This ETF Indicates That Economic Trouble Is Brewing
Plus, Helene’s mom is worried about the price of diesel. Is that a sign?
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Note: Since Monday is Yom Kippur, a holiday I observe, my next column will be Wednesday morning. For those who observe, have an easy fast.
As I go through the charts of the various stocks and industries, I am reminded of the old Wall Street joke that the stock market has predicted nine of the last five recessions. Because so many charts are so far off their highs, it’s hard to imagine investors aren’t thinking ‘recession’.
There are so many ETFs out there that I can barely keep up, but when I was asked to look at RSPD and realized it was an equal-weight Consumer Discretionary ETF, I thought of another Wall Street-ism I have not heard in ages: the consumer accounts for two-thirds of the economy. It seems these days everyone says AI is the economy.
However, if Google is correct, US consumer spending still accounts for close to 70% of the economy. The RSPD has not made a higher high since February, and it is now down ten percent in a straight line. Again, if you want to believe the stock market knows all, this chart says consumer spending is not great. Or investors think it’s not great.
I am not an economist, nor do I play one on television, but I can look at a chart to know confidence in the consumer is not great right now. There is quite a bit of support down here, and heck, anything down ten percent in a straight line is oversold, but this chart seems important, even if semiconductors are holding up the S&P.
And yes, on Friday, folks once again became enamored with the semis. Heck, they were about the only group that rallied. In fact, I saw several folks who had been cautious on the market change their view to more positive now that semis are back in the market’s good graces.
I have not been bearish tech stocks since they had that terrific washout in late July. In fact, I have thought it was the others, the so-called broadening out story, would come back to earth, and that folks would move back into tech. But even with the renewed love of the semis, the SOX has still not crossed that line at 12,000.
Notice the last two little rallies (late August and early September) came right to this level and stopped. Now we’re here once again, only this time the downtrend line is there as well. This coming week will be a big test for the SOX: it needs to get over that line or I will turn cautious on them.
Aside from that, the sentiment did not get more bearish as I wanted it to. We’ve still only got the AAII and the NAAIM surveys that show that complacency was wrung out. We don’t see it in the put/call ratios, and we don’t see it in the VIX.
Let me conclude with a word about oil. My view is that the rise in oil is just about over. Once the DSI got over 90, that was my view. I think there will be more rally attempts, and crossing that blue line gave way to a nice rally, lifting oil fifteen bucks in the month so far. However, do you realize XLE is flat on the month, and OIH is down?
And just the other day, my mother felt it necessary to ask me if I had seen the price of diesel. My mother does not drive a truck that takes diesel, yet she is concerned about it. And she reported that she paid $4.29 for regular gas. Then she added—and that was at Costco!
It’s been a while since my mother has shared any pearls of wisdom on the markets, so I’m a bit out of practice on ascertaining if she still has the magic touch of reporting what the guy on the radio says near the end of the move, but I’m inclined to think she still has it!
