A technical analyst and a fundamental analyst are chatting about the markets in the kitchen.
Accidentally, one of them knocks a kitchen knife off the table, and it lands right in the fundamental analyst’s foot!
The fundamental analyst yells at the technician, “Why didn’t you catch the knife?”
“You know technicians don’t catch falling knives!” the technician responds.
And then he asks the fundamentalist, “Why didn’t you move your foot out of the way?”
“I didn’t think it could go that low…”
Happy Saturday!
Looks Like “Up” to Me
The University of Michigan Consumer Sentiment Survey printed at 50.8 in May.
That’s the second-lowest print record. The consensus forecast was for 53.4.
All these unhappy consumers means there’s a lot more upside for stocks:
If it was the other way around – and all the consumers thought everything was great – then that would be the problem!
Take a close look at the chart above.
When sentiment is down – 1980, 2009, 2012, 2022 – historically it’s been a great time to be buying stocks.
U.S. Debt Downgraded
It’s not just the consumer that’s upset. Remember the bond rating agencies?
Yes, they still exist.
And it appears they haven’t embarrassed themselves enough yet.
Moody’s released a statement on Friday night after the market closed saying it was downgrading debt issued by the United States of America.
Now, to be fair, Moody’s is just following what the other two rating agencies have already done.
It’s the blind leading the blind over there.
But, by my math, nothing has changed.
The market’s reaction to past downgrades suggests this is noise, not a signal – just like in 2011 and 2023.
Here’s a rule of thumb, with a qualification…
Whenever these ratings agencies downgrade U.S. debt, you buy stocks.
It’s worked great in the past. And it should work here once again.
Stocks did well after 2011 and 2023, when Standard & Poor’s and Fitch, respectively, downgraded U.S. debt.
Being the third man in makes the Moody’s move less dramatic – think of it more like a useless formality.
Yes, stocks usually go up after they downgrade U.S. debt.
But stocks are going up anyway.
So don’t overthink it.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs