Home Stock Granddad Russell, Grandma Retail and Grand Debt | Mish’s Market Minute

Granddad Russell, Grandma Retail and Grand Debt | Mish’s Market Minute

Granddad Russell, Grandma Retail and Grand Debt | Mish’s Market Minute


On August 1st, as many cheered the rise in GDP (partly as a result of client spending is 70% of the GDP), one other company didn’t cheer in any respect.

With Authorities Debt to the GDP ratio tremendous excessive, coupled with excessive rates of interest, Fitch was not having it. They see this as an enormous stress on the financial system.

In 2011, the final time the US had a downgrade, the Fed promised to maintain charges low. That turned out to create an enormous purchase alternative. Now although, the Fed makes no such promise. They’ve inflation, a robust labor market, and now a debt downgrade on their palms. This leaves little or no wiggle room for the Fed to maneuver.

In 2011, the Fed was not nervous about inflation. Now they’re. 

However what do Granny and Gramps of our Financial Fashionable Household must say about that?

It is a nice time to take a look at the month-to-month charts. Keep in mind, our thesis was that over the 23-month transferring common (blue line), the index or sector indicators enlargement on a 2-year enterprise cycle.

All of the indices completed that, together with IWM, the Russell 2000. Sure, Gramps was final of the 4; nonetheless, he is gramps.

Now, with the information of the downgrade, IWM is taking a breather. However not too unhealthy at this level. With numerous authorities spending supporting manufacturing and business within the US, Gramps WANTS to broaden. In fact, that’s how the federal government created a lot debt within the first place…

However can it final? August has simply begun, so we don’t actually know at this level.

Granny Retail then again, has but to clear its 23-month MA and persuade us that the retail client is hanging round for a greater second half of the yr. That makes for some attention-grabbing diversions.

191 is the extent for IWM to carry. On a shorter timeframe, 193 is the July 6-month calendar vary excessive. Proper now, each ranges are intact.

67.40 in XRT is the July 6-month calendar vary excessive; the value sits beneath that. 69.50 is the 23-month MA; the value sits beneath that. Ought to XRT break 66.00, that may be a signal of weak point.

Backside line: Granny has the buying energy and the larger affect on the GDP. We like the place IWM is holding for positive. With out his bride although, as we speak’s downgrade is a harbinger.

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Coming Up:

August 3: TD Ameritrade Macro Present

August 10:The Ultimate Bar on StockCharts TV

October 29-31: The Cash Present

  • S&P 500 (SPY): Failing the July calendar vary excessive; observe through Thursday to draw back needs to be adopted.
  • Russell 2000 (IWM): 191 is the 23-month holy grail.
  • Dow (DIA): 35,000 assist.
  • Nasdaq (QQQ): Final 2 weeks of pricing worn out; now we watch 365-380 vary.
  • Regional banks (KRE): Again over 48 seems to be okay; underneath 44, not a lot.
  • Semiconductors (SMH): 161 now extra within the rearview, 150 in focus.
  • Transportation (IYT): Nonetheless very robust so long as it holds its July 6-month calendar vary excessive at 259.30.
  • Biotechnology (IBB): Compression between 123-130.
  • Retail (XRT): 66-67.40 short-term vary.

Mish Schneider


Director of Buying and selling Analysis and Schooling

Mish Schneider

Concerning the writer:
serves as Director of Buying and selling Schooling at MarketGauge.com. For practically 20 years, MarketGauge.com has supplied monetary data and schooling to 1000’s of people, in addition to to giant monetary establishments and publications corresponding to Barron’s, Constancy, ILX Programs, Thomson Reuters and Financial institution of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of many high 50 monetary folks to observe on Twitter. In 2018, Mish was the winner of the Prime Inventory Decide of the yr for RealVision.

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