The market found a bid just as the Fear & Greed Index edged into the ‘fear’ zone. A week ago, the reading was almost double the current level – well into ‘greed.’ A reminder on containing emotions.

Yesterday, the screen was green.

Consumer Confidence

I found this comment from the Conference Board report compelling:

Since Sept 2021, with falling #gasprices a major impetus. Vacation intentions rose but plans to purchase homes and major appliances cooled further. This shift from big-ticket items to services will continue in 2023, as will headwinds from inflation and interest rate hikes.”

Yesterday’s biggest winners reflect spending on less expensive stuff and an element of the Fear of Losing Out (FOLO) (cruises are a lot cheaper than new or used cars).

Too Complacent?

We had one good day in what feels like eons, but we will be tested by the CBOE Market Volatility Index (VIX) drifting under 20.0.  The formula of late has worked like a charm when it comes to the VIX:

• Above 30 – buy stocks
• Below 20 – sell stocks

More than half of the S&P 500 is above the 50-day moving average, so there is a lot more work to be done. Nevertheless, watch Energy (XLE), at these levels, it might catch a bid.

 

Portfolio Approach

There are no changes to our Hotline Model Portfolio.

Today’s Session

These days every investor also must be an economist. The word derives from the Greek Oikonomia, which means "household management or thrift,” but these days should mean “reacting to old data.” 

The knee-jerk reactions continue to create tides which wipe out lingering optimism.  Many money managers that have held steadfast to fundamentals and history are now throwing in the towel.

That’s what’s happening this morning, with equities slipping on 3Q GDP being revised to 3.2% from 2.9% and initial jobless claims up only 2,000.

Both reports came in above consensus.

Initial Jobless Claims

As I pointed out from the better-than-expected Consumer Confidence read yesterday, the longer-term trend is still to the downside.

I think the message from the report was lost in the headlines.

The Present Situation Index—increased to 147.2 from 138.3 in direct relationship to the decline in gasoline prices. The Conference Board pointed out people are still opting for lower priced purchases.

The Expectations Index—also edged higher, but the Conference Board made this observation: “However, Expectations are still lingering around 80—a level associated with recession.”

Cars Maxed Out

This morning, we saw proof that consumers are cutting back on expensive purchases from CarMax (KMX).  While it’s no surprised to see a shift away from goods like automobiles, the pace of the decline in the CarMax report is a red flag.

Earnings missed consensus by 63%.

Sales were down 23.7%.

Units plunged in both used and wholesale vehicles. The stock is down, and management is implementing cost savings measures – read layoffs.

Meanwhile, the colors of Christmas is on full display in the individual investor sentiment read, but it speaks to anything but joy.  Look at this monster spike in bearishness.

Negativity reigns, which historically means better times are closer, although, dealing with near term pain and doubt.

Comments

Such a fickle market! Is it possible car sales are down because consumers are on the cusp of whether or not to transition to an EV? Julie David on 12/22/2022 10:42:49 AM

I do not think there is a major demand shift into EVs at the moment demand will come as a consequence of bans on gas-powered cars and many many more charging stations than exist today)and in fact a top industry executive wanted this week the transition will be slower than many assume. Moreover, if this were an EV story shares of Tesla would be much higher even taking into account sling pressure from Musk's role at Twitter. You used the right word: "fickle" which underscores how much emotions have taken control of day to day action. CP Charles Payne on 12/22/2022 11:01:51 AM

1.) Could you add a little explanation to the sectors above the 50 day MA chart and the "XLE might catch a bid" comment? Also, is the utility sector being so high seen as an opportunity or does the nature of the utility sector tend to drive it higher than the others? Per your above comment on EV's - is the opportunity in EV changeover more pronounced in the infrastructure buildout than in the car manufacturers? Thx and Happy Christmas. Dave Morrow on 12/22/2022 11:28:58 AM

I do not think there is a major demand shift into EVs at the moment demand will come as a consequence of bans on gas-powered cars and many many more charging stations than exist today)and in fact a top industry executive wanted this week the transition will be slower than many assume. Moreover, if this were an EV story shares of Tesla would be much higher even taking into account sling pressure from Musk's role at Twitter. You used the right word: "fickle" which underscores how much emotions have taken control of day to day action. CP Charles Payne on 12/22/2022 12:47:59 PM

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