CIB

Combatting Disturbing Market Signals

Date: 05/02/22

Author: Kent Moors, Ph.D.


This weekend marked the latest air show here in Fort Lauderdale. Planes dart across the sky in front of huge crowds drawn to the waters’ edge for the extravaganza overhead…

Photo: legacy.pitchingine.com

…or by a flotilla of private boats moored just offshore for a view.

2022 Fort Lauderdale Air Show Photo: fortlauderdaleairshow.com

In our case, however, we simply sit on one of our balconies high up the tall pink building on the far right in the picture below. The entire show simply passes in front of us.

USAF Thunderbirds, 2022 Fort Lauderdale Air Show Photo: fortlauderdaleairshow.com

One of the highlights involves planes – from old propeller aircraft to F-16 and F-18s – making steep ascents followed by even steeper descents before thousands assembled on the beach.

2021 Fort Lauderdale Air Show Photo: sun-sentinel.com

Unfortunately, these days such maneuvers remind me more of the stomach wrenching machinations confronting investors.

Markets have been telling us for some time now that a correction is underway. How deep the decline will be before we reach a leveling off remains to be seen, but it is already upon us, and the open talk of a recession is hitting the airways with a renewed intensity.

This is not simply another bout with volatility or cycles that are part of a more normal view of performance; this is a collision of events and doomsaying quite unlike anything witnessed in decades. Even the dot.com bubble crash and the subprime mortgage collapse are likely to be of shorter duration that what is now upon us.

The depths of the problems are well indicated by year-to-date (YTD) figures. Through close on Friday, the S&P had given up 13.86 percent for 2022, the Dow has declined 9.86 percent, and the Nasdaq is down 13.26 percent.

In weekly market reviews released on Friday, I expressed it this way to Sigma Trader and PRISM Profits members:

Another week, another bout with extreme volatility. As I write this shortly after close, the markets have followed up a huge gain (Thursday) after a small rise (Wednesday) after the worst single day loss in two years (Tuesday) with…another huge loss. The VIX has been bouncing around like a batch of newly minted jumping beans. This has all the earmarks of likely to be getting worse before any meaningful floor is found.

All of this, of course, reflects the primary investor concern over market trajectory and the questionable ability to offset several disturbing factors. The Russian invasion of Ukraine is bogging down in a combination of Spring mud, continuing military mismanagement, and Kremlin delusion. Meanwhile, inflation marches forward – with its accompanying rising of fixed income interest rates – while concerns over economic recovery persist.

The result is investor uncertainty, something market players dislike more than anything else.

In a rapidly declining afternoon for the last trading day in April, the Dow ended up shedding almost 2.8 percent for the day (and almost 940 points), 3.15 percent for the current rolling week daily average (adding the most recent closing value, deleting the earliest), and 4.91 percent for the current rolling monthly daily average, while the S&P posted declines of 3.63, 3.82. and 8.8 percent, respectively. The S&P closed its worst month since March 2020.

It is the Nasdaq, however, that highlights the downward focus posting its worst monthly performance since October 2008, shedding 4.17 percent for the day (536 points), 5.15 percent for the current rolling week daily average, and a whopping 13.26 percent off for the current rolling monthly daily average. An almost 15 percent plunge in Amazon (AMZN) hardly helped here either.

The Nasdaq will continue to lead the declines so long as the broader market exhibits the jitters. That is because the index’s overall trajectory is dictated by an overweight in technology and those companies requiring access to advancing lines of credit.


Foreign Energy Expert Predicted “Big Oil’s” Recent Surge

With the 7 triple-digit wins under his belt in 3 months, he’s now showcasing the technology he used to do it.

Click the link here to get the full details.


Meanwhile, the major inflationary signal followed in the weekly reports – the 10 year note yield – continues to rise. It closed Friday up 0.84 percent (in a placid market, the interest rate would usually decline modestly in advance of a weekend). The rise for the week is 2.16 percent, while the monthly is a very hot 24.07 percent. Here, the YTD is a staggering 77.33 percent.

As I have noted in the past, this translates into a more rapid rise in credit costs for those tech and energy companies relying on lower rated lines of finance. There, the high yield (i.e., junk) bond levels are rising much more quickly than investment grade paper.

All of this portends some tough times ahead. For what it is worth, the broader number crunching from my proprietary Σ Algorithm trading system points toward further declines in stock valuations and rises in fixed income yields coming. Those calculations completed yesterday indicate an additional aggregate stock YTD movement down of at least 15 percent and a rise of at least 18 percent in interest rates before any plateauing will take place.

Now some of this remains a result of the angst created by the geopolitical climate mentioned above, combined with intense fluctuations in commodities. I am still of the opinion that a reversal will be signaled first in the trade of select metals and energy commodities, although those remain dependent upon the emergence of rather different indicators.

A retail investor these days needs to stand ground, a statement obviously easier said than done in the current milieu. Holding fast is always difficult when an investor watches the face value of holdings decline on a daily basis.

But there is no value in trying to close the proverbial barn door after the horse has left. Trim where you need to but it makes no sense to bail in abject defeat.

There are also few quick fixes to a portfolio in such an environment. However, I have recommended to my subscribers a combination approach involving three main elements.

First, add bear ETFs (exchange traded funds) and ETNs (exchange traded notes) that advance in value as the underlying holdings decline. The focus here are ETFs and ETNs that track the major indices (especially the Nasdaq). These act more as hedges against declines elsewhere in the current picture.

Second, watch for the early changes in commodities that are sources of profit when markets signal impending movements. Here, focus is on two elements: energy and grain. However, the expected trajectories are different.

On energy, I expressed it this way on Friday:

As expected, the crude oil prices advanced in a reverse mirror image of the declines in stocks. Once again, oil is exhibiting a marked overvaluation and will come crashing down hard as soon as the dust settles. But until it does, futures contract writers will continue to push prices upward for one simple reason. Those setting the price have a greater risk on the up rather than the downside (a matter I have discussed before when this environment hits). That means they will need to set the contracts cut at the expected highest next available barrel, using options to offset some of the risk.

There are continuing signs that available aggregate supply will exceed demand, normally a signal for a price contraction. But this has been more than offset by renewed commitments of European end users to cut imports from Russia (a medium-term prospect at best), an accompanying rise in US exports to the Continent, and the all-encompassing fog of war.

Watch the ebb and flow of Chinese import levels. This will be the next close-in barometer of forward oil pricing action. Beijing currently is benefitting from the heavy discount on Russian export volume looking for a direction not limited by foreign sanctions, a situation that is also resulting in a rapid increase in Indian imports from Russia. However, China has already exceeded its level of need or comfort with Russian oil and India is now in the crosshairs of Western sanction pressure.

At close, WTI (West Texas Intermediate, the standard for futures contracts cut in New York) had shed a bit less than 1 percent for the session, while up 6.25 percent for the week and 4.43 percent for the month. Brent (the most often used international yardstick set daily in London) posted rises of 1.41, 6.94, and 1.97 percent, respectively.

As I have been tracking for some time, the divergence between oil and natural gas has emerged. Henry Hub (the US primary benchmark pricing) surged 4.69 percent for the day, up 8.61 percent for the week and a hefty 28.25 percent for the month.

As a further perspective, consider that the YTD for WTI is up 37.71 percent through Friday’s close, while Brent has risen 38.6 percent. On the other hand, Henry Hub has accelerated 89.3 percent. Once oil begins to decline, natural gas may follow suit. But only briefly. Gas will continue to advance while oil finally settles lower. Much of the oil rise has already been factored into valuations. Gas on the other hand, has significant room to run.


This “tool” earned over $400k in 12 months. 

Video uncovers the winning tactics that handed one trader an average $7,300 in profit every week using just shy of $12,000 in capital.

Watch The Official Replay Right Now — Click Here


A corollary consideration here. As Europe works out its commitment to wean itself from Russian imports, two other US-related dimensions open: the export of liquified natural gas (LNG) to the Continent, along with increased crude oil sales moving across the pond. The primary profit moves in the latter will focus upon terminal, storage, and pipeline facilities centering about Corpus Christi, TX (the only excess capacity remaining). I have already moved Sigma and PRISM members into triple-digit winners on the first and will shortly be moving them into high-return prospects on the second.

The grain picture, on the other hand, continues to point toward advancing prices. As we move into a clearer picture of how much the Ukrainian invasion, augmented by harvesting shortfalls in Argentina and weather problems in North America, are impacting upon supply, direct ETFs on both wheat and agricultural production will be the plays.

Third, less noticeable on the analyst radar is a revision in profit centers for two main components of high tech and the electric vehicle (EV) revolution – semiconductors/circuitry and lithium/rare earth metals.

Both have witnessed declines of late with immediate prospects for a general recovery still somewhat off. But both are moving operational concentrations back to North America. Asia will still control the semiconductor production market while rare earth metals in general and processed lithium in particular will still be centered on China.

Nonetheless, the main improvements for investors will be found in the US and Canada,

The difficult part in all of this is the wait. Average investors are looking to the next development as a way of recovering some nasty losses as quickly as possible. That is unlikely to happen. Keep your powder dry and move when the market tells you, not when you want it to.

Dr. Kent Moors


This is an installment of Classified Intelligence Brief, your guide to what’s really happening behind the headlines… and how to profit from it. Dr. Kent Moors served the United States for 30 years as one of the most highly decorated intelligence operatives alive today (including THREE Presidential commendations).

After moving through the inner circles of royalty, oligarchs, billionaires, and the uber-rich, he discovered some of the most important secrets regarding finance, geo-politics, and business. As a result, he built one of the most impressive rolodexes in the world. His insights and network of contacts took him from a Vietnam veteran to becoming one of the globe’s most sought after consultants, with clients including six of the largest energy companies and the United States government.

Now, Dr. Moors is sharing his proprietary research every week…knowledge filtered through his decades as an internationally recognized professor and scholar, intelligence operative, business consultant, investor, and geo-political “troubleshooter.” This publication is designed to give you an insider’s view of what is really happening on the geo-political stage.

You can sign up for FREE to Classified Intelligence Brief and begin receiving insights from Dr. Moors and his team immediately.

Just click here – https://classifiedintelligencebrief.com/

Share this:

Facebook
Twitter
LinkedIn
Pinterest
Reddit
Email
Print

test

By registering you are agreeing to our privacy policy

Are you ready for The Great American Reset?