By Jeffrey Cohen, Investment Advisor Representative
US Advanced Computing Infrastructure, Inc.
We saw 10 things in the market today.
Pre-market movers tended to be small, except $GOEV is up this morning 74%, and $TWTR is flat. Most of our 'hot' industry sectors are pretty flat today. $MULN is active this morning too.
Riskiness of individual stocks has climbed again. Individual stocks have blown out their correlations, and risk (or closing price variance) is up ~20% just recently on both profitable company, and unprofitable company stocks. Those variances are significantly higher than the $SPY now. Also, the risk free return continues to rise, and so expected returns on stock market investments are down. Our conclusion from this is that stock prices must fall, all things being equal, to incent investors to re-join the market and invest fresh money.
Our CQNS UP model picked new stocks. 11 to 17 stocks to get a 6 tick advantage over the $SPY in risk-return. These are large tech, money managers, chips, and a few very low risk stocks to even things out for the portfolio. This is a different answer than before, and worth looking at. This is where the model wants you to go...stocks that have already fallen ~50% and have started to stabilize. It does not mean they cannot fall further, but these stocks are starting to reach the 'zero slope' point in their stock movements.
Our CQNS Down model is still picking similar stocks, and these are either zero profit companies, biotech, or in-play declining stocks like $CVNA Carvana.
US Treasury bonds are up, back to prior support levels. This is because long rates are falling, and likely due to recession fears. In a recession, or in times of turmoil, people would rather hide their money in no-risk US Government bonds than put them into productive investments like building a factory. We also think the EuroDollar fall to parity is due to European big money coming to hide out in US Treasuries.
Japanese Yen is also falling, with the US Dollar buying over 137 Yen. We think this is because Japan (Japan Central Bank) is weakening the currency to protect low interest rates and support manufacturing and the domestic economy.
Mortgage backed securities are up slightly this morning, and mortgage rates are down slightly. Last night we did some homework and we think housing is showing weakness. This would result in some problems paying on recent mortgages as housing prices have been elevated. Nobody wants to carry a home mortgage that is under-water. Also, it is hard to refinance a home when the value falls.
We still have poor market breadth. New Lows greatly outweigh (more than 10:1) in both US fixed income corporate bonds and US equities. Do not catch a falling knife. Those are continuing to fall, and fall farther into new low territory.
Bitcoin is back to $20,000, or it's new support level.
Commodities that are economically sensitive are down hard, either 3% or 4% down this morning, including copper, crude oil WTI and silver.
Pre-market movers $GOEV $MULN $RGC.