-adjusted up to this moment) is 39.3x, a reminder of this Q2 Earnings Season weakness. By Market Values, the Spoo (in real-time) is 359 points above its smooth valuation line; other extended readings therein find Gold some 50 points high and Oil some 10 points low. July’s PPI comes due for the Econ Baro.

Again, at present we’ve all eight BEGOS Markets inside of their Neutral Zones; volatility is mostly light. At Market Trends, the Spoo’s “Baby Blues” in real-time are kinking lower, an early sign that a change of trend may be nigh: whilst the trend remains positive, its consistency is weakening. For the S&P itself, yesterday marked its16th consecutive trading day of being “textbook overbought”. Similarly for the Bond, Euro and Swiss Franc, their respective “Baby Blues” too continue to show similar weakening of the uptrends. Spoo 4122 by the Market Profile is the most dominantly-traded handle of the past 10 trading days, it becoming the line in the sand between support and resistance. The Econ Baro looks to July’s CPI and Treasury Budget, plus June’s Wholesale Inventories.

A brief acknowledgement of missing the boat: last Friday (05 August) we anticipated slowing for July’s Payrolls, which instead grew, (interesting details in the current edition of The Gold Update). For today, at present all eight BEGOS Markets are inside of their Neutral Zones, and volatility is very light, Copper’s EDTR (see Market Ranges) with a 35% tracing and the only one of the bunch exceeding 30% thus far. At Market Trends, the Bond’s “Baby Blues” have further weakened whilst those for the Euro and Swiss Franc continue to appear topping out. In real-time, the Spoo’s gap above its smooth valuation line remains extreme at 319 points, the S&P itself now 15 days “textbook overbought”; the S&P’s “live” P/E is 37.1x. For the Econ Baro we’ve Q2’s Productivity and Unit Labor Costs.

The Spoo is off to a firm start for the week as are Oil and Copper, those BEGOS Markets all trading at present above today’s NZ; none are below same, and volatility is light. The Spoo is (in real-time) 342 points above is smooth valuation line (see Market Values) and the S&P is now 14 trading sessions “textbook overbought”. At Market Trends, only Oil remains in a negative linear regression downtrend; however, the upside consistency has begun to crack in the trends for both the Bond and Swiss Franc. The Gold Update points to its weekly parabolic trend having finally flipped to Long following an 18-week Short stint; Gold’s near-term challenge is to break above its 1779-1854 resistance zone. The Econ Baro’s recent spike is its best 8-day up-move since 2004.

For a third straight day by this hour, Copper is the only BEGOS Market trading outside (in this case above) its neutral zone. Volatility is light (save for Copper’s 66% EDTR tracing [see Market Ranges] thus far). The Spoo (in real-time) remains excessively high by its smooth valuation line (see Market Values), price at present 352 points “high”; the “live” P/E of the S&P 500 is 37.2x, the “P” rising faster than the “E” as Q2 Earnings Season continues to unfold: with 406 of the S&P’s constituents having reported, only 62% have bettered their COVID-effected earnings of Q2 a year ago, the declining Economic Barometer having been a leading indicator of this relatively weak Earnings Season. Indeed, the Econ Baro wraps up its week with slower Payrolls growth for July and an expected decline in June’s Consumer Credit.

In a mirror from this point of the session yesterday, Copper is the sole BEGOS Market trading at present outside (this time below) its Neutral Zone; volatility is mostly light. The Spoo remains overextended at a near century-to-date extreme vis-à-vis its smooth valuation line (see Market Values), the S&P itself now “textbook overbought” through 12 consecutive days. The “live” P/E of the S&P has further increased to 37.3x as prices rise without Earnings participating at a like rate. Our sense is the “herd” believes the bottom is in; the fundamentals hardly support such, even as the Econ Baro is getting a bit of a bump ahead of slower payrolls growth due for July come Friday. For today, the Baro looks to June’s Trade Deficit.

Copper is the sole BEGOS Market trading at present outside (above) its Neutral Zone; volatility is again mostly moderate. Given the weakness of Q2 Earnings Season and the S&P 500 having achived the suggested 4100 level, we’re anticipating the Index to crack, especially as the Spoo is (in real-time) 314 points above its smooth valuation line (see Market Values); in looking back century-to-date, the only stint of like points deviation was during the post-COVID bounce in April 2020, following which there were bi-directional moves of 100+ points over the ensuing few weeks. To the current end, we’re minding the Spoo’s “Baby Blues” (see Market Trends), which thus far today are again notched a bit higher. The futs-adj’d “live” P/E of the S&P is 35.1x. Due for the Econ Baro are July’s ISM(Svc) Index and June’s Factory Orders.

The Spoo has crept back below today’s Neutral Zone; above same is the Bond, and volatility is mostly moderate. The S&P 4100 area is displaying the anticipated resistance in concert with Q2 Earnings Season remaining comparatively weak: the “live” P/E of the S&P in a single day yesterday (wherein the Index itself was down a quiet -0.3%) leapt from 33.4x to 35.3x; better than half-way through the Season, 38% of S&P constituents reporting have not improved their bottom lines of a year ago: and back then, interest rates were essentially zero versus 2%-to-3% money today. Our live reading of the Spoo finds it 323 points above its smooth valuation line (see Market Values), whilst the Spoo settled yesterday 122 points above its Market Magnet.

01 Aug ’22, 09:14 Central Euro Time: Save for the Euro and Swiss Franc, the BEGOS Markets commence the week to the downside, notably at present with both Silver and Copper trading below today’s respective Neutral Zones (“NZ”). The S&P 500’s recent relief rally has extended the Index by “textbook technicals” to being “extremely overbought”, the Spoo itself (in real-time) now 356 points above its smooth valuation line (see Market Values), its highest deviation in better than two years. As noted in The Gold Update, the S&P has yet to test its 3600-3200 support zone, which we anticipate to occur in due course given the advantageous yield in the Bond market and the historically high “live” P/E of the S&P now reading 33.7x. The Gold Update further affirms by our Economic Barometer the StateSide economy being clearly weaker than suggested by the mildly negative Q2 GDP. The Econ Baro today looks to July’s ISM(Mfg) Index and June’s Construction Spending.

29 Jul ’22, 09:15 Central Euro Time: As anticipated these recent months, “The Recession” is now formally recognized, (and absent the Chain Deflator ’tis rather severe as ’twill be noted in tomorrow’s edition of The Gold Update). Today, the Euro, Swiss Franc, Gold and Silver all are trading at present above their respective NZs; none of the other BEGOS Markets are below same, and volatility is moderate. Per our 18 Jul comment, the S&P 500 is near to its 4100 structural resistance area (yesterday’s high being 4079). ‘Tis a busy conclusion to the week for the Econ Baro, incoming metrics including Jul’s Chi PMI, Jun’s Personal Income/Spending and Fed-watched Core PCE Inflation Index, plus Q2’s Employment Cost Index.