It was a great week by 2022 standards because there have been so few, but if the market hadn’t slipped on Friday, it was poised to be a great week by any standard.

But Friday reverted to what 2022 has been – tough and disappointing. It was one of those sessions that felt like the result of being sucked into a trap, which is the theme on the Street among big investors and those that buy into the conventional wisdom that the market cares more about bashing the froth in resolve among individual investors than the valuations and investment thesis.

All year long, Wall Street has fretted about individual investors not blinking, which has suddenly become more important than inflation, recession, earnings, geopolitical events, and underlying fundamentals.  Those suborn investors have to get out of the way because the market only rewards investing professionals.

Can’t Shake Them

What makes the situation so frustrating for the pros looking to feed off the carcass of retail investors as they dance on the graves of their broken spirits is that everyone should have blinked already. Instead, market breadth has been especially horrible.

This chart expresses the same message –not only has 2022 seen the fewest sessions with more new highs than lows, it’s also been one of the most volatile as well  – like riding a bronco.

Don’t Let Them Win

Hey now, hey now

Don't dream it's over

Hey now, hey now

When the world comes in

They come, they come

To build a wall between us

You know they won't win

Don't let them win (Hey now, hey now)

Hey now, hey now

Hey now, hey now

Don't let them win (They come, they come)

Don't let them win (Hey now, hey now), yeah

Hey now, hey now – Crowded House

There are a lot of metrics, exchange-traded funds (ETFs), and comparisons being used on the Street to justify the critical need for individual investors to take on more pain. However, it’s essentially for the greater good. And once that bottom has been reached, and there is a bounce of at least fifty but maybe 100%, those folks should be wooed back into the market - but the right way – passive investing and no thinking on their own.

With that in mind, the Street needs to see the recent haircut in brokerage margin debt double from the recent (sharp) decline.

Heat Map

Defensive names outperformed again, which isn’t surprising going into the weekend - and ahead of a week of huge events from the Fed to Gross Domestic Products (GDP) and a bevy of important earnings results.

Google (GOOG) took the largest hit among those Mega-cap names needed to save the day. 

Earnings Season

I expected multinational companies to have the harshest reactions to earnings because of the strong dollar. Thus far, companies with greater than 50% of revenue and earnings outside the United States (OUS) have rocked.

So, buckle up a ton more – multinational companies are reporting this week.

Portfolio Approach

There are no sector weighting changes this morning, in our Hotline Model Portfolio.

Today’s Session

Equity futures are higher pre-open, but drifting into the opening bell, which is so on script these days.  I’m watching the ten-year to fill a big gap, and then turn lower.

We are getting data from the Chicago area and Dallas Fed that could play a role in how the market acts later this morning.

The NASDAQ 100 holding higher this morning, but it is a long way from a consequential breakout (13,000).

Keep an eye on Consumer Discretionary, which keeps rocking.

Comments

She is a perfect example of of our politicians… they like to project that they are solving problems for us… I contend they are the cause of most of our problems. Such dishonesty is rampant. Don F. on 7/25/2022 10:05:52 AM

We are not capitulating because we like the Payne. robert brush on 7/25/2022 10:57:46 AM

We're already in it. Ashley Kraft on 7/25/2022 12:47:56 PM

My portfolio just turned positive YTD. 😄 Tom Holcomb on 7/25/2022 1:48:54 PM

Hard to deny recession when we are already deep inside one. PDK on 7/25/2022 1:58:05 PM

Those that essentially have "tenure" in the inept bureaucratic beast that is Washington D.C. have, unfortunately, lost their way and have become blinded by their own power and wealth. So much so that they have become numb and insensitive to the suffering of the masses. God has repeatedly warned human beings of these pitfalls and, yet, human beings continue to succumb to the dark forces...time and time again. Janet Y., Tony F., the list goes on and on. Erika K. on 7/25/2022 2:18:15 PM

Janet Yellen can't possibly be reading the same reports we read or see the same charts that we see. I wonder how long it has been since she bought food in a store, not in a restaurant. How long since she filled a car with gasoline? This is only the beginning of a recession. We are in it. This is far from transitory. Paul Hubert on 7/25/2022 2:46:54 PM

No, it's already started. Businesses are already understaffed so they will look forward more slowing. Employment data won't change until it really deepens after the fed makes more moves. Tim Hopp on 7/25/2022 7:52:20 PM

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