Here is this weeks video
The Slay the SPiDeR circle is doing something I have never seen since 1998. We did the Pigtail Loop. We did the Toe Dip with a 10% Nasdaq downturn. We did the 2 O’clock Loop. All fairly normal in size and duration.
Now it appears we kind of did the 4 O’clock Loop, except that the market made less of a move down than in the Pigtail Loop (-3.4%) The Bullish Percent (% of stocks on a Buy Signal) went from 55% to 48%, then 42 and a midweek dip to 36% (not as low as usual for a 4 O’clock Loop), and now we are back at 53%. I went back through my charts, and I’d never seen a 4 O’clock Loop with less than a -14% move down in a market index. More often, it’s in the -20% range and as high as -30%. But less than a -3% move down in ANY of the 3 major indices ?
The moves down and back up in the Bullish Percents were smaller than usual, but not that far out of normal. But, we got nothing at all in the market indices.
I just don’t get it. Right now I am not even certain it was a 4 O’clock Loop, or just some rather sizable “noise” in the BP’s. I am tending to think we really have not seen the real 4 O’clock Loop yet.
The strange thing is that the duration from the 2 O’clock Loop to the start of the 4 O’clock Loop also happens to be the longest I have ever seen. That is explainable by the tremendous cash flows into the markets from the stimulus programs during the 1st 5 months of this year.
The reason I think we’ll still see the 4 O’clock Loop really happen is looking at what is coming at us.
1) The semiconductor shortage is getting worse, rather than being solved. Apple says they don’t have the chips to meet their sales goals this fall.
GM shut down some PickUp plants in June, restarted them in mid-late July, and shut them down again this week. Auto makers worldwide are experiencing shortages. Suzuki is down to 5 days of inventory (45 days is normal). Toyota, Ford, Volkswagon, Nissan, Honda and others are selling vehicles without high end options because of the chip shortages. Toyota is going so far as to re-write software code to make other processors do the functions of chips not available. It’s expensive, and raising prices.
Used car prices are skyrocketing as a result of inventory shortages of new vehicles. Not helping inflation come down. Just the opposite, it’s raising inflation rates.
New semiconductor Fab facilities take 2-3 years to build and cost billions. TSM and Intel are building 3 fabs in Arizona. These won’t help the shortage crisis until 2023 at best, and more likely 2024. Then there is the water issue in AZ. But that is a whole ‘nother story.
2) Semiconductor manufacturers and semi manufacturing equipment makers worldwide are all running at full capacity, higher than ever rates. Yet the shortages are growing. This problem is going to last a long time.
3) The rent moratorium. The administration decided to declare the moratorium is extended. I guess they can do that without legal grounds since they control the DoJ, the House, the Senate, and the WH. They really stiffed the Real Estate lobby on this one, and that is one of the most powerful lobby groups in DC. Then to top it off, the CDC is claiming having the power to take over rental properties from private owners. That should prove interesting in court this fall. The RE groups are really angry and filing lots of actions to get into courts around the country.
4) Back to the chips shortages. HP has raised printer prices across the board by 20% over last years prices. XBox, Playstation, Nintendo, etc. are expecting significant price hikes as they fight for chip supplies. Appliance manufacturers and medical device makers are fighting to have the government ration the chips by industry, and the auto makers, game makers, and everyone else is rushing to buy supplies before that happens. Prices are rising rapidly on many products.
I don’t think the inflation rates are going to prove to be transitory, and this is going to become far more apparent this fall as these things all play out.
There’s more, but I think you get my point that there are some very big negatives coming up in the short term. Hence, we’ll likely see the real 4 O’clock Loop come back into play, and then the Stage 5 Finale. (See my April 14 newsletter about these stages.)
When? I apparently was wrong on buying the Put Options when the index charts reversed down a couple of weeks ago. I bought in on the reversal, and the indexes reversed again the next day and went to new records.
The 4 O’clock Loop is going to happen. Like everyone else, I just don’t know for certain when, and what the trigger will be.