If the overnight markets forecast the day, the S&P 500 futures are headed south again, perhaps for a full retest of the recent swing low at 4293.75. For once, Tech and Growth are dragging the market down as Energy and Financials lead.
The key line in the sand for day trading is 4385.75, which is the breakout candle from 9/22 and not too far below the overnight low of 4388 at this writing. The bears are in the driver’s seat below 4385.75, if not already. As we are approaching the end of the third quarter, anything is possible. Earnings (and accompanying guidance) will be the focus as we close out September at the end of this week. The market is slated to gap down in a true gap so Gap Rules apply this morning.
As yet, the Navigator swing strategy has not rendered a buy signal, and the market is failing at a mish-mash of key lines congregating around 4450 (the Algo trigger, 50, 21, and 5-day lines). As a result, the swing strategy remains in its 100% cash position from September 10th.
In addition to the S&P 500 index, the Founders Group has focused on day trading Energy (XLE) and Financials (XLF) in addition to the S&P 500 futures. There has been some ancillary benefit to the Russell 2000 (IWM) due to its exposure to regional banks and energy companies. There are several financial stocks (e.g., AIG) breaking out of bases.
The underbelly of this market may not be China’s real estate problems, though it merits a separate discussion. The developing problem is much more boring. As I sit here in Southern California and look out the window, there are lines of ships all the way down the coast to Newport Beach waiting to unload. Fully 12% to 15% of all containers in existence are stuck at sea. There is nobody to unload them – or at least not enough dock workers to unload them. Here are the cargo ships waiting around L.A. It is not unlike airplanes circling and waiting to land at an airport.
Seen from a worldwide perspective, the situation is somewhat unprecedented:
This truly is a crisis and is the reason for the shortages coming this fall. The UK has plans for Marshall law as the shortages lead to tensions in the population. And it isn’t just labor shortages at the docks but also a shortage of truck drivers that exacerbates the problems in the UK and even here at home. The UK is experiencing gas lines, and fuel prices have skyrocketed in Europe generally.
In the U.S., the government told us that workers would return as soon as the so-called generous unemployment benefits expired at the end of August. It hasn’t happened. Though there are many reasons for this, the vaccine mandates have further complicated the situation. Workers are told that the unvaccinated need to get vaccinated to protect the already vaccinated from a vaccine that is not protecting them and likely won’t protect the workers either. People are not that stupid, and they choose to quit instead of being forced to take the needle.
The situation is somewhat unprecedented, but it is what it is.
A.F. Thornton