Over the past few trading sessions we saw the start of earnings season with bank earnings. Most of the companies that reported saw their stocks gap up and just sell the news. For the most part, with the banks, earnings fell by 30-50%, but the companies managed to beat already lowered analyst expectations. That helped gin up some excitement on the open Monday for the market averages as the DOW gapped up over 300 points, but then the banks sold off and the market averages did too and finished the day in the red.
It was a classic gap and fade in what is an overall bear market.
Personally, I took some more short positions and in my public portfolio added the 1X short S&P 500 ETF SH to it. That now makes it net short. I rather be buying stocks and trading the long side of the markets, but I go with the big trend and we are in a bear market. The market averages are all trading below their 200-day moving averages and those moving averages are now acting as resistance, which is what they do in a stage four bear market.
Check out the XLF ETF, which tracks the banking sector.
As you can see, the banking sector really didn’t go anywhere despite the excitement last week on Friday and on the open Monday on CNBC. It simply reversed by yesterday’s close and that’s a bad sign, as it suggests that the recent bounce in the market is fizzling out.
The S&P 500 looks the same way, with 3900 acting as resistance now.
This bounce looks like it is running the same course as the previous three bounces for the market did. I’m expecting it to trade in a range with resistance at 3900 for the S&P 500 and 3700, and then breakdown in the coming weeks.
This is still a time to be cautious in these markets, because the Federal Reserve no longer cares about bailing out speculators, because it is more focused now on trying to knock inflationary psychology down.
I know bulls see any up day in the market and start calling bottoms. Jim Cramer and Cathie Wood do it all the time – and to tell you the truth that is what people want to hear. That is what generates views and clicks and doing the opposite causes a loss in both.
This is why I stopped doing Youtube videos for now.
The people that watch Youtube are stock market bulls and crypto bulls who want to be told that things will go up and hear about new buys and the algorithm is created to promote what most people want to watch and demote what they do not want to hear. When a bull loads up a video of someone saying to be cautious they click away to a new one, thereby telling the algorithm that the video is not good for them and the millions of other people like them. As a result, when I do videos trying to warn people about the bear market I actually harm my own Youtube channel by making the algorithm punish it. Youtube shows you the stats when you have a channel and they do not show my videos to new people – almost all of the views come solely from my own website.
At some point when I see a good buying opportunity in something I’ll start the videos back up or/if I come up with a new video format idea that can work on Youtube.
Cathie Wood, and people still using her language to get viewers, copying her, continue to rule the financial niche on Youtube.
The Youtube algorithms are on their side.
-Mike
