Research Report Excerpt #1

Like any rally, we want to understand the beginnings of the rally. Did the downtrend find some key level of support or was the rally headline-driven, something in the media headlines? It could be either, of course, but this one did seem to develop from a key level of technical support offered in the Fibonacci levels and featured in the chart above. You’ll notice that the .382% Fibonacci level is at 3,815, and the S&P 500 hit and bounced from 3,810.

Research Report Excerpt #2

“Now, this large cap breadth indicator is threatening to eclipse its higher-high from February and March. If these 4 Advance/Decline lines can make new swing highs, then we can say that this is a broader advance and not just a quick upside reversal.”

Research Report Excerpt #3

We’re now through 101 trading days this year, but on day 99, the S&P 500 expressed the 4th worst start to a year since 1932. We’ve tracked the data alongside the chart from Charlie Bilello in past reports. What we focus on is just how bad it has been, but what future returns could look like. Each of the 3 worst years compared to the present day experienced significant upside the rest of the calendar year. Most years where the market had a significant decline through the first 99-100 days had upside through year-end; in fact 9 of the 14 previously (middle column).

Research Report Excerpt #4

The chart above is a derivative of the consumer spending shift, as it relates the spending habits to inflationary pressures. As goods were the focus after the pandemic lockdowns, inflation was centered on goods. Now that we see the spending habits normalize in favor of services, inflationary pressure is easing on goods, but rising on services. Please keep this important fact in mind when considering inflation and projecting forward, as everything surrounding the concept of inflation demands context: **Prices don’t have to fall for inflation to decelerate; inflation measures the rate of change in prices rather than the price level. So even if prices simply rise at a slower pace, inflation will turn lower.**

Research Report Excerpt #5

Prior to this past week, we had seen roughly 65% of Q1 reporting companies expanding their Net Profit Margins. Now, there are an equal amount of companies that have reported with profit margins expanding and contracting. This potentially foreshadows the trend toward slower earnings growth than is currently being forecast for the full year.

Research Report Excerpt #6

The right side of the chart candlesticks shows just how much excess savings was built since 2020 and through 2021, setting up a consumer that could still thrive in at least the first half of 2022. From this point, it’s going to be about consumer choice. Will they be willing to pay higher prices going forward? That’s what we can’t predict, but rather pay attention. 

Research Report Excerpt #7

We also know what plagues us as investors, the concerns between now and the long-term reality. I think this past week’s price action paired with this chart in our Weekly State of the Market speak volumes.

How can it not remind us that only a week ago Thursday, the S&P 500 was in the 3,800s and as of this past Friday’s close it is in the 4,150s. In hindsight it looks like a huge missed opportunity, because many are too keenly focused on the risk of the day and into the future. I think that we focus our weekly Research Report so much on future probable returns and disciplines to achieve those most probable returns because this graphic is such a huge part of overcoming the mental and behavioral aspects associated with INVESTING WELL!

Research Report Excerpt #8

“…corporate insiders are holding a non-consensus view across most sectors and actively buying the dip with net insider buying activity reaching 1 STD (standard deviation) above trend level.” – J.P. Morgan

Research Report Excerpt #9

The chart and table below identify past inflation peaks and forward S&P 500 returns.

 

 

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