Weekly Economic and Stock Market Commentary: June 27, 2022

The markets had a great week last week, as the bulls rushed in – perhaps as bargain hunters. The technology stocks led the way, and each major market average saw multiple percentage point gains for the week. The Nasdaq Composite gained nearly 8 percent for the week.

It’s too soon to know if the rebound is real, or a bounce from oversold levels. As it stood before Monday’s opening, the market was oversold by nearly 60 percent. That’s a long way on the oversold level, despite the large gains last week.

Let’s have a little fun at the expense of “our friends in Washington.”

I watched a White House press briefing last week, and a reporter asked if the economy is in a recession, or about to go into recession (the textbook definition is 2 consecutive quarters of a decline of Gross Domestic Product). Personally, I believe we will get to that condition when they announce GDP in July.

Nevertheless, the White House spokes lady replied, “The economy is in a period of strong transition.” Ordinarily that would be a non-answer.

This administration has used some form of that word for the past 15 months in describing a multitude of economic maladies that affected the country during that time.

There are some readers who have been seeing this commentary for more than 20 years now. That also was about the time I started using this investment discipline (21 years to be precise – June 2001).

The next few sentences are recitations of “what has been happening” this year, no more, no less.

As part of the pattern recognition, there are signals based upon the length of the column. If a column goes 18 boxes in a direction, it gets called either high pole warning, or a long stem down alert.

In 2022, I have seen countless high poles and long stems created on an almost daily basis. I am wearing out the ink in my pens very quickly.

This year also saw the most directional changes in the bullish percent indicators since 2008. As I mentioned in this column multiple times over the years, a high amount of column changes in the bullish percent indicators normally occurs when markets are not favorable.

So, we shall see what happens from here.

The X’s & O’s

We saw improvement in the bullish percent indicators last week. The Optionable Bullish Percent went to Xs last week, and I will take that as a good thing.

It was another bad week for the bullish percent numbers. We clearly are in WEALTH PRESERVATION mode.

Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.

Below is where our indicators stand as of June 24, 2022 (Courtesy Dorsey, Wright, and Associates).

The one item of economic news that made it to me last week concerned existing home sales. The National Association of Realtors informed us that May’s existing-home sales fell by 3.4% in May from April to a seasonally adjusted annualized rate of 5.41 million units. That is the slowest sales rate since June 2020, at the depth of the pandemic. The average time on the market during the month was 16 days. Interest rates took the blame for some of the slowdowns. The attribution for slower sales was the median sales price. For the first time in the history of the trade association’s report, the median home sold for a price in excess of $400,000. In May, the actual number was $407,600. That represents a gain of 14.6% from May 2021.

As always, please contact me if you have any questions about this week’s commentary.