Dear Reader,
Let's keep it quick today. With little news on the calendar and everyone sitting on their hands until tomorrow's Fed meeting, right now is the perfect time for a look at the charts...
Particularly the chart I'm about to show you - it happens to be the only chart you need when trying to "time" a rebound in the market.
Do you see those blue spikes at the top of the chart? They happened in October 2008, March 2009, August 2011, January 2016, and April 2020.
Those were all market bottoms: Right after Lehman Brothers crashed, the 2009 "Great Recession" market bottom, the 2011 European financial crisis, the 2015 yuan devaluation crisis, and the 2020 "COVID Crash."
Those spikes are the sum total of all insider buying at S&P 500 companies as compared to insider selling. "What are 'insiders,' anyway, Garrett?" I hear you ask...
Glad you asked. These are the people who have major, influential roles at these companies. The C-suite types. Think CEOs, CFOs, board members, 10%-plus stake owners, and other executives.
So when we define insider buying, we are talking about executives using their own money to buy their own stock. When they do so, they must file a Form 4 document with the SEC - the information's right there for anyone interested to know. The chart above is a calculation of insider buying against insider selling.
And as I intimated before, the ratio is strongest at the market bottoms.
Typically there is a shift in monetary or fiscal policy that benefits the market. And when that happens, the insiders all buy at the same time.
If you look at the chart right now, we don't have a spike. Nowhere close.
Which suggests to me that the bottom is not in.
Later today, we'll dig deeper into the raw power that comes with a grasp of insider buying patterns. My Flashpoint Trader subscribers can expect a rundown of which insiders are buying their stock right now. (Click here to get your insider's report delivered each morning.)
Here's What I'm Watching Today (May 2, 2023)
BRICS Woes: The bloc of nations wanting to shift away from the U.S. dollar is growing. Five Arab states plus Iran join a chorus of 19 nations that are prepared to join the BRICS. The news comes as the trade bloc prepares to hold its annual summit in South Africa. The BRICS are soon prepared to surpass the G7 (which includes the U.S.) in economic growth projections. The G7 will comprise just 28% of the global economy (and declining) in 2028. The BRICS will represent about 35%. Despite the ongoing chorus of concerns around de-dollarization - it's important to remember that nations don't engage in trade - companies do. The dollar remains highly liquid and convertible to other currencies. A company from Brazil selling grain to China may prefer the U.S. dollar, which can quickly be converted into reals or other foreign currencies. We will see the progress in trust around the yuan as a trading instrument or if more nations engage with the euro.
Debt Blowout: The problem is the spending! Janet Yellen, a walking "economic catastrophe," has told House Speaker Kevin McCarthy that the U.S. government may run out of funding for its obligations by June 1. After engaging in "extraordinary measures" (that is to say "paper shuffling") for a few months, it appears federal tax receipts can't paper over the never-ending binge of spending in D.C. The debt ceiling is largely a budgetary debate tool, as the Federal Reserve Staff in 2013 said that the debt can be repaid - it's just Congress stopping the borrowing authorization process. The Fed has called not raising the debt ceiling "a voluntary decision" to stop paying debts. Well, let's play the game again, children, because the story gets real in 2032 when the government is projected to be $50 trillion in debt, facing an insolvent social security system, an imploded Chicago pension system, likely two bankrupt states, and unfunded liabilities in the hundreds of trillions.
A Consumer Slowdown: Hedge funds are starting to bet big that American consumers are tapped out of money. Goldman Sachs reported very bearish positions among hedge funds on companies that sell non-essential consumer products. I wonder if this is finally it. I've been projecting this slowdown in consumer spending for three quarters, yet Americans remain resilient. If that slowdown hits, it might finally be enough for the Fed to raise the red flag for a shift in policy. We'll look at forecasts as earnings season continues. For now, I'm wondering if it shows up in Q3 or Q4 earnings reports.
Stay Liquid,
Garrett
The post Morning Update: Don't Call The Bottom Until The Buyers Start Biting appeared first on Midday Momentum.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.