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CURRENT MARKET PERSPECTIVE
(NOTE: You missed our Subscriber Mid-Week Update - You Are working with only half the value!)
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OUR FIRST GAP DOWN IN NVIDIA?!?!
"MARKET TOPS ARE A PROCESS" - MAJOR TOPS ARE A LONG PROCESS
Click All Charts to Enlarge
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NVIDIA: This week we experienced our FIRST Gap Down in NVDA since it started its meteoric rise! Then also fell another 2.55 on Friday's Options expiration. We now have the potential beginnings of a down TREND channel, however, note we have long term Momentum support (lower pane) not too far below Friday's close. |
1 - SITUATIONAL ANALYSIS
THIS WEEKS RECAP
EARLIER IN THE WEEK
- The Russell 2000 has outperformed the Nasdaq by 12% (the biggest 1-week outperformance since the TMT bubble burst)
- The Russell has outperformed the S&P 500 by 10% (the biggest 1-week outperformance since the Black Monday market crash in 1987).
- US equities have seen a strong broadening move - 76% of stocks have outperformed the benchmark in the last week, in-line with the best 1W breadth in at least 20 years.
- Under the hood there have also been clear signs of risk-on moves with Unprofitable Tech up 11 days in a row, the best ever run for the basket.
- The Russell's 14D RSI is up to 81, the most overbought level in 7 years.
JULY OPTIONS EXPIRATION
- The world's largest IT outage Friday did nothing to help the week as CrowdStrike accidentally confirmed the reality of an 'almost internet kill-switch', leaving Nasdaq suffering its worst week since April (with MAG7 basket down around 4%). Small Caps and The Dow ended the week higher while S&P joined Nasdaq in the red.
- The relative underperformance of Nasdaq vs Small Caps in the last two weeks is the largest since the reversal at the top of the dotcom bubble in 2001.
- Nasdaq is only down a little in July while Russell 2000 remains up over 7%.
- The cap-weighted S&P underperformed the equal-weight S&P by 250bps this week, (the most since Nov 2020 - election/vaccines), and by 450bps in the last two weeks.
- The Magnificent 7 stocks have lost $1.3 trillion in market cap since the peak on 7/10 - the biggest 7-day drop for that basket ever.
- VIX had a big week surging back above 16 - its biggest absolute weekly jump since March 2023 (SVB implosion). It wasn't just VIX - skews all started to blow out this week and implied correlation surged back off record lows.
- WTI tumbled back to an $80 handle - the lowest in a month (from two-month highs).
A SHIFT TO SOFT LANDING EXPECTATIONS
The market is indicating a shift to a potential "Soft Landing" scenario from a "No Landing" growth scenario.
This is confirmed by key measures shown below (dotted box) with each supporting chart further below.
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US RETAIL SALES & RECESSIONS
This week's June Retail Sales indicated NEGATIVE 0.68% Y-o-Y nominal growth. The US is a slightly less than 70% consumption economy. In the past, retail sales trended sideways preceding a Recession.
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CHART BELOW
Equities have outperformed bonds despite a rise in the unemployment rate.
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1- CREDIT - JNK
CREDIT ALWAYS LEADS - Heightened Caution Is Warranted!
CHART RIGHT
The last time CCC/B diverged, it was the dot-com warning.
CHART BELOW
High yield credit has not been confirming the rally in stocks. It is warning there are problems in the underlying credit world.
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CHART BELOW
- Prices have been steadily rising with the 100 DMA now having crossed the 100 DMA.
- We appear to be competing an ABCDE Corrective pattern within Wave 2.
- Wave 2 should end by August.
- Prices then can be expected to fall with spreads widening.
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2- TREASURIES - TNX
- The 10Y US Treasury Note Yield (TNX) continues to weaken as the 40 WMA breaks the 50 DMA to the downside.
- Support appears to be the 80 WMA (in black) at ~4.10%.
- The MATASI Proprietary Momentum Indicator (lower pane) suggests near term support has been found (the black line) is likely to soon be broken, taking the yield to ~4.1%.
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3- THE US DOLLAR - DXY
- The US Dollar is starting to show weakness as it drops below all its daily moving averages.
- The tightly banded moving averages may soon see the 50 DMA break through the 100 DMA to downside.
- As rate cut expectations grow, we can expect the dollar to weaken further.
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4- COMMODITIES - GOLD & SILVER
- On Wednesday, Gold broke higher to a new high on a weakening US Dollar. By Friday's close, Gold had retraced much of its potential breakout gains.
- Gold also broke its overhead Momentum resistance (lower pane) before falling back to its lower Momentum support trend line.
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5- S&P 500
- The S&P 500 sold off by ~79 points on Wednesday to 5588.
- The Magnificent 7 stocks have lost a staggering $1.1 Trillion in market cap in the last five days, taking the S&P 500 down with it.
- The S&P 500 appears to be near a major long term "Doom" top, which we should complete in the not too distant future. Equity markets normally weaken significantly at the time of the first Fed Rate cut, reflecting the reason the Fed is cutting - weakening economic conditions and hence the possibility of weakening earnings going forward.
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SENTIMENT
CHART TOP RIGHT: The BoA Bull-Bear Indicator has moved up to 65 from 63. This rates a moderate level of greed in the US equity market - indicating that investors are still Bullish.
CHART BOTTOM RIGHT: The current reading of the Global Equity Risk-Love Indicator at the 96th percentile signals a high level of optimism in the global equity markets, indicating a need for caution and risk management strategies by investors.
CHART BELOW: The Mag-7 trade is about as overcrowded a trade as we have witnessed since the dotcom bubble with stocks such as Cisco, Worldcom and Enron!
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WHEN RUSSELL 2000 (Small Caps) OUTPERFORM RUSSELL 1000 (Large Caps)
When the Russell 2000 (Small Caps) outperform the Russell 1000 (Large Caps) by 3% or more - the S&P 500 has been higher in every instance one year later by 32% since 1979! The last five days have seen Small Caps (Russell 2000) outperform Large Caps (Russell 1000) by the largest amount in history (going back to 1979).
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The earnings outlook for small caps has started to improve:
- Consensus revenue and net income growth forecasts for the Russell 2000 show a strong recovery in late 2024, with it approaching the S&P 500.
- Data on Russell 2000 futures show that traders had pushed their exposure to the most net-short since 2023.
- About 25% of the $68 billion iShares Russell 2000 ETF’s free float is held short, compared with 9.9% for the $564 billion SPDR S&P 500 ETF Trust and 7.6% for the $302 billion Invesco QQQ Trust Series 1, according to data from S3 Partners.
- Last week's inflow to IWM was the largest since December 4.. The chart looks like a break-out.
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WARREN BUFFETT INDICATOR
Warren Buffett Indicator hits 195%, the highest level in history, surpassing the Dot Com bubble, the Global Financial Crisis and the 2022 Bear Market
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GLOBAL CENTRAL BANKS SEE A RECESSION
CHART RIGHT
The Federal Reserve, despite its public narrative, has its Financial Conditions Index about as loose as it can get it!
ALWAYS watch what central banks do - not what they talk about publicly!
CHART BELOW
The policy pivot has started. With the major exception of the US Federal Reserve, global central banks have on a net basis began loosening.
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MARKET DRIVERS
"AS GO THE FINANCIALS, SO GO THE BANKS: AS GO THE BANKS, SO GO THE MARKETS."
MATASII FINANCIAL STOCK INDEX
We continue to keep an eye on both the Bank and Financial stocks to give us an early signal of market direction. We have been showing the banks over the last few weeks, but the Financials now appear to be giving a clearer signal.
- The MATASII Financial Index has broken strongly to the upside.
- Momentum (bottom pane) has found long term support and appears to want to head to the overhead resistance trend line, shown by a dotted descending orange momentum trend line.
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YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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MATASII BANK STOCK INDEX
- The MATASII Bank Index has surged to and through its upper trend line (black dashed line) before retreating on Friday.
- The "e" Wave may possibly be completed here, at our original target price.
- Momentum (bottom pane) also broke the overhead resistance trend line, (shown by a dotted descending orange momentum trend line) before also retreating.
- The high may now be in.
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YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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As goes NVDA, so goes the MAG-7, As Goes Mag-7 so goes The Market. | Investment benefactors are often not the big winners. |
NVDA - Daily
CHART RIGHT: NVDA v the darling of the Dotcom Bubble (for those who recall), CSCO was dominant. It appears that was nothing!
- NVDA gapped lower on Wednesday finding initial support just above the 50 DMA - likely to minimally touch the 50 DMA.
- Momentum (Lower pane) has plunged lower and still has more to go before finding Momentum support.
- The Dotted Black Trend line in the MATASII Proprietary Momentum Indicator (lower pane below) has clearly indicated this sell-off was coming.
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Divergence is normally seen as a warning to the downside and is still ahead if the Divergence isn't removed by a movement higher in Momentum.
- At some point, the major unfilled gaps (at much lower levels) must be filled. NVDA therefore may no longer become a Short to Intermediate Long Term hold, but rather a position trading stock as others entering the space and force margins to contract.
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YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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MAGNIFICENT 7
- The Magnificent 7 stocks have lost $1.3 trillion in market cap since the peak on 7/10 - the biggest 7-day drop for that basket ever.
- The basket of 'Magnificent 7' stocks sold down again on Wednesday.
- The momentum Divergence signal, which had been clearly broken (bottom pane), tested it as support, which we cautioned it would likely do.
- Continued caution is advised since major global "Dark Pools" have been identified as presently operating behind the scenes on the Mag-7.
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YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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DISTRIBUTION & ROTATION ACCELERATING - FURTHER WEAKENING TECH - SURGING SMALL CAP | |
YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
| THE RUSSELL SURGES (Above): As earning season gets underway, the market is chasing small caps, while distribution in tech and the Mag-7. shows itself. Fund Managers are minimally protecting themselves from possible negative earning surprises &/or are rotating their weighting from big tech to small cap value. | |
YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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THE EQUAL WEIGHT (Above):
- The MATASII CROSS has given a BUY signal to the Equal Weight EFF (RSP).
- It appears Wave 5 of a five wave impulse wave is now underway.
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"CURRENCY" MARKET (Currency, Gold, Black Gold (Oil) & Bitcoin) | |
10Y REAL YIELD RATE (TIPS)
Real Rates reached our initial overhead resistance level of 2.25% before falling off hard as part of our expected "x" leg lower (chart right). We are approaching support and a potential turn upward in yields.
Two alternative resolutions have developed.
Gold is suggesting it will be resolved by a fall in real rates (chart lower right).
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CONTROL PACKAGE
There are TEN charts we have outlined in prior chart packages, which we will continue to watch closely as a CURRENT Control Set:
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US DOLLAR -DXY - MONTHLY (CHART LINK)
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US DOLLAR - DXY - DAILY (CHART LINK)
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GOLD - DAILY (CHART LINK)
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GOLD cfd's - DAILY (CHART LINK)
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GOLD - Integrated - Barrick Gold (CHART LINK)
- SILVER - DAILY (CHART LINK)
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OIL - XLE - MONTHLY (CHART LINK)
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OIL - WTIC - MONTHLY - (CHART LINK)
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BITCOIN - BTCUSD -WEEKLY (CHART LINK)
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10y TIPS - Real Rates - Daily (CHART LINK)
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CONTROL PACKAGE
There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "control set":
- The S&P 500 (CHART LINK)
- The DJIA (CHART LINK)
- The Russell 2000 through the IWM ETF (CHART LINK)
- The MAGNIFICENT SEVEN (CHART ABOVE WITH MATASII CROSS - LINK)
- Nvidia (NVDA) (CHART LINK)
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S&P 500 CFD
- The S&P 500 cfd has shown weakness this week as Big Tech gets hit harder than has recently been witnessed.
- There is a strong possibility we may have a price channel "through-over" before retesting the rising trend channel.
- The MATASII Proprietary Momentum Indicator (middle pane) has not yet broken the concerning Divergence pattern shown by the descending orange dotted trend line.
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YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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S&P 500 - Daily - Our Thought Experiment
OUR CURRENT ASSESSMENT IS THAT THE INTERMEDIATE TERM IS LIKELY TO LOOK LIKE THE FOLLOWING:
NOTE: To reiterate - "the black labeled activity shown below, between now and July, looks like a "Killing Field", where the algos take Day Traders, "Dip Buyers", the "Gamma Guys" and FOMO's all out on stretchers!"
- The S&P 500 has been weak this week after previously breaking to new highs.
- The MATASII Proprietary Momentum Indicator (middle pane) has not yet broken the concerning Divergence pattern shown by the descending orange dotted trend line. Lower prices are likely.
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YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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STOCK MONITOR: What We Spotted
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CONTROL PACKAGE
There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "control set":
- The 10Y TREASURY NOTE YIELD - TNX - HOURLY (CHART LINK)
- The 10Y TREASURY NOTE YIELD - TNX - DAILY (CHART LINK)
- The 10Y TREASURY NOTE YIELD - TNX - WEEKLY (CHART LINK)
- The 30Y TREASURY BOND YIELD - TNX - WEEKLY (CHART LINK)
- REAL RATES (CHART LINK)
FISHER'S EQUATION = 10Y Yield = 10Y INFLATION BE% + REAL % = 2.298% + 1.908% = 4.206%
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10Y UST - TNX - Hourly
- The TNX rose at the end of the week week, as it reaches for its 144 EMA.
- Importantly in the near term is that Momentum (lower pane) appears to have reached a longer term overhead support level.
- We have labeled an Alternative ALT ABCDE count that is inline with the movements in the Real Rate Yields (chart shown above).
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YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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