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WHAT YOU NEED TO KNOW!

NEVER FORGET THIS IS AN ELECTION YEAR!!

Market-driven financial conditions have eased dramatically in the last few months. The market believes the Fed is 100 bps behind the curve and is demanding 200bps of cuts by year end ...or else.

RESEARCH

1- S&P 500 v M2 - A Reliable Indicator of What is Ahead

• One of the most accurate Recession / Stock Market Plunge Indicators is the Ratio of the price of the stock market per the S&P 500 to the Money Supply (M-2).
• Since 1999 there have been 5 signals and all five resulted in Crashes. Now we see a 6th Signal.
• Historically, when this ratio rises to or above 0.22, an Economic Recession and Stock Market plunge (or even a crash) is imminent.
• This Ratio is currently at 0.25, an Indicator on Red Alert for the start of a major economic Recession and Stock Market Decline.
• A similarly accurate Recession / Stock Market Plunge Indicator is the Ratio of the price of the stock market per the Dow Industrial Average to the Money Supply (M-2).
• Since 1999 there have been 5 signals and all five resulted in Crashes. Now we see a 6th Signal.
• Historically, when this ratio rises to or above 1.80, an Economic Recession and Stock Market plunge (or even a crash) is similarly imminent.
• This Ratio is currently at 1.84, an Indicator on Red Alert for the start of a major economic Recession and Stock Market Decline. 

2- AMERICAN PERONISM - KAMALA HARRIS' RADICAL LEFT PLAN 

• .An economy that generates an annual deficit of 6 percent of GDP to achieve a mere 2 percent annual growth is already on a dangerous path, and Kamala Harris’ plan is highly likely to make it even worse.
• Kamala Harris promises to cut inflation by spending and printing more money, reducing competition, and attacking businesses. It has never worked and never will because it is upside-down economics. Welcome to the U.S. “Peronism.”.
• Following the Harris plan, the United States public debt will likely increase by $24 trillion in a decade. There is no set of revenue measures that can bring $2 trillion per year in additional tax receipts while tax hikes will harm both investment and growth.

DEVELOPMENTS TO WATCH

MASSIVE DOWNWARD LABOR REVISON

• Markets were caught off guard by a drastic revision of non-farm payrolls, the worst miss since the Lehman crisis. We at MATASII can justifiably say “We told you so!”
• We have been warning all year about the flawed & politicized BLS reporting and that the headline figures are not catching the early signs of trouble in the US jobs market.

“The Fed is late, and is now going to have to scramble, in an undignified manner.”

One has to sympathize with Fed chairman Jay Powell as he descended on Jackson Hole. The institution has been misled once again by unreliable data. The gain in non-farm payrolls in the twelve months to March was 818K less than previously stated.

DEMOCRATIC ELECTION PLATFORM - What the Right v Left is Actually Hearing

• What the Right Hears (TAXES): 1-Price Controls, 2-Reversal of Trump Tax Cuts, 3- 28% Corporate Tax Increase, 4- 25% Unrealized Capital Gains Tax, 5- 44.6% Capital Gains Tax.
• What the Left Hears (HANDOUTS): 1-Tax breaks for homebuilders with the goal of building 3 million new housing units in four years, 2-Up to $25,000 in down-payment aid for first-time homebuyers, 3-Up to $6,000 for low- and middle-income families with new babies, 4-Up to $3,600 per child per year in an expanded child tax credit, 5-A ban on price gouging in the food sector, singling out meat prices in particular, 6- Work with states to ban the use of medical debt in credit scores.

GLOBAL ECONOMIC REPORTING

JACKSON HOLE ECONOMIC ENCLAVE

• The "Powell Payrolls Pivot" is now complete, because as the Fed chair said:

“... the cooling in labor market conditions is unmistakable.” 

“The time has come for policy to adjust.”

• “It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon.”
• “We do not seek or welcome further cooling in labor market conditions.”
• “The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
• “We will do everything we can to support a strong labor market as we make further progress toward price stability.”

US LEADING ECONOMIC INDICATOR (LEI)

• US Leading Economic Indicators down for their 29th straight month - at a level worse than the trough of COVID lockdowns.
• Outside of the great financial crisis, this is the worst decline in LEI since the mid '70s!!!

In this week's "Current Market Perspectives", we focus on the signals that Sentiment, Fundamentals and various market Segments (Credit, Bond and Equity) are currently giving us.

=========

1- S&P 500 v M2 - A Reliable Indicator of What is Ahead

Last week I discussed the importance of the True Money Supply (TMS) and Liquidity.

I would like to take that discussion a little further based on some quality work by Robert McHugh PhD of the Technical Indicator Index.

When the Federal Reserve starts cutting short-term interest rates, specifically the Federal Funds interest rate, watch out! Every time they did this since 1955, an economic Recession and Stock

Market Plunge occurred within months or sooner.

Why? Because their rising rate cycle leading up to the cuts nearly destroyed the economy (Chart Above).

SPX v M2

Below we show one of the most accurate Recession / Stock Market Plunge Indicators anywhere, and few are noticing: The Ratio of the price of the stock market (in the case below) per the S&P 500 to the Money Supply (M-2).

Since 1999 there have been 5 signals and all five resulted in Crashes. Now we see a 6th Signal. Historically, when this ratio rises to or above 0.22, an Economic Recession and Stock Market plunge (or even a crash) is imminent. This Ratio is currently at 0.25, an Indicator on Red Alert for the start of a major economic Recession and Stock Market Decline.

Here is how this indicator performed historically:

• 2000 to 2003: The S&P 500 Crashed 49.2%
• 2007 to 2009: The S&P 500 Crashed 57.6%
• 2018: The S&P 500 Crashed 20.2%
• 2020: The S&P 500 Crashed 35.4%
• 2022: The S&P 500 Crashed 27.5%
• 2024: The Next Crash? According to this Indicator, Get Ready

DOW INDUSTRIALS v M2

Below we show the Ratio of the price of the stock market (in the case below, per the Dow Industrials) to the Money Supply

(M-2). Since 1999 there have been 5 signals and all five resulted in Crashes. Now we see a 6th Signal.

Historically, when this ratio rises to or above 1.80, an Economic Recession and Stock Market plunge (or even a crash) is imminent. This Ratio is currently at 1.84, an Indicator on Red Alert for the start of a major economic Recession and Stock Market Decline. 

HOW TO TRANSLATE THIS?

Fed Chair Powell spoke at Jackson Hole, Wyoming on Friday and led markets to believe he will soon start dropping interest rates. Every time they started a declining interest rate cycle after they concluded a rising interest rate cycle, those declines came with stock market plunges and economic recessions.

Why? Because for the Fed to drop interest rates, it means there are serious disruptions to economic health, and negative financial developments that cannot be easily reversed without lowering interest rates. For the Fed to lower interest rates, the economic trouble they see is significant.

Citing progress on inflation as a reason to lower interest rates is a smokescreen. But they cite inflation reduction as the reason for lowering interest rates, in order to avoid spooking markets with the truth.

The real reason for lowering interest rates is that evidence has surfaced, whether reported by the financial press or not, of a serious threat to the economy. How do we know this? Since 1955, the end of a Fed rising interest rate cycle and the start of a Fed declining interest rate cycle has occurred 10 times.

Recessions and stock plunges occurred every time. So, unless this time is going to be different - buckle up, because stuff is about to soon happen. 

2- AMERICAN PERONISM - KAMALA HARRIS' RADICAL LEFT PLAN

I neither take political views in my writings nor seldom post other people's work in my newsletters. Today is an exception due to the quality of the work.

Daniel Lacalle is a remarkable Spanish economist well versed in "Peronism" and a keen observer of America. I have found his global macro work to be well researched and thoughtful. Whether Democrat or Republican, you to need to give this article some thought. I therefore publish it below in its entirety without comment.

Authored by Daniel Lacalle:

1. Price controls
2. Higher taxes
3. Government intervention and
4. Subsidies paid for by printing a constantly devalued currency.

These are the essential pillars of “21st century socialism” and the radical left Peronism that obliterated Argentina. These are also the main elements of the economic plan presented by Kamala Harris and the Democratic Party. Undoubtedly, this is the most radical socialist economic plan ever announced by the Democrats.

According to the Committee for a Responsible Federal Budget (CRFB), Harris’s proposals will cost $1.95 trillion over 10 years. However, it emphasizes that if certain measures become permanent, this figure could increase to $2.25 trillion.

The Harris campaign has stated that these costs will be offset by a classic excuse of socialism in any election: “higher taxes on corporations and high earners.” This is, obviously, ludicrous, because there is no revenue measure that will cover the already bloated $2 trillion annual deficit and an added $2 trillion. The mantra of “higher taxes for the rich” always means higher taxes and more inflation, a hidden tax, for you.

The Congressional Budget Office (CBO) has already warned of the fiscal disaster of the United States, with an annual deficit of 6% of GDP. Despite not accounting for a recession and projecting record tax revenues from 2024 to 2034, the CBO predicts an explosion in the budget deficit from $1.9 trillion to $2.8 trillion by 2034, even before factoring in Harris’s new spending plan. This means that the adjusted deficit will rise above 6.9 percent of GDP by 2034, almost twice the average of 3.7 percent over the previous 50 years.

Following the Harris plan, the United States public debt will likely increase by $24 trillion in a decade. As I have explained, there is no set of revenue measures that can bring $2 trillion per year in additional tax receipts, and tax hikes will harm both investment and growth.

An economy that generates an annual deficit of 6 percent of GDP to achieve a mere 2 percent annual growth is already on a dangerous path, and Harris’ plan would make it even worse.

Kamala Harris promises to cut inflation by spending and printing more money, reducing competition, and attacking businesses. It has never worked and never will because it is upside-down economics. Welcome to the U.S. “Peronism.”.

Imagine all those United States citizens who have escaped Latin American or European economies impoverished by interventionism to find a better opportunity in the United States only to find that the same policies will be implemented by Harris.

The narrative of price gouging and greedflation is simply false. In 2023, profit margins in the grocery industry hit the lowest level since 2019, at 1.6%, according to the IMF. Corporations, even if they were stupid and reckless, cannot make all prices rise constantly. Competition would eat away at their market share; newcomers would eliminate them, and aggregate prices would fall. Furthermore, stores and businesses cannot make aggregate prices soar, maintain the increase and consolidate it, which is the measure of inflation (CPI) we read every month.

• The only thing that can make all prices rise and continue increasing at a slower pace is printing money and eroding the purchasing power of the currency.
• The only thing that can make aggregate prices rise constantly is the destruction of the purchasing power of the currency, which comes from massive government spending and printing currency to disguise fiscal imbalances.

Kamala Harris and her team know that their spending plan will make the national debt soar and that price controls do not reduce prices. In fact, these should not be called “price controls” but “limits to competition.” If corporations were the cause of inflation and price controls were the solution, Peronist Argentina would have enjoyed the lowest inflation in the world in the past decades.

Harris’ proposals to forgive debt are profoundly anti-social. They do not forgive any debt; they just add it to the national debt and make you pay for it. This enormous increase in public debt will be a burden for every American, particularly the poorest, with persistent inflation and lower real wages. US citizens have already endured negative real wage growth since January 2021, when Biden took office, according to the Federal reserve of St Louis. Expect worse.

Why does Harris promote the same policies that have failed everywhere? Promising free stuff and blaming others for the negative consequences is the defining strategy of socialist politicians.

Are you surprised to see how Germany, France, and other historically rich nations slump into stagnation, high debt, persistent inflation, enormous taxes, and the destruction of the middle class? Those policies are what Harris is promising. Who benefits? The vast government and its surrounding corporations reap the benefits.

Many people hold the belief that a nation cannot be considered socialist if it contains private companies. It makes no sense. State control does not limit itself to capital ownership, but also to the imposition of increasingly restrictive laws, regulations, and confiscatory taxes. In fact, the government likes to absorb most of the wealth created by the private sector without the inconvenience of managing the businesses. Huerta de Soto defines socialism as “any system of institutional, methodical aggression against the free exercise of entrepreneurship” and that is precisely what Harris promises.

Higher taxes and more debt.

The government will print money to provide subsidies in a currency that is constantly losing value. It will blame stores and businesses for inflation. Interventionist policies will continue to erode the private sector. And they will repeat.

The makers of these policies are aware that they will negatively impact the economy, yet they will also engender a substantial number of enslaved citizens who rely on the government and must abide by its decisions. Voters see an alleged tsunami of free money, but ignore the fact that they will pay for it through higher inflation, lower real wages, and diminishing opportunities for small businesses and families.



The Harris team believes deficits do not matter and that the Federal Reserve can always disguise any budget imbalance. However, cracks have already appeared. Persistent inflation is the consequence of years of excessive spending and monetization.

The next step is the risk of losing the U.S. dollar as the world reserve currency when the world stops accepting the ever-increasing debt.

The real reason for lowering interest rates is evidence has surfaced, whether reported by the financial press or not, of a serious threat to the economy. How do we know this? Since 1955, the end of a Fed rising interest rate cycle and the start of a Fed declining interest rate cycle has occurred 10 times. Recessions and stock plunges occurred every time. So, unless this time is going to be different - buckle up, because stuff is about to happen. 

DEVELOPMENTS

MASSIVE DOWNWARD BLS LABOR REVISION

Markets were caught off guard by a drastic revision of non-farm payrolls, the worst miss since the Lehman crisis. We at MATASII can justifiably say “We told you so!”

We have been warning all year about the flawed & politized BLS reporting and that the headline figures are not catching the early signs of trouble in the US jobs market.

“The Fed is late, and is now going to have to scramble, in an undignified manner.”

Paul Donovan,

Chief economist at UBS wealth management

One has to sympathize with Fed chairman Jay Powell as he descended on Jackson Hole. The institution has been misled once again by unreliable data. The gain in non-farm payrolls in the twelve months to March was 818,000 less than previously stated. The enormous error flattered Bidenomics and overstated the US boom. We should assume that GDP growth will be revised down as well — unless productivity has magically surged, which I doubt.

Citigroup says the economy may already be well into recession. It has penciled in double-decker cuts in both September and early November. 

BLS' "MEA CULPA" SUMMARY



The BLS payrolls were revised lower by 818k, suggesting job growth was not as strong as previously thought between April 2023 and March 2024, and came in closer to the bottom end of Goldman Sachs expectations of between 0.6-1mln downward revision.

• That means, so rather than the economy adding 2.9mln jobs in the 12month period, there were only 2.1mn new jobs.
• On a monthly footing, it means only 178k jobs were added instead of the initially reported average of 246k.
• As such, ING notes, given everything was weak in the latest July jobs report, (weak payrolls, rising unemployment, falling hours worked, and cooling wages), the revisions today will only put more pressure on the Fed to loosen monetary policy.
• Even further the bank adds, momentum is being lost from an even weaker position than originally thought.
• Note, money market pricing currently has 34bps of cuts priced in for September and 105bps by year-end. But all focus turns on Chair Powell at Jackson Hole on Friday, and thereafter the next BLS jobs report on September 6th, the day of Fed blackout before the next FOMC meeting.

KAMALA HARRIS' ECONOMIC PLAN FOR "LOWERING COSTS FOR AMERICAN FAMILIES"

WHAT THE RIGHT v LEFT IS ACTUALLY HEARING

LEFT'S VIEW

The Left leaning NPR and their fact based WHYY have outline the following policy platforms offered by Kamala Harris:

Kamala Harris' campaign speeches to date have been long on vibes and short on actual platforms. Many of her positions are based on proposals originally made by Biden that he and Democrats were unable to get through Congress.

Harris gave her first major policy speech on what she would do to address the high costs of housing, groceries, health care and raising kids. Her proposals include:

• Tax breaks for homebuilders with the goal of building 3 million new housing units in four years
• Up to $25,000 in down-payment aid for first-time homebuyers
• Up to $6,000 for low- and middle-income families with new babies
• Up to $3,600 per child per year in an expanded child tax credit
• A ban on price gouging in the food sector, singling out meat prices in particular
• Work with states to ban the use of medical debt in credit scores

In other campaign speeches, Harris has said she would:

• Ban hidden bank fees
• Hike the minimum wage
• Ban taxes on tips for service and hospitality workers
• Support affordable child care and paid family leave

So far, there have been few details on:

• The overall costs of these new measures
• Whether Harris would raise taxes or cut other spending to pay for them
• Who would qualify for the various incentives

The Harris campaign told Politico that she would not raise taxes on people making less than $400,000 per year.

REPRODUCTIVE RIGHTS

After the Supreme Court struck down Roe v. Wade in 2022:

• Harris became the administration’s leading voice on restoring protections for abortion rights.
• She has urged Congress to pass legislation to codify Roe protections and said she would sign it into law.

HEALTH CARE

• Harris has backed Biden administration efforts to negotiate lower prescription drug prices for seniors on Medicare.
• She has said she would accelerate those talks with pharmaceutical companies.
• Like Biden, Harris has vowed to try to:
• Cap the price of insulin at $35 for everyone, not just seniors
• Cap out-of-pocket expenses for prescription drugs at $2,000 per year for everyone

IMMIGRATION

• Harris has said she backs comprehensive immigration reform with “an earned pathway to citizenship”, but she has not spelled out the details.
• Her campaign ads say Harris would hire thousands of border agents, use technology to crack down on fentanyl and increase funding to stop human trafficking.
• She has said she would urge the Senate to revive a bipartisan border security bill that Republicans balked at earlier this year at the urging of former President Donald Trump. That bill would give her the power to shut the border to migrants under certain conditions and would establish changes to the asylum process.

MORE DOMESTIC POLICY

• Harris has promised to pass the Freedom to Vote Act and the John Lewis Voting Rights Advancement Act, both of which have stalled in Congress.
• She has said she would address gun violence by urging Congress to pass universal background checks, red flag laws and an assault weapons ban.

FOREIGN POLICY

• Harris has not yet given a major foreign policy address. But she gave extensive remarks after meeting Israeli Prime Minister Benjamin Netanyahu last month, where she said she would “not be silent” about the toll Israel’s war on Hamas has taken on Palestinian civilians in Gaza, even as she made clear she supports Israel’s right to defend itself.

RIGHT'S VIEW

Further Right sources quote Kamala Harris as supporting the following:

1- REVERSE TRUMP TAX CUTS

Kamala Harris is pledging to undo much of former President Donald J. Trump‘s tax cuts.

2- 28% US CORPORATE TAX RATE

VP Harris is planning on enacting her own proposal to raise the U.S. corporate tax rate to 28 percent. An increase in the corporate rate to 28 percent would put the United States on par with the average corporate tax rate among the economically struggling nations of Africa—with the continental average sitting at 27.37 percent. Meanwhile, the current North American average rate is 25.46 percent, while the comparable corporate rates in Europe and Asia sit at 19.92 percent and 19.80 percent, respectively.

In an interview with NBC News, James Singer—a spokesman for the Harris campaign—claimed the plan is “a fiscally responsible way to put money back in the pockets of working people and ensure billionaires and big corporations pay their fair share.” However, economists note that the higher rate would put the U.S. at a disadvantage to comparable nations around the globe in terms of tax competitiveness.

3- 44.6% CAPITAL GAINS TAX & 25% TAX ON UNREALIZED GAINS

Presidential candidate Kamala Harris signaled she would be supporting President Joe Biden’s tax proposals for 2025, which include a 44.6% capital gains rate and a 25% tax on unrealized gains.

4- PRICE CONTROLS TO FIGHT INFLATION

The announcement by the Harris campaign marks just the latest economic proposal to raise eyebrows and concerns among economists and America’s business class. Last week, Harris rolled out a plan to enact price controls on groceries, which was widely panned as dangerous and irresponsible—even by the ostensible Harris campaign allies in the corporate media.

GLOBAL ECONOMIC INDICATORS:

What This Week's Key Global Economic Releases Tell Us

US

JACKSON HOLE ECONOMIC ENCLAVE

POWELL PAYROLLS PIVOT

The "Powell Payrolls Pivot" is now complete because, as the Fed chair said:

“... the cooling in labor market conditions is unmistakable.”

“The time has come for policy to adjust.”

... even if it was quite mistakable to the Biden administration as recently as one month ago.

Powell is dovish across the board—from the same stage where he two years ago signaled the Fed would accept a recession as the price of restoring inflation:

• “The cooling in labor market conditions is unmistakable.”
• “It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon.”
• “We do not seek or welcome further cooling in labor market conditions.”
• “The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
• “We will do everything we can to support a strong labor market as we make further progress toward price stability.”

Powell unfurls his narrative on the causes and behaviors of inflation since 2020. Recognizing not everyone will agree with his framing, he concludes with this:

• "That is my assessment of events. Your mileage may vary."
• After recounting the series of judgments that led officials to describe inflation as likely to be transitory, Powell observes how widely shared these views were outside the Fed:

"The good ship Transitory was a crowded one."

On the labor market, the Chair said "We do not seek or welcome further labor market cooling", which once again shows the importance of the US jobs report on 6th September which will seemingly dictate the size of the move by the Fed.

As WSJ Fed Reporter Nick Timiraos noted earlier in the wake that a report as weak as July might lead to a larger than 25bps cut.

Powell continued to note how the Fed’s attention has shifted within its dual mandate, as it stated:

"the balance of risks to our mandates has changed and upside risks to inflation have diminished,

downside risks to employment have increased."

Lastly, the Chair reiterated data-dependency noting that:

"timing and pace of rate cuts will depend on data, outlook, balance of risks".

LEADING ECONOMIC INDICATOR (LEI)

US Leading Economic Indicators down for their 29th straight month - at a level worse than the trough of COVID lockdowns.

Outside of the great financial crisis, this is the worst decline in LEI since the mid '70s!!!

“In July, weakness was widespread among non-financial components. A sharp deterioration in new orders, persistently weak consumer expectations of business conditions, and softer building permits and hours worked in manufacturing drove the decline, together with the still-negative yield spread." -- Head of The Conference Board

Almost all the macro data signals weakening growth for years, but because stocks are up (and credit spreads down), there's no recession anywhere on the horizon!!??

GLOBAL

WHAT DOES YOUR SCAN OF THE DATA BELOW TELL YOU? - THE MEDIA AVOIDS BAD NEWS!

We present the data in a way you can quickly see what is happening.

THIS WEEK WE SAW

Exp. =Expectations, Prev. =Previous

POWELL GREENLIGHTS SEPTEMBER RATE CUT

DOLLAR & YIELDS FALL - PUSHING STOCKS UP

Click All Charts to Enlarge

DOLLAR FALLS: The Dollar has fallen strongly (breaking Momentum support in lower pane), while lifting stocks and gold with yields weakening further. Though the dollar is at near term support, note that the 50 DMA is about to potentially cross the 200 DMA - this is called a "Death Cross"!

1 - SITUATIONAL ANALYSIS



In our Mid-week update we suggested you watch the IWM for market direction. We wrote:

WHAT TO WATCH FOR: (Mid-Week Chart Right)

• Will Momentum (middle pane) break the current overhead resistance level (dotted orange trend line) or the lower support line? IWM broke upper momentum Line.
• If momentum breaks overhead resistance, price may run much higher as momentum is likely to want to test long term overhead resistance, as shown by the black dash trend line.
• The gap was filled and therefore has erased the Island Formation?
• Will price then test the underside of the ending diagonal triangle (in black) as overhead resistance? Tested and Broke Through Underside of Ending Diagonal.
• Will price then rise to put in a Double Top?
• Any of these could mark a major long term top for the market.
• A break of a double top means the Bull market does not see a recession and the bull market has further to run!

WHAT HAPPENED IS SHOWN BELOW

SENTIMENT - Nervous & Cautious

CHART RIGHT:

The options markets are still pricing in the potential for short-term chaos amid a heavy calendar of risk catalysts including Powell's address at Jackson Hole, NVDA earnings, NFP, CPI and Options Expiration.

CHART RIGHT: Gone is extreme fear. We are now right in the middle of neutral.

The market was completely confused at what to do with the - 818K payrolls revisions earlier this week, but Chairman Powell clarified this on Friday with his Jackson Hole speech.

With seven little words, Fed Chair Powell unleashed some chaos today as he confirmed "time has come for policy to adjust" and rate-cut expectations adjusted dovishly, (though we note they were pretty much fully priced for this after the Wednesday FOMC Minutes).

2024 rate-cut expectations lifted to 104bps, (just over 4 full cuts - well above the single-cut according to The Fed's Dot-Plot), and 213bps thru the end of 2025.

Gold, bonds and stocks rallied while the dollar tumbled

CHART BELOW: However, this is not how calm looks like! VVIX just below 110 and VIX above 17. While VIX has puked, other measures of "fear" have stayed well bid. One of those is downside protection, skew. 

BLACK v YELLOW GOLD - The Global Macro in one chart; the gap between oil and gold is getting wider by the day.

JAWS OF DEATH: This gap will be closed. Either Bond Investors are overpricing Fed Rate Cuts or Stocks are Over pricing falling Yields PLUS an aggressive Bond Investor positioning.

2 - FUNDAMENTAL ANALYSIS

1. Geo-economic Risk Premium (GRP) has risen, reflecting increased risks in global equities.

2. Economic policy uncertainty is growing, especially in Europe, while geopolitical risks decline.

3. Defensive sectors like Health Care, Swiss equities and large caps potentially offer protection against these risks.

In Q2 2024, S&P 500 EPS increased by 11% year-over-year, reflecting a strong earnings season where 79% of companies surpassed analysts’ expectations.

Q2 EPS growth turned positive for the first time since Q3 2022. Sales growth also saw the strongest improvement since 2022 (US/Europe).

Global earnings revisions are improving. The One Month Ratio is calculated as number of stocks with EPS upgrades divided by downgrades.

GROWTH IS NOW THE FOCUSI.

CHART RIGHT: In BofA’s August credit investor survey, 74% of investors anticipate a soft landing, reflecting a significant increase in optimism despite recent market volatility.

The technical levels that would flip Wall St narrative from soft to hard landing have not been broken.

• 4% on 30-year Treasury
• 400bps on HY CDX
• 5050 on S&P500

All good news so far, but important now for stock leaders SOX (4600) & big tech XLK (200) to hold 200dma levels. If levels break, traders then target 2021 highs (i.e. 10% lower).

CHART BELOW

Global growth expectations in the August survey fell a sharp 20ppt from July ...a net 47% of survey respondents expect a weaker global economy in the next 12 months.

Growth has taken over as a driver of risk appetite and is becoming more important driver than monetary policy/inflation.

CORPORATE STOCK BUYBACKS CONTINUE TO PROPEL EQUITIES

Goldman Sachs predicts a substantial rise in S&P 500 share buybacks throughout 2024 and 2025.

This growth is currently expected to be fueled by continued strong earnings from technology companies and improved financial conditions.

CHART BELOW LEFT

As S&P 500 companies’ cash reserves decline, Bank of America expects buybacks to peak soon.

CHART BELOW RIGHT

The correlation between stock buybacks and S&P 500 performance is significant, as companies that repurchase shares improve their financial metrics and boost investor confidence, often resulting in higher stock prices.

3 - TECHNICAL ANALYSIS.

NVDA

• NVDA has decidedly broken above the 50 DMA and the upper bound of the current downward trend channel.
• The MATASII Proprietary Momentum Indicator (lower pane) has also broken through its longer term support with a short term Momentum line (Dotted descending Orange Line) above it to act as overhead resistance.
• The upcoming Wednesday August 28th Earnings release date will be very important for not only NVDA but the market overall.
• The Dotted Black Trend line in the MATASII Proprietary Momentum Indicator, (lower pane below), has been signaling this sell-down was coming for some time now.
• Divergence is normally seen as a warning to the downside and is still ahead if the Divergence isn't removed by a movement higher in Momentum.
• At some point, the major unfilled gaps (at much lower levels) must be filled. NVDA therefore may no longer become a Short to Intermediate Long Term hold, but rather a position trading stock as other competitors enter the space and force margins and the earnings growth rate contracts. 

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

MAGNIFICENT 7

CONTROL PACKAGE

1. APPLE - AAPL - DAILY (CHART LINK)
2. AMAZON - AMZN - DAILY (CHART LINK)
3. META - META - DAILY (CHART LINK)
4. GOOGLE - GOOG - DAILY (CHART LINK)
5. NVIDIA - NVDA - DAILY (CHART LINK)
6. MICROSOFT - MSFT - DAILY (CHART LINK)
7. TESLA - TSLA - DAILY (CHART LINK)

• The basket of 'Magnificent 7' stocks bounced off near term support at the black dotted line labeled "initial Support" line on our chart below.
• The Intermediate Momentum Indicator trend line (Lower pane) also offered support, before being broken and now appears to be weakly trying to test the underside as temporary overhead resistance.
• As we said in former reports: "A brief counter rally may ensue next week, but it is highly likely that Longer term Momentum Support (lower pane black dashed line) will soon be tested".
• Continued caution is advised since major global "Dark Pools" have been identified as presently operating behind the scenes on the Mag-7.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

"CURRENCY" MARKET (Currency, Gold, Black Gold (Oil) & Bitcoin)

10Y REAL YIELD RATE (TIPS)

Real Rates bounced-off our lower support trend line, which gives us confidence with the two alternative counts that could occur, (shown in the chart to the right - as of close week ending 08/23/24). (LATEST)

NOTE: Gold is suggesting it will be resolved by the red line (chart right) with a fall in real rates (chart lower right) with rising Gold prices.

CONTROL PACKAGE

There are TEN charts we have outlined in prior chart packages, which we will continue to watch closely as a CURRENT Control Set:

1. US DOLLAR -DXY - MONTHLY (CHART LINK)
2. US DOLLAR - DXY - DAILY (CHART LINK)
3. GOLD - DAILY (CHART LINK)
4. GOLD cfd's - DAILY (CHART LINK)
5. GOLD - Integrated - Barrick Gold (CHART LINK)
6. SILVER - DAILY (CHART LINK)
7. OIL - XLE - MONTHLY (CHART LINK)
8. OIL - WTIC - MONTHLY - (CHART LINK)
9. BITCOIN - BTCUSD -WEEKLY (CHART LINK)
10. 10y TIPS - Real Rates - Daily (CHART LINK)

US DOLLAR - DXY - Monthly

CURRENT

• The Dollar has broken the dotted continuation triangle and should now be expected to fall with expectations for Fed Rate cuts.
• There are key lower support levels shown below (and on the more detailed Daily chart  we showed in prior newsletters) that should be expected to offer important support.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

GOLD

CHART RIGHT:

We have just experienced the biggest 2-week inflow to gold since March '22.

CHART BELOW

• Gold tested and broke through its overhead resistance line (black line).
• The potential rising triangle suggests gold (if true) may be reaching towards an Intermediate term high. However, the Macro suggests otherwise with the dollar continuing to fall and Real Rates weakening.
• Also, the MATASII Proprietary Momentum Indicator (Lower pane) was within a "momentum wedge", which has been broken to the upside - though tested to downside currently.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

US EQUITY MARKETS

CONTROL PACKAGE

CHART RIGHT: Beware of the Island top Formation pattern in the SPX with downside projections at 5287 (measured move) and 5135 (pattern count).



There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "control set":

1. The S&P 500 (CHART LINK)
2. The DJIA (CHART LINK)
3. The Russell 2000 through the IWM ETF (CHART LINK)
4. The MAGNIFICENT SEVEN (CHART ABOVE WITH MATASII CROSS - LINK)
5. Nvidia (NVDA) (CHART LINK)

S&P 500 CFD

• The S&P 500 cfd has broken decidedly higher on dollar weakness. Many wonder if this is a Bear Market trap often accompanying a major sell-off? A sell-off that didn't test the 200 DMA?
• We have a potential Double Top forming.
• The MATASII Proprietary Momentum Indicator (middle pane) is currently rising again and is testing its overhead resistance level (the dotted orange trend line ) as part of a large wedge that appears soon to end.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

S&P 500 - Daily - Our Thought Experiment

OUR CURRENT ASSESSMENT IS THAT THE INTERMEDIATE TERM IS LIKELY TO LOOK LIKE THE FOLLOWING:

NOTE: To reiterate - "the black labeled activity shown below, between now and September, looks like a "Killing Field", where the algos take Day Traders, "Dip Buyers", the "Gamma Guys" and FOMO's all out on stretchers!"

WHY DID I CALL IT A KILLING FIELD?:  "We remain in short gamma land. Dealers had to sell deltas into the 5450 support area during the July 30 move lower. The same dealers had to chase all that sold delta and much more at higher prices as they became shorter and shorter deltas when the market ripped higher yesterday. Today is another brutal day for the short gamma community, as they have been forced to sell (at much lower prices) all that delta they bought yesterday. Add to it poor summer liquidity, and you realize why things are moving in an erratic way."

• The S&P 500, like the S&P 500 cfd, appears to have broken decidedly higher on dollar weakness and additionally is putting in a potential Double Top.
• The MATASII Proprietary Momentum Indicator (lower pane) supplied initial support at its longer term rising support trend line before being decisively broken before rising. This should be seen as an indication that final support has not yet been found, (likely the 200 DMA).
• The longer term Momentum Indicator wedge (dashed black lines) is narrowing. It appears the S&P 500 is looking to touch this overhead resistance level.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

STOCK MONITOR: What We Spotted

BOND MARKET

LOWER BOND YIELDS CORRECTLY SPOT A WEAKER MACRO

CONTROL PACKAGE

There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "control set":

1. The 10Y TREASURY NOTE YIELD - TNX - HOURLY (CHART LINK)
2. The 10Y TREASURY NOTE YIELD - TNX - DAILY (CHART LINK)
3. The 10Y TREASURY NOTE YIELD - TNX - WEEKLY (CHART LINK)
4. The 30Y TREASURY BOND YIELD - TNX - WEEKLY (CHART LINK)
5. REAL RATES (CHART LINK)

FISHER'S EQUATION = 10Y Yield = 10Y INFLATION BE% + REAL % = 2.129% + 1.685% = 3.814%

• The TNX appears to be putting in a potential ABC corrective pattern. This suggests yields have a possible leg higher before heading lower.
• The Momentum Indicator (lower pane) is also showing weakness as it retests its support level.
• The Bond Vigilante's continue to send a clear message to the Fed that they are 100 bps behind the curve and yields are heading lower.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

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