The END of the Bear-Market RALLY

oh man come on cineworld's going

bankrupt bed bath and beyond's

plummeting as ryan cohen sells

apparently the housing market is in a

housing recession now and all of a

sudden the market looks like it might be

snapping its rally and turning red today

now hopefully the red doesn't last but

we should talk about some catalysts and

some things that are going on including

is retail finally capitulating after all

we got a ton of options that expire

today in fact over a trillion dollars

worth of options expired today and boy

oh boy if you think that a trillion

dollars of options means a volatility

you're right

all right folks let's get into what the

heck is going on so first of all it's

really important to remember that

way back in march and february we

reviewed this particular chart here now

this chart looks a little complicated

but basically what it says is when the

market's doing poopy doopy

if there is a recession you get the

black line if there's no recession you

get the gray line now unfortunately a

feature of the black line is this three

bear market rally bull trap it basically

means at the circles the bulls are like

that's it we hit the bottom let's get in

and then it goes even lower

and unfortunately since we technically

are in a recession there's a very good

argument that uh oh

we might actually have just another bear

market rally on our hands in fact 55

percent of you according to my twitter

poll the other day said yeah no kevin

this is just another bear market rally

this is not the sign of the bottom

anyway you can follow me on twitter at

realme kevin but it's a little

concerning when you actually line it up

to what's going on on the nasdaq because

in the nasdaq here you see a triple

bottom over here on the yellow line that

led to our first bear market rally which

then led to a new low after that now

we're potentially in the second bull

trap and that means we potentially have

one more to go unfortunately

lower

now

this is not a guarantee this is just

based on one particular chat from

bloomberg and quite frankly there's a

super bear over at bloomberg that even

posted something kind of bullish he

posted the following it's mr macroman

and posted that well dang after the s p

falls more than seven percent in one

month but then recovers more than seven

percent the next month

the average returns after the war era

were generally positive in fact the

three

six uh let me make sure i got straight

yeah oh sorry the one month three month

six months and 12 month returns

were positive in all of the instances

that i am highlighting in green here

and so you know

it's on one hand you got a chart from

bloomberg that says

you know this could be another bull trap

and we could be facing some real issues

and on the other hand you got this chart

here that suggests well you know

potentially we could actually be looking

at some really nice and juicy returns

one month three month 12 mon six months

and 12 months out okay fine so you got

information on both sides

let's just talk practically for a moment

what led to the plummet

of the last

bear market rally why did we hit a new

low let's place that or explain that

very very simply so first of all we

crashed and then we had our bear market

rally but why did we come off of that

why did we crash after that bear market

rally only to go down lower

well the reason in my opinion had to do

with the fact that inflation didn't

actually peak in march see in march we

got a peak of inflation and in april

that inflation report went down which is

really really interesting because if you

write march here

and april here you could also say the

same thing about june potentially being

a higher peak

and july

showing a slight decline that led a lot

of folks to get excited in july just

like kind of in april but the problem

was when we ended up getting our next

cpi release in may what ended up

happening we actually ended up getting a

higher level of inflation

and that same thing could play out now

that is when we get the august report

which comes out in september for cpi we

could end up seeing another

oopsy-doopsies certainly if inflation

misses we've got a lot more pain ahead

of us

but usually we've got to establish so

much pain that it's new pain and it's

pain that we haven't experienced before

see the stock market likes to trend up

if the stock market is just receiving

the same information it previously had

received

technically it shouldn't have to go

lower

but there's something big that could end

up pushing the market lower and you

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the big thing most folks who are bearish

are talking about is that the consumer

is standing on their last legs even

though their personal savings rate has

actually increased in the second quarter

in all income groups their incomes have

gone up people's incomes have gone up

their savings have gone up in the second

quarter even though that is happening

there is the belief that consumers are

taking on way too much debt and here is

a chart of total consumer credit owned

and they or

essentially owed back to the bank right

this is a potential problem because you

can see we're at all-time highs and

consumer credit is exploding somewhat

implying that maybe consumers are

actually in distress maybe the reason

bank balances are going up is solely

because they're taking on more credit

however we have another interesting

phenomenon that is usually overlooked by

the bears and this is when we actually

take our debt payments and basically

divide them by the amount of our extra

income that we have just to see how much

of a burden that debt is and when we

look at that chart we actually get

something that looks quite motivating

the

debt service payments for individuals as

a percentage of disposable income are at

relatively low levels certainly levels

that are

lower than anything we've seen since

2016

but not quite as low as levels that we

saw in 2010 to 2015 but we're at

decently low levels and we haven't

seen this level skyrocket to levels that

are higher than anything that they've

ever been at before so sure maybe total

debt is increasing but if people have

more disposable income still today

because they're getting maybe paid more

at their job

maybe the consumer could hold up just

fine and maybe we won't actually end up

with the kind of crisis that a lot of

folks think

is coming especially to the stock market

and the end of this bear market rally

now there are other catalysts as well

that could totally make this market turn

one of the most popular catalysts that

folks like to pay attention to is what

is retail doing and the fact of the

matter is they ain't capitulating retail

is not given up retail is diamond

handing and staying strong in fact if

anything flows by retail according to

vandertrak are increasing and not

decreasing this is a sign that retail is

not capitulating retail is not paper

handing retail is staying in this market

and they continue to be net buyers in

fact vandertrak tells us that there has

not been a single

day

that retail has been a net seller in

this market nope they have had zero days

of net selling in this drawdown cycle

the net buy is about 1.1 billion dollars

in uh in any previous session and that

really only leaves the one catalyst

which mostly affects housing and that is

is the federal reserve's path on

interest rates right now markets mostly

expect to the tune of 65 percent that

the federal reserve is going to come out

and do a 50 basis point hike

well we've got another month to go

before the fed actually comes out and

tells us ultimately what they decide to

do and between now and then we're going

to get a lot of housing data and this

housing data is very fascinating because

there are a lot of folks that say if

housing wealth goes down we could

actually see a real slowdown in spending

and then we could actually get our

earnings recession look at wayfair look

at kohl's look at target they're

struggling with the consumer yeah maybe

tesla and apple are still doing well

today but maybe they won't in three

months

so what is my

summary out of all of this and sort of

what's my thought and what would i be

thinking about doing well first of all

it's important to remember that i'm not

a financial advisor i'm not certainly

your financial advisor i'm just a guy

who makes videos on youtube i like to

consider myself an educator or a teacher

of perspective but i do have a diamond

hand coffee mug with a straw in it and

uh i'm wearing a t-shirt so

um take it all with a grain of salt but

anyway here's my thought i think for

most folks any kind of sell-off in this

market

especially if we get back to nasdaq

around 318 320 levels is an opportunity

to buy in to march lows and april lows

and lows that we've recently fortunately

come out of yeah we did have lower lows

in june but i think it would take a lot

of substantial pain for us to really

revisit those lows

we had new pain the last time around

inflation didn't peak on us that could

happen again we could again be cheering

an inflation peak commodity prices could

skyrocket as there's another energy

crisis for whatever reason one hurricane

and oil prices skyrocket again and there

goes inflation again owner's equivalent

rents for real estate could finally

catch up there are a lot of things that

could push this market lower but

personally i see all of it as

long america

get in on the best companies that you

believe in stay away from the momentum

gamble other than with little bits of

money that you're willing to lose

otherwise go long america whether that's

a basket of index funds one index fund

or some of your favorite companies

hopefully you're somewhat diversified

but the biggest thing for me is get in

the market not financial advice so that

way hopefully if the stock market does

recover at the same time as real estate

stays in the gutters you'll be able to

buy real estate and remember folks i've

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