The Ball Bounces, Rolls, Stops

The ball is the stock price. The recent rally is the bounce from the last market correction. When a ball stops bouncing, it rolls for a spell until it stops. The reason is gravity. There are more Bulls than Bears. After the bear growls, the bulls put juice back into the market. However, there is only so much juice. The energy runs out. With the knowledge of charts, we can see the strength of gravity. The chart pattern of the three black crows is being completed. A retest toward the last high, but never eclipsing it. As for the juice, it is stronger to the downside. This tells us at Evolution that another drop is coming. We believe the market will test the last correction at 38,500 of the industrials. If the price is not pierced with stronger volume, than what we stated in the previous piece, a market consolidation.

The ball is rolling until it stops. The market is waiting for something to give conviction. At the moment, it is just playing catch between the bulls and bears. 

Enter the Fed

The conviction should come from the Fed decision in September. Whatever happens, the verdict will be seen through the value of the dollar. King $Dollar broke support at 103.5. Last Friday, it closed at 102.3. The market may like a lower dollar, but so does inflation. The two fools running for the top spot only offer ideas that destroy the dollar, our standard of living and most importantly, endanger the dollar as the world's reserve currency. Our currency is becoming unhinged. Wall Street, the government and the media are like the French nobility just before the revolution except no one can afford cake. They forget that the inflationary prices are set. Our citizens cannot make ends meet. Just because they say inflation is falling, does not mean that a dozen eggs are back to $1.25. They are $2.75. Those prices are my regional costs. Yours will differ, but the point is the same. We can see the future in the price of gold. It broke a record last week at over $2500 an ounce. Gold has a value. Paper does not. The two political parties are too egotistical consisting of mostly rich lawyers who have lost touch with reality. 

This is Reality

The average home tax on Long Island, New York is $10,000. Could you afford that? If our nation were to lose the dollar as the world's reserve currency, the above number will double as well as whatever you are paying this year. What a knowledgeable candidate should propose is the necessity of a balanced budget amendment. Amen! 

By the way, last week's inflation index showed a reading of 5.7% rise in the cost for shelter. It didn't give a mention to utilities which rose everywhere in the nation like in Baltimore at 11%. Ouch! Of course, the three things that we all need everyday, food, shelter and energy are not included in the phony Fed matrix formula for inflation. The BS is because of the volatility within each. Here is the inflation level with just the three needs for life. Food rose 2.9%. Energy 2.2% and shelter up 5.7% = 3.3% for the month of July. You compound the years total and then, you can understand why we say we are in a "stealth recession." This is the sad reality of life.

A long time ago (1965) in a different life, a folk singer sang, "The Eastern world, it is explodin' Violence flarin', bullets loadin'...You can leave here for four days in space, but when you return, its the same old place: fighting and destruction all over the place...And you don't believe we're on the eve of destruction." Thank you P.F. Sloan for your true words and the voice of Barry McQuire. You won't hear that song from the Democratic convention or at a Trump rally. That is our reality. Peace. 

Market Indecision

- The market could go up or down.

- Wisdom of nonsense

Market Direction

We saw heavier volume to the downside. This has been our call since 2022 because we see our economy in stagflation. The media under the influence of the power in office, says the economy is fine with job growth and low unemployment. The government does not worry about making ends meet. This is why we need a balance budget amendment.

Of course, we need a lot of changes, but the central point that the market is evaluating is the political outcome. The winner will effect certain industries. We could care less. We have stated many times that both of our political parties are corrupt. Whoever wins will spend or tax cut until the nation wakes up one day to see the world no longer trusts us to be the world's reserve currency. The day of reckoning will have us all feel pain for a long time. Anyway, market signs are being digested. We saw the VIX rise to 65. This has only happened three times since the financial crisis of 2008. Consider all the events in the timeline from then to today - presidential changes, wars in Europe and the Middle East, COVID, bank failures and interest rates that moved from zero to over 5%. The IWM gives us a clue of stock rotation. The index has fallen big time. The Bulls have not given up. They gave the market a big bounce. The question is this, is it only a bounce because the Bears have strength when the elevator goes down? This tells us that we will probably be in a large trading range or consolidation until something happens that changes the outlook.

Meanwhile

The CEO of Nvidia, J. Huang sold $323 million of his shares just before the companies stock fell 29%. We told you last week that one analyst says an 80% drop could happen. When JFL looked at the chart of the chipmaker, he noticed many gaps. They have a tendency to be filled. Stops in the down elevator are at $96 with heavy volume. There is another at $75 and another at $68. If you purchased the stock split, put in your stop. 

Speaking of stops, beware Coke Cola. They lost a tax case that the IRS says the firm owes them $6 billion. Ouch! I don't feel sorry because the company sought to avoid paying their tax liability by putting the revenue overseas. We predict that government will crack down on firms that seek loopholes to avoid taxes as our government will become desparate for revenues.

Billionaire

Barry Sternlicht expects a bank failure at the rate of one per week due to real estate loans. In a related aspect, regional banks, PNC, Truist, Regions and Webster have decided to take their losses in low yielding bonds and use the proceeds to purchase the present higher notes.

Retail Death...

continues as Outback announced the closing of 41 locations and Appelbee's is dropping 35 units. Each week more and more firms reveal failure in their model and the catagion is extending into other industries. This is not a strong economy and the unemployment figures cannot be trusted as well as job growth numbers.

Inflation 

The second wave could arrive as the dollar broke below the confluencial point of 103.5 last week. It tried to bounce, but it could not hold price. Any fall in the dollar will help the stock market, but the inflation will hurt everyone.

In the meantime, try to enjoy the Olympics. There are many good stories like the French swimmer, Leon, Shari Richardson's marvelous effort to come from behind to win gold and the persistence of Rai Benjamin in the 400 hurdles. Gold for the Bronx/Mt Vernon athelete. Maybe the best is a poster of the great Spanish painter, Francisco Goya. His work, Two Old Men was used in reference to James and Curry of the USA basketball team. Is their an artist out there who can update the work to three old  men and add Durant?   Peace.

Curse, Enacted

 - Borrowing to pay the interest on borrowed money and the curse of perpetual debt is upon you.

-  Brutus

For those of you that might confuse the above Brutus with the Caesar assassination, it is not. It is the pseudo of an American revolutionary in response to the Federalist Papers seeking to ratify the offered constitution. His prophecy among other flaws, mainly the Supreme Court, was not only a warning, but a correct forecast. 

During the give and take in forming a government, one debate was government's need for revenue and the options to obtain money and still keep a new currency strong. The wisdom of our first president has been pushed aside by foolish, egotistical leaders. Washington said, "Use debt as sparingly as possible." Hamilton was in favor of a central bank. He thought there is a positive in a small perpetual debt, but one that can be controlled. He eventually got his way to have a central bank, but compromised on fiat currency. The gold standard acted as a blockag to debt. This is why our country grew to be the strongest in the world. The list of foundings against debt is all our greats: Franklin, Jefferson, Adams and Madison to name a few. The list for debt were individuals that put their self-interest before the nation. Gladly, they loss out in the debate, but that does not mean that they gave up.  

Today

By exporting jobs and importing more than exporting, the debt began to grow. When President Nixon cut the last tie of the gold standard in 1971, fiat arose like Dracula after dark. Hamilton, a writer for the Federalist Papers would be wrong and Brutus, a name chosen to end tyranny, is right. The debt is not just a snowball rolling down a mountain, but an avalanche. Dear Reader, our debt is greater than the combined GDP of China, Japan, Germany and the UK. It is so mind boggling to consider that every week we add $196 billion just from interest. This correlates to $6.4 billion per day and $268 million per hour. Crazy as it sounds, but the time that it takes to read this section, has our debt climbing by $74,401 per second. The military and the Federal Reserve is bankrupting our nation. When your deficit spending grows by 8% and your economy by 2%, you are losing every year with intesest! Any candidate that says, "I'm in favor of tax cuts" should be immediately disqualified for office. Look around! We have excess immigrants sleeping on streets in all of our ciries. They are in competition for space with homelessness. Homelessness is a growing enterprise (poor pun) at 10%. Almost every week this post adds info on companies that are laying off workers or worse, closing down.

Not Just Retail

Our leading chip maker, Intel announced poor earning results. They will be laying off 15,000 highly skilled workers to cut costs. People, this firm just received stimulus money from the IRA bill and still, they claim to be losing money along with market share. We told you last week that Walgreens is about to offer bad news. This is it: 700 stores will be shuttered. It is no wonder that the unemployment figure ticked uo to 4.3%. We have so much more info and data from last week, but space is limited. Next week, we will show that Intel is not the only chip-maker to suffer. Nvidia is down 29% since its stock split. One analyst says it could fall 80%. There is truth in this wild forecast. We will tell you in our next peiece. Meanwhile, take a break and root for your nation in this wonderful Olympics that France is sponsoring. Peace.

Odds and Ends: July 2024

 - Turning and turning in the widening gyre, the falcon caanot hear the falconer;                                            Things fall apart, the center cannot hold; Mere anarchy is loosed upon the world.

- Yeats (poem)

The falcon is a metaphor for humanity and the widening gyre represents the motion of history toward chaos and instability. Could the current news, other than the feel good opening act of the Olympics, be any more volatile? Did the lies of the GOP like "I could end the war in Ukraine in one day with one call" go unnoticed? Did the GOP ever mention the national debt of $35 trillion that they are partly responsible? Here is a prediction. At the Democratic convention, they too will not mention the debt that they are half responsible. 

What is wrong with people? Netanyahu is guitly of excessive bombing and killing of Palestians. Why does he get invited to speak and influence Congress? On the street, protestors paint HAMAS as good when they are equally bad, is truly a sin and mind boggling. There are many more examples, but space is limited. 

Little Things...

are building up to make serious big problems. Last week we saw day-after-day of announcements by companies of closing stores or laying off of workers. One firm that was in business for 134 years, Conn's Home (furniture and electronics) is closing its doors on 70 sites. Big Lots declared 40 closings and then, it changed the number to 150. Think about all those jobs and then, related jobs in the delivery chain? It keeps coming. National furniture and hardware will shut 70 locations. Three more shipping truck firms are filing for bankruptcy. Walgreens is about to announce layoffs.

Insiders

These are corporate directors and officers of public companies. They are selling their shares. They see less growth and value. This is a long-term indicator. It points to a stock market that will be lower in July 2025 than present.

Home Flippers

These are small buyers of fix'em up homes that are flipped to resell into the market. Well, they are having a hard time selling with high interest rates. Their short-term construction loans are due. They cannot afford to pay the higher costs and still hold onto the property. This is the same story for large commercial buildings that lost tenants. They cannot make the projected costs with our higher interest rate environment. There is some disharmony here. Home builders like Toll Brothers are seeing their stock at all-time highs. Maybe because the price of lumber is dropping like a brick in water?

Tapped Out

We see the consumer reaching its limit. Contrary to the last consumer spending report, we see car repossessions on a huge upswing. They have spiked 50% in the last two years and 23% yoy. Banks are noticing more and more partial payments in credit cards and even Dominoes Pizza is seeing less deliveries and more customers picking up their pizza.

Dichotomy 

The stock market is still not sure which way things are going. The firm, Dexcom (DXCM) plunged from $140 in April to $108 on Friday, while 3-M (MMM) was $102 on Thursday and upto $127 on Friday. We told you about the three black crows and we remind you that the market has a tendency to top in Summer with a drop until Fall. We feel it is looking that way.

More Danger

Foreigners (read Commies) are buying land adjacent to our military bases and we see many Chinese people sneaking through our southern border. Meanwhile, the cameras used on our bases are mainly from China. How stupid is the pentagon? Meanwhile, Nvidia is retooling three chip factories to supply China and avoid government regulation with chip sales to China.

With the heat of summer try to take your family, friends or self to a water body. The cool waters will allow your mind to reflect His greatness and knowing that, not to worry. Peace.

  

After the Eye

 - After the storm passes and calm appears, beware the passing eye.

- JFL

We can learn a lot from nature and especially, hurricanes. Today, we have the technology to know when the whirlwind will approach. We also know there is a calming eye in the center of the storm. The real danger is in the second wave: heavy rain, gusting wind and possible tornadoes. 

In life, we take many things for granted. No one expects a heart attack. No one saw the disaster of Biden in the debate with Trump. Where am I going? Sebastian called the pullback and JFL sees a second wave of inflation on the horizon. The first indicator...

Shipping Prices

They continue to rise. They are approaching $10,000 for a 40-foot container. The rate has doubled since Februray. This will effect all imports and your wallet. One might ask, can it get any worse? It can. Early in the pandemic, prices reached $16,000 for a small box. Ouch! Watch the Shanghai Container Freight Index. A price of $8,100 is normal for the trip from Shanghai to the West Coast (US).

National Rent Cap?

Biden wants a bill to cap rents at 5%. We ask, "Isn't the Feds inflation rate 2%? Why isn't the cap-rate target 2%? In any event, housing which is not included in the phony Fed matrix inflation formula, continues to rise. Speaking of rising...

5X Multiplication Table

The fast food workers in California and elsewhere protested for a raise from minimum to $10. Then, the meme was $15. Soon, it was $20 as is the case in California. Full-time help is on the decline as owners cut hours. With the new protest for $30 per hour, how much will a burger cost? How many will go out of business or leave the state? We know firm that is leaving, Tesla.

You can thank the Federal Reserve for destroying the purchase value of the dollar for the mess in fast food, housing everywhere, food on the table, taxes and insurance come to mind. Can you understand our meme? End the Fed!

Greed and Outsourcing

John Deere is set to layoff a large number of workers. They cry costs, as they quietly move production to Mexico. The company made $10 billion in 2023.  The CEO clears $26 million. Those workers helped to make the company standout, but basic greed wins the day. Where are the protective tariffs to keep jobs in America?

Retail Catastrophe Continues...

Red Lobster has entered into bankruptcy. Many more stores will close. They are not alone. Rite Aid is closing more units as well as Stop ' Go. Dollar Tree and its affiliate, Family Dollar no longer sell items for a buck or less. The floor is $1.25 and still that is not enough. The end is coming or a dramatic change as they announce 1,000 stores will be shuttered. The unemployment numbers will soon rise. This effect seems to affect banking too. The industry continues to close more branch banks to cut costs. 

Sebastian's Call

He told us long ago that the US economy is in stagflation. The stock market refused to believe. Last week, we saw the first realization of what stagflation means and the outlook from it. Nasdaq dropped. It showed a 3-Black Crows pattern. In candelstick charting, three down days in arow form the pattern. It is important to view the size of the candels. They were big and similar. This suggests a strong follow through to the downside. With that said, black crows generally have a bounce that comes close to the last high, but it does not breach it. Then, the express elevator goes down. By the way, the transports showed a similar pattern. Put your stops in...Oh, yeah. Political news will be an instint market changer.

FLASH: JFL wrote this piece on Saturday and the Biden news will show its effect on Monday, Tuesday, Wednesday, etc. until the next bombshell plays out. Political news is a market changer.

Sebastian says the worse type of pullback will be the razor blade cut of continuous down days. If the market has a big sudden drop, that might be the end of this movement.  Peace.

  

The Rhyme of History

- The past is the prolgue

- William Shakespeare

In Shakespeare's play, The Tempest, he is saying that all past acts form a catalyst for what comes next. Human emotions do not change. This is why we can see individuals as well as national entities, repeating acts in many similar situations. This can also be seen in stock market charts. Despite all the regulations of pubically revealing stock trades by large traders, institutions and hedge funds, these people seek to confuse the market observations with hedges, distribution and other forms to hide their intentions. Of course, an afternoon refreshment at a watering hole, a phone call or other communication within the club of big money can clarify the intent position. 

We, at Evolution have stated in the past that we see "cannibalization" in the market due to the very rules that is suppose to protect trading. When a deep pocket observes market price action in a certain stock trades, that person can get a lot of information. If trades are in large blocks, this is a strong hand. If it is many small trades, the deep pocket can go against the retail trader. This action can scare the small retail trader out of the trade, even if the trade is the correct call. There are other dangers that seem to occur repeatedly in the market.

Meme Stocks

The list is as long as the market has been in existence. Recent action in Game Stop and AMC are perfect examples. However, there are also big names and companies that this phenomenon appears. Today, Sebastian sees this price action of cannibalization and meme in the price action of Tesla. Last month, Musk took a pay package of 10% of Tesla's market evaluation. One would think that the price would fall to a new market perception? It did. It went from the last high at $200 down to $170. Then, it rallied a hundred pointsto $270. You may ask why? We believe deep pockets purchased shares. Even when the price action indicated a retest of the last low, buying returned. The stock closed last Friday at $248 on strong volume of 816 million shares. Sebastian did notice the strength was to the downside.This battle is far from over. Keep the following in mind if you are thinking about entering the fray.

Tesla stock was $420 in November 2021. Competition in the EV field had the stock fall to $300 last July. There were also fear of a Chinese backlash due to tariffs and the end of EV tax credits. The ETF vehicle by Direction gave Tesla its own trading symbol, TSLL=bull and TSLS=bear. Then, one has to take into account the trend in the market. It is up, but it is also being led by only a few big caps. Speaking of caps, Tesla is valued at 16x Ford. It has a possible big winner with its semi. The truck has better excelleration and handling. The problem is twofold. A lack of charging stations and an excess supply of diesel engines at a much lower price. The rally in the price has been helped by the rise in the Dow, S&P 500 and NASDAQ. 

If you look at the market evaluations, they are in dangerous territory. The Schiller CAPE is up over 18.5% yoy. It sits at 35.49. The long-term average is 16.8. NASDAQ has climbed 10,000 points. The $COMPQ has climbed 6,000 points since November. Has any of the firms developed a new revelutionary product? The AI meme is only a projection. The answer is no. The index is following the same pattern as the market in the year 2000. You know what happened then. CISCO has never reached the high it did at that time. Buying at highs can lead to ruin. Be careful. Peace.. 

Rate Cut, No Cut...

You can sing the title to The Beat Goes On. You can feel the consequences of the Federal Reserve long before Jerome Powell's infamous, "Inflation is transitory." Next line, "Cost up, cost down..."

Walgreens says the higher interest rates along with high inflation as well as labor problems is driving up costs. It is leading them to close a "lot" of stores this year. They do not see costs coming down. You can see the consequences of cost cutting by firms. The first in line is labor. This can be seen in the recent uptick in unemployment to 4.1%. Next line, "I want, Give me..."

[Dust to dust= 3,200 stores have gone and we are only at the halfway point in the year.]

JP MorganChase warns that if banking does not get what it wants, 86 million checking accounts will see you pay for your checking services. I already pay to have my checks printed and I must keep a high balance so the bank does not add fees, but it is never enough. Refrain line, "I'm pissed! It never ends!" 

Marianne Lake, the head of Chase bank also says that debit and credit card fees will be charged in all transactions. Now, everyone will be pissed. Time to repeat the refrain, "I'm pissed! It never ends!"

This is about "capping" bank fees and the greed of banking. Banks should be regulated like a utility. Of course, the Fed will come to their recue and bottom line.

Rate Cut, No Cut...

The phony Federal Reserve with their BS mandate never mentions this aspect about labor, although they take a bow in saying that historically, unemployment is low. Full time labor has been flat since 2002. The gains in the job market have been mostly in part-time help. Why, you may ask? Because there is no benefits to add in costs. There will never be a pay raise and together spells no promotion and no social mobility. You can find some exceptions like the drivers for UPS, but that was mainly due to retirement of baby boomers and the scarcity of replacement workers. Of course, management cries out their Ab-lib line, "Costs up, Rate up..."  

With that said, their favorite song line is, "I want, Give me..."

Song ends. Flipside, "Summertime Blues."

There is an interesting chart that shows for the last twelve years, the market has seen a top during the Summer and a low in the Fall. Keep in mind, trading is light on Monday and Friday during this period. We still see a sharp pullback. It is approaching. The market is over-bought and the CAPE is too high. Be warned. Be prepared. Last song for the week. It is my favorite and now, a meme, End the Fed!"   Peace.