In today’s briefing:
- SPX (S&P500) Will Probably Hit 3200 (Minus 18%) …It Could Even Test 2500 (Minus 35%)!
- In Search of the Bullish Catalys
- The Bears Gain the Upper Hand
SPX (S&P500) Will Probably Hit 3200 (Minus 18%) …It Could Even Test 2500 (Minus 35%)!
- Bear market caused by sharp monetary squeeze as Central Bank liquidity withdrawn. More pain to come US Federal Reserve is now leading the charge.
- QT is slated to begin in June, but Fed has already been secretly tightening liquidity for months
- Effective Fed balance sheet is set to contract by US$2 trillion under QT plans, but policy error could easily force a bigger US$3 trillion correction and crater stock prices
In Search of the Bullish Catalys
- The U.S. equity market is currently suffering from a non-recessionary slump.
- Valuations are slightly above fair value and bottom-up EPS estimates are rising.
- In order for prices to advance, either earnings need to continue growing or the cost of capital, otherwise known as interest rates, needs to fall.
The Bears Gain the Upper Hand
- After surging off a test off the lows in late May, the S&P 500 decisively broke down through a narrow trading range after a brief consolidation.
- Despite the recent technical breakdown, our survey of sentiment and technical indicators is mostly bullish or neutral.
- We interpret this as crash risk is low and downside potential is limited.
Before it’s here, it’s on Smartkarma
