Still Ugly

Difficult to tell where the bottom is on this market. While it’s already over-sold by many measures, the bears still seem to be in charge. This also appears to be more than a mechanical flushing-out of leverage. With the cost of capital on the rise, the markets seem to be (rather violently) re-evaluating the value of equities.

The new rules of valuation aren’t yet clear. What is or isn’t priced into this market isn’t clear either. Sentiment is pretty negative, but there are still some technical lines in the sand that haven’t been breached.

In some respects, it’s difficult to see how some of the largest and most influential tech stocks in the world can lose over half of their value. Then again, there are those out there suggesting they should fall 50% further before their values make sense.

This market is fickle. It’s possible we’re in for a longer bear cycle this time around. The Fed has a difficult job ahead. The question is, how quickly does the market price in news these days? When Covid shut down the economy, it took about three or four weeks to figure it out. Today? We shall see.

For the week, look for more volatility. The technicals are pretty rough. Either a footing is found here and we see a rebound toward 4300 or so on the SPX, or we could see support completely fail and head towards the high 3700’s (very extreme on that one, and probably not achieved in a single week).

No odds calculated this time. We’re in no man’s land. At some point capitulation happens. We’re closer this week than last week. But right now, it’s a guess. If you get it right, it’s glory. If you get it wrong, it’s a market. Hang in there. This too shall pass…

Disclosure: this isn’t advice, and this info changes all the time, so take it with a grain of salt; use at your own risk; all that stuff.

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