Countdown: 2,1...

- An investment in knowledge always pays the best interest.

- Benjamin Franklin

Last Two Weeks

The market's action last week shouts loudly that our call for a correction is wrong. The only consolation is that we have one more week in our outlook. With the Industrials and S&P 500 each claiming a new record high and Nasdaq rising over 1,000 points, it seems all over but the crying. With that said, the market is not in full harmony. According to Dow Theory, all three indexes must be in accord. The Transports were up last Friday, but still down for the week. The only index with subpar volume was the transports. At the moment, the bulls are in control. They do not worry about the over leverage spending on AI and data centers by high tech. They have forgotten the red flags posted by private credit market. They are escaping the summer heat by swimming in their profits and placing bets on the "souless" Polymarket platform. 

Behind the Scene...

...As always the revisions by the BLS are never shouted or even hardly mentioned. They confirm what we saw in making our correction call. Jobs were revised DOWN for April, May, June and July. They even had the audacity to say that unemplyment fell to 4.1%. They present their data like a puzzle. The central piece falls with the lack in their research of hearing people say, "I cannot find a job." What the sentence lacks is this continuation, "Cannot find a job...that pays a living wage."

Related

Our Treasury secretary, Scott Bessent says, "The K-shaped" economy is over." He means lower income levels are regaining footing. We see this as funny since he never mentioned the "K-shape" economy before and like the last Fed Chair, Powell, no idea or lying about "transitory" in reference to inflation. 

In addition...

Facts are being gathered about failing businesses in America. Bankruptcies in major firms (those worth over one billion) are rising to alarming levels. There were 785 such firms in bankruptcy court in 2025. We read where Walgreens and Staple's are closing stores and Wendy's saw its revenue shrink for six consecutive quarters

Lastly,

Keep an eye on the dollar. It fell hard last week and it is under 100. Resistance is at 98, but after that the 96/95 range is possible. Even if it stays range bound at its present level, inflation will pick-up. Gas is up as well as mortgage rates. This is not good for summer trips to a water hole or seeking a home before school starts. Our countdown ends next week. so far, our call is looking poorly...Peace

Countdown: 3, 2...

- A 1,000 point drop, a 1,000 point gain leads to foreboding and foreshadowing.

- Sebastian, Evolution of Democracy

Rocky Road

It maybe hot enough that you think of ice cream. We like Rocky Road, but not in the market. As our countdown nears completion, the market reversed. Last Wednesday, our call for a correction was looking good until Thursday. The market reversed. Is the rally still on? Is our call wrong? This is the picture that the stats gave us.

S&P 500 low was 7316 on heavy volume on Wednesday. It closed up last Friday to 7489. Reversal? Yes and no. Although the index was up for the week and broke above its previous support at 7473, the S&P 500 was down for the month. The volume was good. This is two months in a row of a down trend. Foreboding and foreshadowing...  

Industrials offer a similar picture. On Wednesday, they fell to 51,594. Last Friday, they closed up at 52,485. The volume was strong. However, this index fell for the month. The second straight down month.

The Transports had a down week. Although the volume was light, the price decline was severe. The index fell over 1400 points for the week. It too fell two straight months.

Nasdaq was the most volatile. On Wednesday, it fell to 24,442. It closed on Friday at 25,373. The monthly volume was heavy and like the other two indexes, it fell for the second month in a row.

The small cap, Russell was neutral for the week. It was down for the month, but unlike the other indexes, this index was up in June. However, it was down in May. 

What It Means?

There is no conclusive aspect and the countdown has two more weeks. We sampled some of the market leaders. It gives the same confusing answer. 

Apple: This stock hit a new, all-time high, but failed to hold price. For the month it was up, but it fell hard last week on heavy volume.

Meta: Looks like it is collapsing. It was 740 in February and last Friday it was 556.

Google (Alphabet): It was down for the month and fifty points below its June high.

Microsoft: This tech leader shot higher than a Musk rocket. It was up 83 points for the week on good volume. It was up for the month.

Micron: The chipmaker fell like one of the booster rockets falling off a rocket. It was down for the month with heavy volume.

Sandisk: It continues to fall in price. It fell 221 points for the week with a down month.

Amazon: Bezo makes rockets too. His firm exploded for the month from 235 to 271. Problem. There is a huge gap in price and gaps generally get filled.

Bottom line: A new month and the first week is very important and telling. What is the market foreboding and foreshadowing? We will see says the blind man...Peace.

Odds and Ends: July 2026

- When things go wrong don't follow them.

- Elvis Presley

Countdown Continues... 4, 3...

We continue our countdown call. Last week all the indexes fell, however there was little conviction as the volume was low. If our call is correct, the volume should pick up.

Indu      = the industrials fell on average volume. The next resistance point is 50,000.                                Spy       = the S&P 500 broke its first resistance point at 7473 on average volume. Next one up is 7200. Tran      = the transports fell the least on very low volume. The resistance point is 21 ,500.                      Nasdaq = It fell over 2% on average volume. Resistance is at 24,500.                                                        Russell = The small caps fell the most (almost 3%). However, the volume was low. Resistance at 280.

Note: The big bounce back rally last Tuesday was in our view, a short cover bounce. The proof came as the remaining week saw the indexes fall. This could repeat itself, but discovering the market trend is the real knowledge as to where price is going. One related aspect. A few weeks ago many chipmakers and new IPOs saw parabolic moves. We have learned that investors have used margin money to enter the market. Retail debt set a new, all-time level at $1.5 trillion. In the past when investors over use margin money, the market falls. This strengthens our belief in our call.

Tale of 3 Data Centers

The first in Texas was stopped by the owners call. Change of heart? Maybe or maybe something else? Please continue. Microsoft is halting its work. It leaves us the same question, why? Meta canceled its Michigan plant. However, this one has an answer and it is the same answer for the other two. These huge energy using locations cannot get its future need of...electricity. 

Related

We are not backers of the AI use to purchase carbon credits, but we see a lot of activity from a Singapore firm, Thryve.Earth. They are operating on the island of Sulawesi. Among their participating concerns are some big players like Tencent Holding, Google and the consulting firm, McKinsey & Co. The project increases forest cover, so we all can breathe better. Hope it works.

Closer Look

If you think that Space X fell hard (Half of opening high), there must be a reason. Yes, they scrubbed a launch, but not that. Apparently, the company is set to release a ton of shares into the market. This dilutes value. The shares can fall all the way back to earth.

AI Hack?

Can AI hack? Yes, it can and it can do so without human direction. Open AI hacked a firm last week on its own. This exposes another danger in the making of AI. Just like the early founders of the internet covered up the danger and problem of safety by hackers, the new developers of AI are not putting safeguards into their framework. This is greed. This is so wrong. They love the praise and riches, but they do not deserve either. Their work is corrupt and it endangers all of us. In addition, there are other problems like piggy-backing on someone's work. Case in point is Kimi K3. They used an AI model to track and train itself on American knowhow. Then, they claim a new advanced AI model. This is stealing! This is the root of almost every Chinese firm. Steal, cheat and lie!

By the way, the president and co-founder, Greg Brockman of Open AI says, "This is indicative of the time we live."  Sebastian say, "This is indicative of lying, greedy people."

Meanwhile...

Another month passes and along with it, the continuing retail and economic disasters in America. Patreon is cutting 20% of its labor force. Dairy Queen is closing 46 locations. Denny's is closing 150 plus restaurants. Papa Murphy's is cloing 50 locations and KFC is closing 207 locations. How can our unemployment figures remain so low in the face of all these failures? This is why we do not believe the BLS. If you leave out the "L" then you see the truth. Speaking of BS, the Fed reveals its latest today...Peace. 

Countdown 6...5...4

- It's not what you look at that matters, it is what you see.

- Henry David Thoreau

Market Call

We continue with our countdown call for a market correction after our Fourth of July holiday. The first week had little change. Last week, we saw the first real sign with the recent market leaders (chips) falling hard. Some high tech firms like IBM, Micron (MU) San Disk (SNDK) fell off a cliff.                                  

IBM = -74 points and in bear territory.                                                                                                    SNDK = -561 points and in bear territory.                                                                                                MU = -130 points and close to bear levels.

Not Everything

The banks like we called had banner profits. Apple (APPL) was up almost 6% on good volume. Brent oil closed up 15% for the week at its high of $88.05. This is very inflationary. The two big, recent IPOs fell hard on strong volume. SPCX is below its original, asking price. SKHY fell on double its initial offering and close to its original, asking price. Not good.

Unemployment

We never believe the BLS on employment. We look at the participation rate. It fell again. In fact, this is the lowest level (61.5%) in the last 50-years. Terrible!

Finally, the Scoreboard

Industrial (INDU)   = down on good volume.                                                                                                S&P 500 (SPX)      = down on strong volume. The lower resistance price is 7473.                                    Transports (TRAN)= up on lower volume and far from its high.                                                                  Nasdaq (COMPQ)  = down on average volume.                                                                                          Russell (IWM)        = down on rising volume.

Bottom line: If our call is correct, we should see another down week. However, we point out that the transports must be in harmony with the industrials. They are not. The ongoing saga of AI and data centers will continue to impact the market. We see the rising costs to high tech. This will lead to more borrowing and hurt the bottom line. We noticed a rumor. It says that the Fed will start some type of QE by the end of the year? The Fed's next meeting at the end of the month will answer a lot of questions, especially for those who took a "wait and see" attitude. Finally, in the mixing bowl of everything that is going on in the world, King $Dollar remains strong...Peace.

  

Countdown

- One man's ceiling is another man's floor.

- Paul Simon

Our Call

We stated in our amended piece that if our call for a market correction were to happen, it would begin after the Independence holiday. For the first week, the Industrials were down a half percent on average volume. The S&P 500 was up a full percentage point on average volume. The transports were up a half point on low volume. NASDAQ was neutral with low volume. The Russell (IWM) was down a half point on low volume. Bottom line: Little change on summer trading. No clear trend.

Next Week

This period begins the earning season. The banks will lead the parade. We see them making big money, but the real effect upon the market will be high tech. They spent a ton of money on chips for their data centers and AI. This will impact the market. We know from their recent actions that they are feeling it in the bottom line. They have begun layoffs and they are seeking money through notes. This is a red flag.

Related Aspects

At the end of the month, the Fed under Warsh will have his first meeting where he cannot BS the public. Wherever he directs the Fed, it will directly effect the market. If he shows that he intends to fight inflation, a raise in interest rates will have consequences. Higher rates will attract bond money. This will take money out of the market into the safety of bonds. If he does nothing, this is something. It could show patience or a lack of a plan and conviction? If he lowers rates, he will make Trump happy, but this will hurt the dollar. King $Dollar has been very strong lately. Any fall will pump inflation that needs no pumping. Prices will rise across the board and the precious metals will awaken. News of our federal debt has been kept quiet as well as the rumors in private credit. We read this interesting thing about our debt. The US spends $24 billion each week on...Can you guess? Interest on our debt. This does not lower our debt which compounds, but it just services interest on the debt. All these stories will be back on the front page.  

In addition...

...The market has seen a recent flurry of IPOs. The latest was the big firm from South Korea, SK Hynix (SKHY). The firm raised $26.5 billion. It became the largest foreign company IPO. It helped to pump the market last week and the week before SpaceX. The problem with these and all the other IPOs is that they take money from one stock to their stock. This is a form of distribution. When a man dances on his floor, the person below suffers the noise. When there is a sudden drop in price, the danger is that it can cause a catagious withdrawal. Then, there is the court battle between Open AI and Apple. These things happen along with fraud cases just before a market drop. We will see says the blind man...Peace.

All Talk, No Change

As we celebrated Independence Day this past Saturday, I began this week's piece. My mind drew a blank. Upon reflection, I began looking at past pieces around our national holiday. I would use it like a time capsule to compare what was talked about and what changes have taken place. The chosen article, posted on 5 July 2023 was titled, "Surprises." It began with the thoughts from two icons. The first was Niccolo Machiavelli from his famous work, The Prince.

- Wars will begin where you will, but they will not end where you please.

The second comes from the lead character (Clint Eastwood) in the movie, A Fist Full of Dollars.

- When a man has money in his pocket, he begins to appreciate peace.

The two thoughts found their way into the world of 2023. We had the turmoil of China/Taiwan and Ukraine/Russia. Three years later, we add the US/Israel conflict with Iran and all the other unsettled problems in the Middle East. All talk, no change.

Back then student debt, environment, combustion/electric, old energy versus alternative power and whatever else was happening in your world. The baggage gets carried to our present day. The media was fragmented with so many choices, but they just repeat the news. Some, especially with the presence of AI will provide misinformation to outright lies. It only gets worse today. The power of the pulpit overshadows any challenging voices. This goes all the way to the founding of our nation.

Federalist Papers

When Alexander Hamilton, John Jay and James Madison wrote the "Federalist Paper," they were the pulpit. In seeking to influence the other colonies to ratify the constitution, they exaggerated the truth concerning the judicial system. The job does not separate one from their personal baggage. One court with baggage says separate but equal is fine and another says it violates our rights as citizens. You get the verdicts you seek by appointing like minded people. In our unpublished work, we will provide an answer.  

Anyway, we continue to spend too much on the miitary and use flawed economic theories. The GDP does not consider the cost to our environment, communities and water bodies in its matrix. Our government is controlled by greedy, small minded people whose anti-worker sentiments has outsourced all the strengths of our economy and lowered our standard of living. We are not number one. We are not even in the top ten. Men do not have money in their pocket. We see the results: Lower education, homelessness, mass shootings (mental health) and crime.

The Fed

We have allowed corrupt bankers to establish the Federal Reserve. It is destroying our democracy by creating two classes within our nation: Haves and have-nots. They have consistently destroyed the purchasing power of the dollar and this lowers our standard of living. The Fed, along with the government cater to the wealthy and all their actions result in a top down formation. It should be directed from a bottom up where everyone gets a pursuit of happuness. Today, the next financial crisis is already forming. It centers on our excessive debt and all the new debt that high tech is using to seek the elusive AI dominance. The Fed's answer will be to throw money at the problem. This devalues our currency. Milton Friedman had it right, "Inflation is always a money supply issue." Yet, somehow, we survive. We still can enjoy our day of independence. Hope yours was good and pray for no more negative surprises...Peace

  

Mid-Year Report

- Wisdom is knowing what to do next, virtue is doing it.

- David Starr Jordan

What We Said...

...We called for a maket pullback. The market did attempt a few, but not at the level that we felt was more closely resembling the economy. This makes our initial call wrong. We did amend it after we saw the huge amount of money flowing into AI and data centers. Our updated version says the pullback should begin after the July 4th celebration. We could be wrong. 

Thanks to Tom Bowley of Stock Charts who showed us charts related to the money flowing into semi-makers. For example, Micron looks parabolic on a chart until you look at their earnings. They made over $43 billion in the last 90-days.  Its guidance indicates the boom will continue. This is central to our outlook call. The entire producers of chips are seeing their stock price go parabolic. The question becomes for how long? Placing an order is one thing, however orders can be cancelled. This is the risk in the current state of the market. Dear Reader, it gets worse because the market indexes are rigged. 

Do you realize that 38% of the SPY is tech and 18% is the semi's. Firms that once were included in the index are no longer a part of it. It is like creating a team of all-stars. Only the best is on the team. This is why maybe an analyst from Morgen Stanley calls for the S&P 500 to hit 8300? It is even worse under NASDAQ. They allocate 58% in tech and 32% is in the semi's. It is no wonder that index is going bananas. Everyone overlooks that 40% of both indexes have stocks below their 200-day moving average. We don't. Anyway, we feel that since our economy is consumer controlled and the consumer is deep in debt, the break in the market will happen. Apparently, our call due to the collapse of retail does not matter to Wall St. They only look at all the money flowing into AI and data centers. They do see some risk associated with the continuous influx of money into this special field. We see it too. High-tech is seeking money to cover this investment. They are up against the government which has to cover the national deficit. This will push up rates and then, everyone suffers. Anyway, this is our outlook, but we offer you the view from two leading brokerage houses, Morgan Stanley and Charles Schwab.

Schwab and Morgan

They both agree that AI has pushed the market prices at a parabolic rate. They both see the boom time continuing. Some investors do not realize that the expression boom and bust can include semi's. Most think the term only refers to the oil industry. Semi's experience the same type of spike demand and then, no demand just like oil producers. 

Schwab noted that more retail customers are in the market than in the past. If there is a pullback, retail has a tendency to sell.  Many buy on margin. They are considered by Wall St as weak hands. However, selling has a way of creating panic. Morgan mentioned that the new Fed chair might change the way the Fed looks at inflation. Generally, a spike in oil leads to higher interest rates and versa versa with lower rates.   

The two agreed that bitcoin is in a bear market. The price has been cut in half. They think some of that money went into chips and AI. They both feel a "wait and see" approach to the new Fed is the proper course of action. 

What They Didn't Say...

Neither mentioned precious metals or copper. Copper is needed for data centers and AI. In a future piece we will name our new favorite copper stock. As for precious metals, our floor price for gold was $4800. We are wrong. We feel the metal will be in a consolidation range until August. The top is $4200 and the bottom is $3800. 

Our silver floor was way off the mark. We do not like to use an excuse like the rigging in this market. You should know by now never to trust Goldman or Morgan Chase as they are for fiat and debt. However, the present range of $50 to $55 appears to be the resistance price. It is a full retracement from the time that it rallied over $120. This metal should awaken in August. We'll see says the blind man. By the way, the first crack in AI expenses is from Oracle. They announced the cutting of 21,000 workers. If that sounds high, maybe it is, but then again, consider Volkawagen. They plan to close 4 plants and laying off 100,000. No, that is not a typo...Peace.