S&P 500 Goes To Red... But..
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I’m sending this to you because the S&P 500 ETF (SPY) has moved under its 20-day moving average and outflows have accelerated on the Russell 2000 and the S&P 500.
Now, there is a caveat here.
It’s the Third Friday, a day on which $2.7 trillion in options expire… But I don’t usually see this sort of movement on expiry days unless they are Quad Witching events in March, June, September, and December (also the third Friday of those months).
First, the math: The equation has gone negative, so we have to be very cautious. We have 15 stocks in our elevated Beta area for Breakout stocks (B Segment).
But the number of Falling (F Segment) stocks is 31.
This has all happened in the last 24 hours. This is the first time we’ve had a serious turn like this since December 10 (the market bottomed out on December 18/19).
The reactions have been sharp, especially with weakness in cruise lines, domestic oil producer Diamondback Energy (FANG), and industrial stocks.
There are a few issues in force.
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There’s a lot of concern about Japan’s inflation. Ongoing pressures here impact the carry trade and could fuel an exodus. I am on high alert for Monday.
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Watch Bitcoin over the weekend for clues about liquidity and Israel’s tech-heavy market. A selloff on Sunday in Israel could be a clue about whether this selloff is closer tied to options expiration OR something bigger.
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Tariffs are getting closer and closer, while investors were naturally concerned about Walmart’s forecast.
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There are plenty of unknowns out there… how unknown the unknowns are create even more pressing issues.
Concerning Walmart, I’m going to say something right now that might surprise you.
I think the No. 1 economic issue in politics next year - when Congressional races start…
It’s not going to be tariffs or the border. It’s going to be the rising cost of electricity. This is becoming a problem, and the Trump administration faces an uphill battle to fast-track grid solutions to tackle rising costs. After Walmart's (WMT) forecasts, no one seemed to mention that 500,000 households are 60 days or more behind on their electricity bills and own more than $1 billion.
Rising property taxes and utility costs are impacting Americans’ budgets. This isn’t hard. Add on tariffs and higher costs, and you have red flags for this economy heading into this year as the Fed deals with higher interest rates.
Stagflation and higher utility costs (thanks, Green New Deal)… that’s a problem.
I’ll be back on Monday with an update on if this is a head fake or not.
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