Focusing the Picture

We, at Evolution, told you last week that the timing by calendar along with the debt ceiling issue would lead to a market rally.  To be honest, we did not anticipate the upward push would be this strong. We understand why behind the scenes. The market Bulls saw the same thing. In addition, they had ammo from AI with Nvidia. The chip company jumped like Michael Jordan on a dunk layup. It gapped higher. It made a 100-point rally in three trading sessions. This is the second gap higher for the company. It rose 40-points in one day back in February of this year. That gap has not been filled. The firm could get another gap upward. If it does, beware! A triple-gap formation in a stock price ends with the price falling back to where it started. At the moment, the PE ratio is over 200. Would you invest $200 for one dollar in earnings? This is what we mean to focus on the picture.

The Fed is...

...the smudge on the lens. It is connected to the US debt issue. The bill allows the US Treasury to issue bonds for our debt. The revenue is the money the government uses to pay the bills. In that short sentence, the next issue for the market will emerge. The government needs to raise trillions with a "T." They will not be able to sell out all the bonds available. So, you ask, who buys the remainder? The Fed. (Just another reason why we say, End the Fed!) 

Here is another tidbit. It is actually the height of hypocrisy. The name of the bill which allows our government to go into debt of over $31 trillion dollars is called Financial Responsibility Law. How can you claim financial responsibility when you allow our nation to fall into a debt cycle that extends from one administration to the next decade after decade? Anyway, this market rally has legs.

SPY will probably test 440. The calendar timing will connect to the next Fed meeting. The bulls are hoping to continue to control the market with a Fed pause. They have support with a rising banking sector. This leads back to the Fed. By pausing, the banking industry will stop their losses due to when they purchased bonds with negative rates like two and three percent. Any rate drop by the Fed will provide more ammo to the banking sector and market rally. However, there is one other important aspect...

King $Dollar

It looks like it wants to test the 106 level. If it continues to climb, this rally will stall at resistance. You can get a clearer picture by watching the NASDAQ and its leading index, the

QQQ

It looks to test 370.

IWM

The small cap index broke above consolidation. This is a bet that the economy will get stronger. We believe this is a head fake.

The action and price of the dollar will focus the picture. We still maintain that our economy is in a "stealth" recession. Any time that you have inflation in your wallet and the overall economic growth is less than that level, you have the worst of all economies, stagflation. This is what we are experiencing. If things were going great, oil would be much higher in price. It is at its lows. Retail is suffering and a clue comes from a leader, Advance Auto Parts (AAP). It opened a downward gap of over 30 points last week. It is cutting its dividend by 80%. It was $156 in February of this year and last Friday, it was $67 and falling. Ouch!

Science tells us that our eyes only see a small fraction of what we are viewing. They also tell us that our mind can play tricks with us in our ability to ascertain info. We, at Evolution, say, focus your lens and take a moment to understand what you think that you are seeing.  Peace.

Odds and Ends: May 2023

Back in the day, I worked part-time in a retail shop. My boss followed the lead of grocery stores by seeking to have a weekly special to draw customers. He had a large bin where he placed his best seller since the hula hoop, flip-flops. You could select any size for a buck. At times, we had small mobs surrounding the bin to grab multiple pairs. Now, I ask you a question. Would you say that my boss's store was a success? Of course, any intelligent answer would have to ask, what else did the store sell in relationship to costs? 

I used the above story to remind you that the recent market rally is only due to tech that is being led by the chips. Microsoft and Apple make up 14% of value in the S&P 500. What are the other 498 firms doing? When you ask intelligent questions, you receive better info. Retail is suffering. VFC is a leader. The stock hit $100. Last Friday, it was $18. How about the farming sector? We know egg pricing is crazy high. The fertilizer firm Nutrien was $117 in April 2022 and now, it is $55. Ouch! It is not alone. Mosaic (MOS) was $64 in its yearly range and now, it is falling to its lower end. Last Friday, it was $33. Oil is in its lower range. The whole market has been in a consolidation pattern for April and May. So, even in the next few trading days, the market rallies, this is only window dressing and debt ceiling news. Remember, the flip-flop fad ended and this chip rally will too. Then what? 

Reminder

Inflation is tough on your wallet, but there is another aspect to rising costs. If you have to replace something like an air-conditioner, your car, you realize sticker shock. Then you think the firms that sell these items must be suffering with lower sales? You might be right, but you could be wrong. This dilemma can be seen in home builders. Your home is your biggest expense. We know that inflation makes things cost more. We also know that there have been supply shortages as well as labor. Interest rates on mortgages are also rising. Home prices have fallen from highs. We, at Evolution say, "Don't be fooled!" If you had to replace your home, the costs would exceed the present selling cost. This is reflected in our example of a home builder, Toll Brothers. The home builder is rising to highs ($68). It bust through its last high of $72. Why, you ask? Because inflationary prices become ingrained. The level of inflation may fall, but the prices will remain high and with us. 

Downside

The sad aspect of inflation hitting our economy and us, is this, our standard of living declines. We have already told you in past articles that the lie about our nation being number one is based on having the largest GDP. In reality, our standard of living is number 22. The OECD released a report on Western poverty rates. Our nation is not the only one suffering. Canada has a 11.6% poverty level. The UK is 12.4%. Italy is at 14.2%. Japan is climbing to 15.7%. Mexico pushes 16.6%. Now us. The US shows 18%. We think that it is even higher. Whether we are right or wrong, many economists agree about this economic and labor issue. As AI advances, it will replace one-third of the West's labor force. The numbers that this translates too are staggering. They are saying, "300 million!" If our nation does not protect the few industries that remain, we feel that our poverty level will approach 30%. Dear Reader, that is scary.

In another related aspect, another study shows that 63% of part-time workers are women. There is also a rise in self-employment to 20 million. Working age people are doing "gig" work. We feel the reason is because there is no full-time employment available. Everyone is scrambling to make ends meet. The debt level is not only affecting the government, we all need more revenues.

Good News

We, at Evolution, worry about the King Dollar and the privilege of being the reserve currency. Last week, a huge South African miner, Anglo Asanti stated that they are leaving the African Exchange for New York. What it is really is saying is it is leaving the BRICS for King Dollar. 

Meanwhile

The banking industry holds its breath. At the end of every month, the pluses and minuses in the banking ledgers are taken. Back in the financial crises of 2008 to 2015, the number of bank failures was 500. The numbers have actually come down. There are only 18 biting the dust since 2017. 

"Worst that could happen..."

No, we are not doing our rendition of the Brooklyn Bridge. This goes to our Supreme Court. They are really a dictatorship. In our unpublished book, we have an answer that will make the process more democratic. Now, we suffer. The court made a mockery of the Clean Water Act. Their decision will result in 900 species dying and suffering. We will get more flooding and pollution. It truly is the worst that could happen... Peace.

Deceiving Appearances

There are so many in our culture, we are losing our ability to know what is real and truthful as opposed to artificial and phony. There are probably blogs out there at this moment being run by AI. When something is so prevalent it develops its own category. We now have influencers as a job field. Sadly, could this be one of the reasons for so many divorces? I guess the ultimate in deception has to go to the gays with their stage show. Maybe they are showing us deception by asking you to look deeper at the real person? However, here at Evolution, we only address the market and our economy. In politics, as our readers know, we are for a new third political party. With that said, we see the market showing extreme volatility.

Dow...

...has rallied above its two moving averages and with volume.

S&P...

...has allowed the shills to declare that it will rise to 4300. Not to rain on their parade, but simple math with Fibonacci indicates that this should happen. Nevertheless, the index is also above its two moving averages.

$Tran...

...to be in harmony in Dow Theory, this index should also be rallying. It has moved up, but it has not breached its two moving averages. However, the next index is rocketing to the heavens.

NASDAQ...

...the composite is looking at 13,000 with a lot of fuel still in the tank. What gives, you ask? Have we at Evolution flipped our stance?

No! However, we see some strange facts and factors in the market. We always look at oil. It is hanging at its lows. One aspect is this is a nail to inflation and a big plus to consumers. The flipside says the economy is weak and getting weaker. Then, we read this...

One versus 2,000

Like Ripley says, "Believe it or not..." Apple has a market evaluation greater than the 2,000 stocks comprised of the Russell Index. How can that be, you ask? The market receives new money every month from retirement funds, index funds and big, private concerns. They put their cash behind leaders and they especially like tech. We find this aspect very unhealthy. Apple has fallen hard in the past. It could happen again. If it does, there will be a lot of pain out there. Then, we read this report from...

Home Depo (HD)

It missed on earnings. This is big because it directly relates to consumers biggest purchase, a home. The firm always caters to contractors. This is to say there is weakness in the housing industry. You can get more verification by looking at the price of lumber. Like oil, it is hanging at its lows. Not good.

What we think...

The recent market rally can be nothing more than a relief rally centered on the debt ceiling situation. With news affecting the market, the volatility is high and it will remain high until the next hurdle in life. Peace.

 

Inside Market Price Movements

- Hit the road, Jack and don't come back no more, no more, no more...

- Ray Charles

The song fits the current market. No one reaches a breaking point in a relationship just like that. There has to be a backstory. The volatility in the market is the same. We have addressed the backstory. The market is reaching its breaking point. Do not be misled. The long consolidation range within the market is set to make its conviction move. It could go up and then our call is wrong. It could go down and we gather your faith. We have seen in the battle between the bulls and the bears, market prices rise and fall. However, the charts and volume indicate what we see as its true intent. In addition, the recent volume has been low and cautious. We feel this is related to the debt situation. The market wants an answer.

King $Dollar

It seems to be falling every week. A closer look reveals that yes, it did touch a new low, but never closed at a new low. In fact, the dollar has a series of higher lows. In addition, it rallied last Friday in a strong upward rise. The test will be the 50-day moving average on the weekly chart and the 200-day average on the daily chart. We know a strong dollar will kill any market rally.

Gold

We have not touched on our favorite. You know that we oppose the Federal Reserve and its fiat money. Our belief is in Franklin and Jefferson with a strong currency backed by precious metals. Last week, gold touched a new, all-time high ($2085) before retracing. Gold had begun its attack on the $2000 level last year. Now, it is attacking a new high. Keep in mind, if the dollar rallies, gold and commodities fall. With that said, we see $2154 on the cards. Yay!

Silver

The other precious metal had a strange week. It formed a new high and then fell sharply. The happiness in gold is not complete until the two are in harmony. This is divergence. Boo!

Oil

It took a beatdown last week. It is hanging at its lows. This is never a good thing. If you add the fact that the price is below its two moving averages, and more unemployment claims, the outlook says it could fall to $57. We never like to bet against the most important commodity, but unlike the Federal Reserve, we always include it in our thinking.

$VIX

This index reflects the price action in the market. On a daily chart it says the market will rally. On a weekly chart, it shows higher lows like the dollar. Keep your eye on this index. Could it be the market tell?

Dr. Copper

Money can't buy health. Therefore, we always like a quick checkup with the doctor. It has been a long time since copper popped over $5. It was February of 2022. Since the beginning of this year, it has been in one long decline. It is below its two moving averages. We know the Biden infrastructure stimulus will help in our nation. So, we believe the low demand must be global, which is not good for the health of the doctor. Until next week, peace.

Crisis of Trust

One of the founders of AI at Google quit. He cited multiple reasons. His biggest concern relates to the movie, Terminator. AI could get so smart that it could request more power to operate and thus, be able to control humanity. The more understandable reasons are fraud, polarization and corruption. 

Citizens can be misled with information coming from unknown sources that in fact could be AI. At the moment, we still have the human version of fraud, corruption and machinations. We, at Evolution have a fear that in the near-term future, our society will end up in fractions. Each may possess a kernel of truth, but not the whole truth. This will be bad for our collective nation. The sad aspect of this point begins at the Executive branch and includes Congress. Our presidents and elected leaders continually lie to us about things. They always have an agenda and if lying gets what is wanted, so be it.

Banking Dilemma

Last week, JP Morgan took control of First Republic Bank. What is not revealed by the corrupt Federal Reserve is the details. We gathered some tidbits. JP Morgan gets a $50 billion, 5-year loan with a fixed rate. The Fed won't reveal the interest rate. Morgan gets assistance in a loss-sharing agreement. The FDIC will cover 80% of losses and will contribute $13 billion to depositors. Bottom line: JP Morgan is already up $2.6 billion for the quarter. However, I would not buy as the charts reveal huge gaps and generally, gaps get filled.

Banking Oligarchy

The Fed set this crisis up by allowing human greed to put the parts in place. Small banks complained after the Dobbs-Frank Act. The regulations were too strict, especially with banking reserves. The Fed waited. They gave the meme of complaints time as they said that they took this point into consideration. Then, they waved the reserve requirements for small lending institutions. These small banks like Silicon and First Republic grew rapidly. They built their skyscraper without a foundation. It was only a matter of time...now you know the story. Except there are many other small, regional banks that followed the same script. When they fail, "the too big to fail" institutions will gobble them up. The Fed is creating a banking oligarchy. Waiting for the day of reckoning are PacWest Bancorp (PACW), Western Alliance Bancorporation (WAL) and First Horizon (FHN). The rich get richer and we all get poorer.

Solution?

Did you know that the banking industry can create money? True. Every deposit adds to the bank's reserves. Then, they can lend your deposit to gain profits. With lower reserve requirements, banks can do this repeatedly. They are adding to the money supply. We, at Evolution, suggest this idea: Tax this new money. Use the revenue to strengthen the banking system. In fact, Congress should tax the Federal Reserve whenever they create money which dilutes the value of the dollar and our nation's standard of living. Put that money toward reducing the national debt. We agree with Milton Freidman, "Inflation is always related to the money supply."

Back to Doubt

Do you recall just two months ago that Yellen and President Biden both declared the banking system sound? If you keep yelling "wolf" eventually, the cry will go unanswered. This is what our visionless leaders are doing by lying all the time. Our nation will enter a crisis of trust. However, you can trust us because we spell out our positions and seek to do something good for our citizens.  Peace. 

Point of Resistance

Later today, the Fed's decision will give direction to the market. Many are hoping for a pivot. Some believe a pause is in the cards. The Fed could pull the rug out as it seeks its true aims, which are never announced. They may go up again by another quarter point just to prove that they are independent and fight the inflationary forces that they created. When you look at their history, a concept by a greedy, manipulative JP Morgan or sincere men like Jefferson and Franklin, can you see why we say, "End the Fed!" 

We, at Evolution, stick by our call last year that our economy is already in a "stealth" recession. When you look at inflation, it moves from sector to sector. Each sector's higher price hurts someone or company. When we look at the market indexes, we see the indecision of investors due to the Fed, geopolitical concerns, the dollar, higher interest rates, and earnings. The charts reveal...

Dow is at resistance (34500). Interestingly, this coincides with today's Fed decision.

Transport is still in a downward trend.

S&P 500 is at resistance. 

NASDAQ has rallied, but it has a long way to go to reach resistance (13000). Actually, it is closer to continuing a downside move rather than an upside swing.

IWM, the small caps are weak.

Oil is in a huge consolidation pattern.

Second Opinion

Leon Cooperman says, "The S&P 500 will not hit a new high...for a long time." He worries about our banking system. In related news, Moody's has downgraded 11 regional banks.

Continuing Worry...

about King $Dollar. The IMF has gotten into the fray. It is introducing the "Unicoin." It is now in use. Strangely, it is not a currency, but acts like one. It is being used to settle transactions. It is acting like a "monetary commodity." This is another nail to dethrone King $Dollar.

We worry that the IMF is seeking to become the "world's" central bank. This plays into the One World concept and danger for our nation.

Back to the Fed

The vice chair for bank supervision at the Fed, Michael Barr says, "The Fed did not do a good job of supervising smaller banks." He goes on to say that the Fed needs to do a better job. He does not mention the fact that the Fed ended all reserve requirements in smaller banks which allowed greed to determine their actions.

The biggest retailer, Amazon says it sees lower future sales and Walmart continues to lay off people. Every week there are new firms announcing layoffs. Remember the old Wall Street slogan, "Sell in May and go away!"                   Peace.

Odds and Ends: April 2023

 We begin with the market. It displayed some clues that we believe adds conviction to our recession call. This will send the market elevator down.

Market Clues:

Last Friday, during the trading session, the dollar began an upward bounce. The market immediately tanked. This led to the market low of the day and had enough steam to carry the Dow index lower for the week. This is a BIG tell. It confirms our point that the market still works in conjunction with King Dollar. Dollar up, market down and conversely, dollar down, market up. There are other clues. 

Market Breadth

The McClellan Oscillator is decisively bearish. Market action has more stocks down than up. Tesla is a firm that highlights the negative effect. It is not just charting that uncovers problems. The fundamentals of companies also indicate internal problems. P&G is a well-known firm with a dividend. However, did you know that that had 165 products for sale and now, only 65? In addition, they raised their prices by 20% last year and now, they have increased their prices by another 10%.  They are not selling anymore. They are receiving higher income from their sales. Generic items are cutting into their sales due to inflation. Higher price brand names are losing market share. In addition, many firms across many sectors are continuing to lay off workers. The latest report says another 1400 stores will be closing. If you multiply the stores with workers in each one, the numbers become quite high. This is a slow razor cut to the economy. At Evolution, we put no faith in government reports on unemployment.

Commodities

Unlike the Federal Reserve, we always include oil as an important indicator. It failed to breakout above $87. It is out of gas (can I say that). The easiest price move is down. There is also a gap at $75.13. This will be the test in oil.

If you check with Dr Copper, he had a bad week. Together, these two point the market down. It a related aspect, the Federal Reserve stated that they will not be saying anything until their next meeting in May. I'll believe it like Thomas believed the Lord rose from the dead. 

Other Aspects

We told you that commercial real estate is in big trouble due to short loan time that is combined to rising rates. We also mentioned that bankruptcies will happen, especially to zombie firms. It has begun and Bed, Bath and Beyond are added to the list. Not good.

Last point: Consider in 2000, China exports to the US was worth $25 billion. Today, even with the BS about tariffs, China exports is worth $3.5 trillion or 140x more! Tax all imports and protect American jobs! The Communists' egos do not thank us for taking their nation from peasant status to number one in the world. They are our enemy. They constantly lie, cheat and steal. We should end all trade with them. I know that cannot be done overnight. We should mandate to our greedy, outsourcing firms that they have five years to get out of China. We find our solution quite ironic. We use a five-year plan on the Commies. 

In other news, a report on alternative energy proves that our leaders have no vision. Our solar influence is nowhere near where it needs to be. JFL gives one great idea. In our cities, the mayors should pass a construction mandate: All new construction of four stories or more, has to have a solar roof. This will create a movement in the American solar industry and create high paying quality jobs. This will not affect residential housing, but as solar gets cheaper with the mandate, new homes could afford the change for the better.

However, our wind power production continues to grow. We, at Evolution, are getting older and our solution for our nation's fresh water is still not published. Then, we read this: In California, our leading state, 920,000 people are drinking tainted water. Not good.   Peace.