Drill Down Friday

It is the end of the week, lets look at the hourly version of the chart I sent out the past two days, the daily and weekly versions. The hourly is what I watch when I see a trigger developing.

Obviously what everyone is looking for is a signal as to when they should abandon the liquidity model and start looking at value. This will be a big change for stocks as they, depending on the measuring stick one uses, stocks are 50 to 75 % overpriced.

So what will bring back the concept of value? The FED has made a mockery of value calculations, hedging is gone from the vocabulary. I don’t think we will see the signal coming from the FED, they rarely if ever taper, or attempt to get ahead of the curve.

That leaves an economic accident as the most likely trigger to move the market away from this liquidity trap.

Possibilities are:

  1. Timid Consumer Reopening results,
  2. A China related event
  3. An overwhelming climate event
  4. A major domestic political event
  5. A major international event
  6. Comprehensive Congressional Jobs/Corp Tax event

The bi-partisan infrastructure bill announced yesterday is a lame attempt to get some work done, however the big action that will turn the economy around will be jobs related, involving education and retraining.

So take your pick from the six choices.

Here is the hourly chart as of 10:00 AM CDT. Note that the high was made on Monday, June 14 and this morning we are tracking below the average since February 24, 2021. Keep in mind that stocks are the most speculative part of the equation, controlled by the big equity pools, and will be the last of the ten segments to turn.

Have a good weekend.

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