If you regularly read our blog, you should know the term, "window dressing." For newbies, it means that the first few days of every month, new money is put into the market from funds. It is one reason why the market is biased to the up-side. With that said, last Wednesday (1st) was mostly down, but reversed. It closed with a plus 5-points in the Dow. Dear Reader, this demonstrates a very weak market. In the bullish case, the market did respond strongly the next two days. We, at Evolution feel that the market had many things to help produce a strong rally. In our estimation, it failed. The elevator is still going down. However, you decide. Here is the picture.
Positives
The Dow was heading to fall below its 200-day moving average. It held. Not only that, but all the indexes stayed above the dreaded line in the sand. By the way, the Transports were never close to piercing that marker. This is a big plus for the market. Will momentum carry into this week and month?
China revealed a strong return by its economy. This will help commodities, shipping, everything. We feel that China is the number one economy in the world. We are number two. That's how we see it. With China opening back up, it is like a high tide. It raises all boats.
In the US, we passed the chips act and the stimulus for infrastructure. However, the money has not circulated or has had enough time to influence the two sectors. It should help both.
Coming into this month, the economy had a strong tailwind from the consumer. We mentioned that the three aspects for this is states raising its minimum wage law, the increase to social security and job switching by employees. At the moment, we see this as a neutral.
Neutrals
Hanging with Doctor Copper shows it maintains its price around $4.00. The same could be said about oil. It seems to be forming a consolidation range. China's potential demand could change its direction.
Negatives
One would think that the strong labor reports with jobs would be a strength. It is not. Full-time labor has declined. Quality jobs are suffering layoffs. In the US, 800 more retail stores will be closing. The list includes big names like Walmart and Best Buy. Nordstrom is closing ALL of its Canadian stores. Every week, new names are added or announced. Facebook just announced more layoffs. This is not a strong economy. There are other clues.
Evictions are back in the news. We feel this will be contagious as government protections have expired. Landlords are raising rents. Renters are using almost half of their income to meet this obligation. The same story will soon surface with housing. Home owners are barely scraping by to meet their obligations. State taxes, car insurance and utilities are not helping as they all are on the rise. Then, the automakers who offered incentives like delayed payments back in 2020 have seen delinquencies rise. People cannot afford the cost of a new car and a report says that one-half of the population cannot now and possibly ever, afford to buy their own home. This is sad and troubling. There are other reports revealing that consumer's are using their credit cards to make ends meet. This is a recipe for disaster. However, the data says this aspect is on the rise.
When you add the war in Europe, geo-political problems, sabber rattling and other stupid forms of tension, the world is on edge. Then, we add the Federal Reserve who only make things worse by their arrogant, egotistical belief in engineering the economy. Their thinking is backwards. You do not worry about the richest class, but build your policy on how it effects the bottom class. If a poor person can get by, well, everyone else should too. Anyway, this is how we see it.
Finally, the January barometer was down. The saying goes like this. If January is a plus, the chances favor a good year in the market. If it is down, it is more likely the year will be down. January was down. Peace.
