What a miserable week in a miserable year where a lack of leadership has been as exacerbating as the deluge of bad news.

The Fed steps up to the plate this week, and Powell will have to find the right tone, words, and perhaps even a groundswell of courage that has eluded the job since Paul Volcker walked the halls with a cigar in his mouth (not sure if it was lit).

Meanwhile, the White House keeps playing the blame game, and it’s making me sick to my stomach. 

"We're going to make sure everyone knows Exxon's profits. Exxon made more money than God last year" - President Biden

In 2020, Exxon lost $22.4 billion. Yet, the Federal government made $25.8 billion on gas taxes (imagine how much Biden & Co are raking in right now). It’s a slippery slope to start talking about profits when a lot of companies make a lot more money than oil companies for selling products that could never get us to grandma’s house.

Sea of Red

I know I’ve written it over and over, but the sea of red is mind-boggling. The S&P 500 has been down >1% in three consecutive sessions, which is rare. And most times, the fourth session isn’t too hot.

Cigarettes and Walmart were the only places to hide on Friday.

Speaking of Leadership

Jay Powell has to consider a 75 to 100- basis points (bps) hike this week. There is no way he can spook the market at this point other than to come across as too complacent and gun-shy.

The Street was modeling a 23% chance of a 75-bps hike on Friday afternoon, but that spike faded over the weekend.  Not sure if it’s cooler heads or a realization the Fed isn’t going to go there. Not that I know a lot of smart folks who think the Fed should go 25-bps. Perhaps on paper, but in this hyper-emotional period, they have to deliver what’s promised or something stronger.

Friday’s market breadth was devastating for all metrics.

Market Breadth	NYSE	NASDAQ
Advancers	521	935
Decliners	2,768	3,788
New Highs	4	23
New Lows	251	470
Up Volume	574.63 million	1.11 billion
Down Volume	4.38 billion	4.07 billion

Schedule

A lot of stuff is coming up, but only the Federal Open Market Committee (FOMC) meeting and reaction matters.

Yield curves are flattening and more now see the Fed watch odds changing back towards a 75-bps hike. 

 

Portfolio Approach

There is no sector weighting in our Hotline Model Portfolio and we have lifted all the current buys. 

Today’s Session

The S&P 500 will join the NASDAQ at the start of trading opening in bear market territory.  The problem is there are no clear support points below 3850 – which means maybe the 200-day comes into play and that’s currently 3,500.

For all the headlines on the CPI print, its inflation expectations that are most worrisome.

Bond yields going haywire.  The 10-2 year yield curve flirting with inversion.

Incidentally, the 10 year and 3 month curve is moving the opposite direction.

The bond market is taking the lead as all eyes look to the Fed for a command decision on Wednesday.  

Comments

Charles… your first five paragraph are superlative. I always appreciate your directness… and like you… the “bullshit” and out-right lies are making me sick !! Best regards, Don Don Fapore on 6/16/2022 9:37:33 AM

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