The Narrative Shifts to Talk of a Slowdown
Recent chop has given way to chatter about a slowing economy as the industrials, consumers, and commodities take a breather. We also take a look at Palantir, Kellogg, and General Mills.
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The Market
Another day of chop but this time there has been a very small shift in the narrative. There is a lot more chatter this week about a slowing economy. Folks are looking at the bonds and saying ‘slowdown is coming’.
Folks are looking at the small caps and saying ‘slowdown is coming’. They believe the industrials are struggling. They believe the consumer is struggling. They see oil and they are screaming slow down. And today they sold all those commodity stocks like copper just as the trade got so very crowded. So yes, there is definitely a theme developing.
I suppose everyone will tell us that the Employment report on Friday is so very important. Isn’t it always?
I am no economist but even I could see the industrials were weakening. Even I could see the reaction to earnings during the first quarter reporting season didn’t see a lot of gaps up but rather a lot of gaps down. But overall, the market indexes have barely budged.
Sure, the iShares Russell 2000 ETF IWM broke that uptrend line. But you need a magnifying glass to see it. I suspect if it gets down to that 200-ish area and closes the gap we’ll see a bounce. What would be more bearish is if it gaps under 200 and cannot recapture it.
Take a look at that chart and what do you see? An index that is essentially flat on the year. For all the hoopla about broadening out, we keep trying and giving it back. Away from the big/mega cap stocks, this market has been about trading this year.
I will note one thing about rates coming down this time. This time we also have commodity prices backing off. That seems like a change to me. And one that would eventually be positive. Once it gets through the system.
New Ideas
I have been asked what to do with the iShares 20+ Year Treasury Bond ETF TLT now. It is desperately trying to cross that downtrend line. I suspect even if it does, the rally is getting a little long in the tooth in the near term so it would pop to say 94-ish and then come back and test the line.
I have been waiting for Palantir PLTR to fill that gap and it refuses to do so. I will say I do not like that island high from earnings in early May but as long as it stays over 21, it gets the benefit of the doubt.
Today’s Indicator
The McClellan Summation Index is still heading down. It needs breadth to be +1200 or better to halt the slide.
Q&A/Reader’s Feedback
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We had a nice trade in WK Kellogg KLG from the fall until earlier this year. The question now is if it’s time to get back in. It’s too early to tell but the stock is down so much that I would say it really ought to bounce from that 17-18 area.
I have liked the chart of General Mills GIS for quite some time but it has gone nowhere. That remains a big base but if it breaks under 66, I will concede it needs even more time than it has already put in.
When will it be time to buy the China Internet ETF KWEB back? I have been eyeing the 27-28 area and it can’t seem to get down there but if it managed to get to 28 I would start nibbling again.
The Oil Services ETF OIH has just collapsed but several of you have asked about taking a stab at it here. I’ll say that the chart was much nicer when it was over 310 but I can’t argue that I would be surprised if it doesn’t bounce from that line.
