The NASDAQ Composite keeps powering ahead like a juggernaut, but the S&P 500 stole the spotlight yesterday by nestling up to 4,200. This is the big test for those deep-pocketed investors that have ignored the rally and bet big against it. Will they blink?

The script hasn’t changed with Growth sectors crushing it and oversold sectors attracting bottom fishers.

The S&P 500 is in an ascending wedge formation and ready to make a huge breakout. Meanwhile, the Relative Strength Index (RSI) is near 70, which is often a sign of short-term names being overbought. So, a big move is going to happen very soon.

The Invesco QQQ Trust (QQQ) broke through key resistance and could see clear sailing, but the RSI is too high.

Is the Economy Too Strong?

The Conference Board Leading Economic Index indicators edged up from last month but continued to swoon from a year ago. Interestingly, much of the Street keeps saying the economy is too strong. They aren’t alone, as the Fed is moving with exact unison on the notion, they still have more hikes to arrest inflation.

The Street is now reconsidering the notion of a pause. At one point yesterday, there was a 44% chance of a 25-basis points (bps) hike at the next Federal Open Market Committee (FOMC) gathering. It settled back to 36%, but it’s clear the Street is having second thoughts.

The Masters of the Universe Can Make Huge Mistakes

Reports of Carl Icahn losing $9,000,000,000 on bearish bets are astonishing. This week, we saw an avalanche of 13F Filings that revealed recent moves by hedge funds and other wealthy investors. They are buying stocks; even the folks that were singing from “The End of the World” hymn sheet.

Meanwhile, Individual Investor Sentiment is extremely bearish, with a recent bump in bullishness vanishing in the past week.

Portfolio Approach

We closed three stocks in our Hotline Model Portfolio.

Today’s Session

Thoughts Into the Weekend: The Economy Wall Street Economist and the Federal Reserve Refuse to See

This is extremely important and extremely frustrating.  Policies are based on the notion that the economy is still too hot.  America is winding down the largest influx of cash into Main Street in history and policies are being promoted to harm the economy based on backwards data. The Leading Economic Indicators came in negative for the 13th month in a row.

So-called excess savings based on all the stimulus money have gone from more than $2 trillion to $500 billion and it’s being spent faster.

By the way, the vast majority of so-called excess savings is held by wealthy households.  Meanwhile, the masses are just getting by, and now, they are pulling back.

This morning CEOs of Foot Locker (FL) and Burlington (BURL) issued warnings:

And forget about buying new coats and sneakers - searches for food assistance and a side job are surging.

Americans are working, but wages are growing slower and jobs that represent mobility, like trade and warehousing, have been declining.

The bottom line is the need to browbeat the economy because the richest Americans have excess savings is in my mind a misguided mistake and cruel.

The market is looking to open higher but will be on guard all session watching debt ceiling headlines.

Comments

With all of the unused Covid funds sitting out there, why can't we use that money to either pay down our debt or make social security and medicare solvent? Because that would make sense and nothing the government does makes sense. Bruce Sisler on 5/19/2023 6:00:54 PM

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