{"id":64942,"date":"2023-06-24T17:29:40","date_gmt":"2023-06-25T00:29:40","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=64942"},"modified":"2023-06-24T18:13:44","modified_gmt":"2023-06-25T01:13:44","slug":"bulls-fade-fast-from-overbought-frontier-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2023\/06\/24\/bulls-fade-fast-from-overbought-frontier-the-market-breadth\/","title":{"rendered":"Bulls Fade Fast from the Overbought Frontier – The Market Breadth"},"content":{"rendered":"\n

Stock Market Commentary:<\/strong><\/h2>\n\n\n\n

The summer of loving stocks is facing its first real test. In the middle of the week, the rally finally failed at the threshold of overbought market breadth<\/a>. The stock market closed the week with market breadth confirming the end of the primary rally and the start of an important test of the uptrends. As bulls fade fast from from the overbought frontier, all the bearish arguments lobbed against the stock market take on increased prominence.<\/p>\n\n\n\n

For example, even though Federal Reserve Chair Jerome Powell simply reiterated the Fed’s hawkish stances at Senate banking panel<\/a>, the timing on Wednesday conveniently coincided with a complete reversal of the gains from the previous week’s Federal Reserve press conference. Pile on the start of recessions in New Zealand and Germany, big rate hikes from the Bank of England and the Central Bank of the Republic of Turkey<\/a>, and weak manufacturing PMIs from across the major economies, and suddenly even a summer of loving stocks cannot resist gravity.<\/p>\n\n\n\n

A U.S. recession has occupied the time and minds of economists, pundits, and analysts for over a year. Yet, the reality on the ground continues to outfox the forecasts. A quote from an economics professor interviewed in Marketplace’s “Economic indicators can\u2019t tell us the economy\u2019s whole story<\/a>” sums up the conundrum for fundamental analysts who strain to see the future: “the best way to predict the trajectory of the economy is to look at how the economy\u2019s doing right now”. Right now, the economy in aggregate is doing pretty well, especially considering the potential headwinds.<\/p>\n\n\n\n

The “lagging” indicator of employment has been more informative than a battery of leading indicators. The Conference Board’s index of leading economic indicators<\/a> just fell for a 14th month in a row. Yet, the economist who manages this indicator still had to upgrade her forecast for Q2 GDP growth from negative to positive. In other words, a leading indicator can fail to provide guidance on timing.<\/p>\n\n\n\n

I have pointed out for a long while that eventually the U.S. will have a recession. There is no magic in making such a claim since the business cycle remains a part of economic life. The breathless expectations for a recession<\/a> have made the rally from the October lows seem misguided. The solidification of this rally AFTER the calamity in regional banks in March is particularly frustrating for bears and those who are waiting to buy the market at much lower prices. Folks tend to believe the stock market when it aligns with their own expectations. For me, I believe the stock market between the extremes of market breadth. The bulls fade from the overbought frontier, the upper extreme of market breadth, has me ever so slightly more sympathetic to the skepticism of the bears.<\/p>\n\n\n\n

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