Now What ?

The rally last week got everyone’s attention.

My take on this…We hear there are more bulls than bears after last week. Probably true, problem is, a majority of the bulls are not long anything close to their normal position if they are long at all. And why would that be, maybe all the bear talk by the experts, like Dimon, Summers, Grantham, Druckenmiller, …McCullough.

At this early juncture, the Twitter talk seems to be how a recession and lower interest rates are inevitable. I still doubt that conclusion. My view is that we have seen the highs on rates, but they will not go down that much and there will be no recession. Rather I see 10 year rates sitting comfortably in the 4.25 to 4.50 level for an extended period. Anything above 3.5 keeps speculation at bay, which is good, and anything over 5.5 kills the economy which would not be good.

I remained focused on the Russell 2000 vs Nasdaq 100 to tell me when investors start believing in growth. To do that I watch the RUT/NDX relationship. Last week it was low at 0.1134. The 0.1173 level would indicate that a bottom has been made with 0.1224 and 0.1328 being the first two indications of liftoff. Chart closed at 0.1166 on Friday.

Here is the chart:

Stay tuned.

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