Don’t Miss a Post. Subscribe now.

The Market is Oversold, So What? It’s Destined to Become More Oversold

May 6, 2022

•

9:17 pm

•

51 comments

•

Economics

*Jerome Powell is all powerful image from Fox Video clip*

Hoot of the Day

My hoot of the day is a bonus double play from the same person.

Charles Payne says The Market is Oversold

Well OK it is. That’s hardly worth a hoot. But the rest of what he has to say is. Let’s look at a pair of ideas.

“One thing is not up for debate. Jerome Powell is all powerful.”
“I do believe the market is oversold. I am licking my chops. Right now my subscribers have a 25% cash position. We’ve taken some losses to help build that. I’m gearing up for the next big move higher. We’re gonna have major, major bounces, bounces so big you can make money from them. Once you get out, it’s all she wrote. You’ve made a mistake.”

Nonsense From Bank of America Via MarketWatch

MarketWatch says Based on 19 bear markets in the last 140 years, here’s where the current downturn may end, says Bank of America

I’d post a clip but I won’t pay for garbage to do so. So let’s focus on the subtitle that caught my eye.

“Just $3 for every $100 invested has left the stock market,” says Bank of America

Mish readers no doubt are laughing their heads off.

Precisely $0 has left the market because leaving, in aggregate, is impossible.

For every sock sold there is a buyer. It is mathematically impossible for money to leave the market given that fact.

S&P 500 Weekly Chart

I created that chart a few days ago, but nothing has changed technically.

The bounces keep getting weaker and weaker.

Bounces can happen at any time, but I don’t expect a major one until the 3700 level or so. And I don’t expect that to hold.

Then we can expect a bounce at the 3200 level or so, and I don’t expect that to hold either.

For further discussion, please see my May 5 post Bond Massacre Continues and the Fed Dove Rally Fails Already

One final point: In bear markets, “oversold” can last a long, long time just as “overbought” goes on and on in bull markets.

So don’t let notions of oversold be your guide.

This post originated at MishTalk.Com.

Thanks for Tuning In!

Please Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

If you have subscribed and do not get email alerts, please check your spam folder.

Mish

Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

This post originated on MishTalk.Com

Thanks for Tuning In!

Mish

Comments to this post are now closed.

51 Comments

Newest

Oldest Most Voted

RGCheek

4 years ago

Mish, love your columns, but I disagree on this one item you have said before; money can and does leave the market.

If I buy $5k in ACME stock in 2019 that someone else had paid $1k for in 2001, then a net $4k has entered into the market.

If I now sell that stock for $3k to someone else, then $2k in loss has occurred to me and total market cap.

Where am I wrong?

Gordofeo

4 years ago

I find it comical that people freak out over the recent decline when the S&P is still up huge vs pre-Covid. Even Mish’s last support line at 3200 is only barely now pre-Covid record high.

BigGringo

4 years ago

Mish, why shouldn’t stock revert right back to the top before the pandemic. It was crazy that stocks climbed for a year and a half after the world stopped, and then slowly crawled out of the Covid doldrums (China still climbing back in!). So, I use the pre-pandemic high as my base and then go from there. The market had been on a fantastic 12 year run before then, so, was already long in the tooth. Everything we had since then was just gov spend high.

PreCambrian

4 years ago

John Hussman is a big proponent of the “no cash on the sidelines” and for every seller there is a buyer. So I don’t understand how they get these ideas of money flow and how they calculate it. If in one day the S&P 500 declined by 50% but only one share of SPY was sold and nothing else, how much money would they say left the market?

I can see how one could calculate money flow into ETFs due to share creations, etc. but for money into and out of the market, even when an SPY ETF share is created, they bought the shares of all the constituent stocks from someone who sold them.

Cocoa

4 years ago

We may be in a long protracted bear market. Death by a 1000 knives. The opposite of the bull which rallied incessantly due to liquidity. Powell needs ammo to save the markets which were going down anyways so once we hit a few technicals in deleveraging he probably will give up on QT. Mathematically he has to

Captain Ahab

4 years ago

Forget the media hype. Journalistic bull$hit!

What I want to know is what is going through the heads of boomers and millenials etc as they see their nest eggs shrink. When they start to panic all bets are off. Sure, there will be some profit taking along the way, but at enormous risk. The true BOTTOM is regression to the mean, plus over-ride.

Christoball

4 years ago

Reply to Captain Ahab

I agree. It will take another 12-15 months to get there but I see things going to pre Trump levels of 18,000 DOW. The Spring 2020 flash crash had us at 22,000 DOW and that was not that long ago.

worleyeoe

4 years ago

Reply to Christoball

I agree with the 12-15 months to find the bottom. There’s still a lot of economic oomph left to be taken out of the system, ultimately by some level of recession.

Lisa_Hooker

4 years ago

Reply to Captain Ahab

Increasingly they will be discovering that shares must be sold before they can be eaten.

killben

4 years ago

One more loony who knows it – S&P at 3000 not at 3001 or 2999 mind you. Lay your bet accordingly.

Financial Media is a den of loonies and knowalls.

Wall Street’s Most Accurate Analyst: “Today’s Bear Market Ends In October With The S&P At 3,000”

Nuddernoitall

4 years ago

Reply to killben

You refer to BofA’s chief investment strategist Michael Hartnett. In a group of 10 (or 100), Hartnett’s bear thesis stands out versus his peers like a sore thumb, because his bear thesis is playing more true each passing day. You and I know no one can call an exact market low or high — it’s all speculation with some viewpoints being more “defendable” than others — but in this current financial environment I would be inclined to suggest it’s not Hartnett who wears the looney tunes hat, but rather many of his market cheerleading peers. As always in these markets … we shall see!

goldguy

4 years ago

I am looking for Dow support next week at 31800. If that breaks then down to 30400.

Nuddernoitall

4 years ago

Reply to goldguy

Street level bottom floors for me are 29,500 Dow; 3,500 S&P; 10,100 Nasdaq. Unforeseen shocks to the worldwide financial systems would sink those levels into the basement, sub-basement or into the tunnels under the building. I like values, but I really don’t want to think about the broad and negative ramifications of those potential below ground-level discounts.

goldguy

4 years ago

Reply to Nuddernoitall

Dow floor is 27000 in my mind, doubt we get anything like that next week, but, who knows.

worleyeoe

4 years ago

Reply to goldguy

A floor of $27K, now that’s funny, if not a Mish “hoot of the day”.

We won’t find the floor until we’re about 1/2 through a recession.

Nuddernoitall

4 years ago

Saw some of those musings today somewhere on the financial news sites. Incidentally, I continue to lower my targeted entry points for a slew of stocks I follow. The non-energy and non-materials stocks are already down 30% to 60%. On a chart, they would appear to be ripe for buying activity, but I believe they will continue to drop. They will drop as earnings (high valuations, no Fed pillow) are affected by real challenges worldwide. (Problems we all know.) Did you see the consumer credit “scores” for March (latest data)? Historical highs in credit card usage and also, highs in revolving credit card debt. The American family is maxed out. Their savings stockpile has shrunk. Inflation is the major problem, and it won’t go away anytime soon. Stocks finally ready to be purchased because of an agnostic technical chart or “buy signals” from the “experts??” No, I don’t think so; I’m seeking a lower entry point and convinced it will appear in time. Patience is a virtue.

Jackula

4 years ago

Reply to Nuddernoitall

The maxed out personal debt is scary

worleyeoe

4 years ago

Reply to Jackula

Just like it was in 2007, but all of the real estate gurus keep saying this time is different. No, it’s not. There’s more than enough equivalents to subprime loan, which only were 12% of the market in 2007, systemic issues to cause housing chaos.

prumbly

4 years ago

Reply to Nuddernoitall

If the American family is maxed out, won’t they soon stop spending? And if so, isn’t that deflationary?

Six000mileyear

4 years ago

I’ve been counting Elliott waves. The daily chart looks more reliable. Intraday charts show basic patterns of zigzags and motive at one level, but at the next high level of pattern the rules are broken so badly that an alternate bull or bear count is nearly impossible to form.

Since E-waves is based on the theory that emotion drives markets, the bear case is favored over the bull case as indicated by the number of negative non-financial news headlines. Jerome Powell may be able to prevent a technical stock market crash, but he cannot stop negative mood.

Rogue_Onesie

4 years ago

well said. i hear “oversold” all the time for the last 10 years during the tiny dips … never “overbought” .
the hype MSM , stonk brahs , and circus tweeters … when they shut up, i’ll know the bottom is in.

Nuddernoitall

4 years ago

Reply to Rogue_Onesie

Maybe you don’t hear the term “overbought” but the RSI number provides a pretty clue. You’re probably familiar with RSI ….under 30 is oversold… more than 70 is overbought. I would be lying if I said RSI data didn’t influence some of my purchases or sales.

pimaCanyon

4 years ago

thank you. I’d say there’s lots of what is termed “recency bias”. Traders and even longer term investors have been “buying the dip” for years now and it’s worked well for them. So they will continue doing that, never mind what’s happening in the bond market, never mind what happens historically to stocks when the Fed raises interests rates, never mind we’re seeing the worst inflation since the 1980’s, never mind we have an old man with dementia as our President, never mind he’s already told us “there will be food shortages”….

ColoradoAccountant

4 years ago

Reply to pimaCanyon

Fortunate for me I put on that Pandemic 15 lbs to help me through the coming food shortages.

Lisa_Hooker

4 years ago

Reply to ColoradoAccountant

If it were only 15 lbs I’d be a happy camper.

Captain Ahab

4 years ago

Reply to pimaCanyon

Buy the dip works in a rising market. Not so good in a falling market. It is all about probability distributions, none of them normal–that is deeply skewed.

prumbly

4 years ago

Reply to pimaCanyon

If you had “bought the dip” at any time in history you would have gone on to make a fortune. So yes, this strategy has worked out well for investors since forever.

Jackula

4 years ago

I’m waiting for Palintir at $5. My gambling stock.

worleyeoe

4 years ago

Reply to Jackula

I also want to dump some into AI, QS & SLDP, & maybe a little into UPST.

thimk

4 years ago

Got pasta ? /s

MPO45

4 years ago

I picked up Cisco Systems (hold long term) and almost bought Apple instead but Apple can wait another week or two. I like Apple below $155. The question to be asked is if EVERY single stock is overpriced, oversold or perfectly neutral. The answer of course is, it depends. It is a market of stocks not a stock market and in any market there are values to be found if you are willing to do some due diligence.

Ultimately with inflation at 8%, cash is trash and money needs to return *something* and neither gold nor bonds will do it. For me, good dividend value stocks is where it’s at right now. Of course, I also have rental properties for that income and appreciation.

As Realist would say, a balanced portfolio….

thimk

4 years ago

Reply to MPO45

“money needs to return *something*” , maybe .

MPO45

4 years ago

Reply to thimk

Cash is losing 8% but I guess it’s supposed to be “transitory” and gold is still below $1900 and barely budged. Go figure.

Scooot

4 years ago

Reply to MPO45

Cash debasing isn’t transitory it’s permanent, just at different rates. Inflation is high now because as well as cash devaluing there are also shortages causing real prices to rise.

Don’t know if you’re aware of it but this site is interesting.

http://pricedingold.com/half-life-of-the-us-dollar/

MPO45

4 years ago

Reply to Scooot

So how is gold helping you right now? Not interested in theoretical hyperbole..

Scooot

4 years ago

Reply to MPO45

For me? Well it’s been much better than holding Sterling over the last few years.

However I was just trying to give you some more information to show how fiat devalues over time. I’m not trying to suggest Gold is the best investment, and in any case it’s very volatile so quite risky.

Jack

4 years ago

Reply to Scooot

Interesting chart, but the fitted second order equation only tracks with accuracy between 2002-2012 period.

Did not work before 2002 or after 2012.

I can make a lot of lines fit over a short term – but do not mean anything.

This chart cherry picked data to try and prove a point.

Six000mileyear

4 years ago

Reply to MPO45

Sometimes the “winner” is the one who loses the least.

PapaDave

4 years ago

Reply to MPO45

I think Realist had so much money he “had” to diversify all over the world. Kudos to his oil and gas stock recommendations. I bought every one and I am up huge. I also think he was spot-on in his analysis of the sector. Also, Kudos to Mish and this blog. Without it, I might have missed that investment opportunity.

Myself, I prefer to focus on the areas that hold the most promise going forward.

Oil and gas, Commodities and value stocks mostly. Still some banks and utilities with good dividends. Not yet ready to go back into tech and other growth. I left that party a little early, but I am patiently waiting. I don’t like trying to catch that falling knife.

As you say, it is tough to hold cash when it is losing close to 10% per year due to inflation.

Captain Ahab

4 years ago

Reply to PapaDave

At the top of a business cycle, oil/energy always peaks dramatically. Reason: high demand, constrained supply. Stand clear on the downside. Same factors, but in reverse

PapaDave

4 years ago

Reply to Captain Ahab

The future is uncertain. But I like my odds. Every week brings new info on supply problems. Not just in oil and gas. But all commodities. Palm oil. Wheat. Fertilizer. And on, and on.

Most energy stocks that I own have breakevens below $40/bbl. And they are drastically reducing or even eliminating their debt, which will serve them well in any downturn. World oil, gas, and distillate storage levels have been dropping for 2 years and continue to drop. Once those storage levels begin to rise, I will begin to lighten up on my oils.

It is very difficult to call tops and bottoms. I’ll bet you have been calling the top in oil for over a year now, and you probably will for another year. Meanwhile, some investors are making out like bandits.

Are you sitting in cash, waiting for the “crash”? If so, you are losing 10% per year to inflation.

worleyeoe

4 years ago

Reply to PapaDave

No I’m not in a down market that’s going to take at least 12-15 months to find the bottom.

PapaDave

4 years ago

Reply to worleyeoe

So worleyeoe, you ARE in cash. What’s wrong? Afraid to admit it? No shame in that. Then, when all other investments tank, you can claim victory because you lost less than everyone else, and can buy the bargains that remain. A good strategy if you can get the timing right. And I will toast your good call. And you can bask in the glory.

How long have you been in cash? Because timing a move like that is difficult. Some have been in cash for over a year now, waiting for the crash. They have lost 10% and I am up over 100% thanks to the stock recommendations on this blog.

Captain Ahab

4 years ago

Reply to MPO45

Engage brain! One year ago, Apple was at $121

The time to buy gold was a couple of years ago. Unless I’m mistaken Mish was saying it then.

Dr_Novaxx

4 years ago

XLE is good, commodities in general are good. Everything else is trash right now, either go to cash, or go short.

Christoball

4 years ago

Reply to Dr_Novaxx

Time will tell.

MPO45

4 years ago

Reply to Dr_Novaxx

Oil & Gas is good if they can find enough workers, materials, and investment. There is always a risk somewhere.

https://www.wsj.com/articles/in-the-top-u-s-oil-field-a-battle-for-materials-crimps-growth-11651089832

Captain Ahab

4 years ago

Reply to MPO45

World-wide recession headed your way. Oil back to $35 , same as 2008

Dr_Novaxx

4 years ago

Reply to Captain Ahab

but Captain! we’re given’ her all she’s got!

— Scotty

All technical signals are to the upside on WTI & Brent right now.

$200/bbl is in sight, especially considering MP045’s comments.

Dr_Novaxx

4 years ago

Reply to MPO45

Exactly! These constraints along with restrictions in new leases from the current Administration, to try to force the “green agenda” only enhance price pressure to the upside.

worleyeoe

4 years ago

Reply to Dr_Novaxx

And that’s why it’s going to be a GOP this fall, then again in 2024.

Click each image to view details or purchase in the store.

Stay Informed

Subscribe to MishTalk

You will receive all messages from this feed and they will be delivered by email.

Don’t Miss a Post. Subscribe now.

The Market is Oversold, So What? It’s Destined to Become More Oversold

Share this:

Recommended Articles

Decorate Your Walls with Mish Fine Art Images

Stay Informed

Subscribe to MishTalk