How's the Economy Doing? Let's Ask the Stock Market.

There seems to be a raging debate going on regarding earnings and the economy. Many folks feel that earnings have flat-lined and are drifting down. Some of those folks are in the soft landing camp.

Then, there are those who think we’ve gone past the point of no return and we’re already in a recession. This camp believes that we will look back and determine that the recession began last summer.

I am not an economist, so I am the last person who should be asked about a recession. The one thing I do know is that I am a firm believer that stocks tend to anticipate. The so-called recession stocks have been in serious uptrends since April. Just look at the Consumer Staples ETF XLP.

I know staples don’t tend to move at the same rate as tech or growth stocks, but that is a solid uptrend. Notice, though, that in September, we’ve got some stalling out. A move under 81-82 would indicate to me that there has been quite a change in folks’ views toward the recession names.

We can put the Utes in that camp as well, although I am told that the Utes are now a data center play. When I hear stuff like that, all I can think of is when Starbucks told us they were a technology company. You can see how well that worked out for them.

But check out the Utes. I thought they were done at 1040 and have been wrong. However, Tuesday’s market saw them fall nearly one percent. Unless or until they break that uptrend line, there isn’t enough to fuss over, but that’s what I am looking for.

As for sentiment, I don’t think it is giddy, but we did see the put/call ratio for equities dip under .50 for the first time since late August on Monday. And then, there is the anecdotal evidence such as folks buying Beyond Meat BYND or Peleton PTON. BYND was up nearly seven percent, and PTON just over nine percent. I admit PTON has a nice base but every time folks get excited over this stock, we know the speculation has entered the market.

But back to statistics. The number of stocks making new highs is down quite a bit for both Nasdaq and the NYSE. I believe that is the overbought-ness at work. I am still looking for a bout of volatility to come our way.

Finally, there is China. Just over a week ago, I showed you the chart of KWEB, noting that the risk/reward looked pretty good. We were rewarded when China decided to announce some stimulus measures. KWEB was up over twelve percent on the day. Here is the three-year (weekly) chart that shows resistance in the 31-32 area. That is a big base if it can break out.

I’ll end by noting that the Daily Sentiment Index (DSI) for Gold is at 88 since I know that will be the question of the day.