Sevens Report Co-Editor, Tyler Richey, Quoted in Market Watch on July 31st, 2023

Stocks could sink into a bear-market recession, says technician. Here are five signals on when it likely starts.

“We continue to respect the rally and acknowledge the trend in equities is still higher, but we remain ‘patient bears’ with regard to stocks given the deeply inverted yield curve,” Tyler Richey, co-editor at Sevens Report Research wrote in a Monday report.

“We view the fact that most Treasury spreads have inverted to levels not seen since the early 1980s as a clear warning sign that the more than 500 basis points of Fed rate hikes in less than 18 months was way too much for the economy to weather,” noted Richey. 

Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on October 12th, 2022

Wall Street’s ‘fear gauge’ is flashing a warning that stocks could be about to fall off a cliff

In the past, these “golden crosses” have preceded sharp downturns in stocks. One occurred in September 2008, just before stock-market volatility exploded in response to Lehman Brothers’ bankruptcy, according to Tyler Richey, co-editor of the Sevens Report and a stock-market strategist who closely follows the Vix. Click here to read the full article.

VIX History and the Current Bear Market

What’s in Today’s Report:

  • A Look at VIX History and the Current Bear Market
  • Chart: 30-Yr Treasury Bonds Fall to New Lows

Stock futures are testing the 2022 lows this morning as global bond yields push multi-year highs amid renewed turmoil in the U.K.’s government bond market.

The BOE expanded its emergency bond-buying program overnight after Gilt yields spiked higher, with officials warning that market dysfunction is threatening the U.K.’s financial stability.

Economically, the NFIB Small Business Optimism Index came in at  92.1 vs. (E) 91.5 for September.

There are no additional economic reports today but there are two Fed officials scheduled to speak: Harker (11:30 a.m. ET) and Mester (12:00 p.m. ET).

Looking back to the bond markets, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and if the results are weak, sending yields higher, that would further pressure stocks today.

Bottom line is, turmoil in the U.K. Gilts market is once again sending global yields higher and weighing on risk assets and if we don’t see bond markets stabilize this morning, then expect stocks and other risk assets to remain under pressure today.

The Current Reality Facing Stocks (Not Good)

What’s in Today’s Report:

  • The Current Reality Facing Stocks (Not Good)
  • Technical Update:  Watch the VIX
  • Weekly Economic Cheat Sheet:  CPI Thursday is the Key Number
  • Weekly Market Preview:  Can Earnings Hold Up?

Futures are slightly lower as markets digest the implications of Friday’s strong jobs report following a mostly quiet weekend.

Friday’s jobs report won’t make the Fed any more hawkish, but it’ll keep stocks facing a dual headwind of aggressive Fed and earnings pressure, and that’s weighing on futures.

There were no notable economic reports overnight.

Today is Columbus Day so there are no economic reports while the banks and bond market will be closed, likely leading to slow trading in stocks.  There is one Fed speaker, Evans (9:00 a.m. ET), but he shouldn’t move markets (at this point it’s well-known what the Fed plans to do).

Did the Markets Achieve Peak Inflation & Peak Hawkishness

What’s in Today’s Report:

  • Keys to a Bottom Update:  Did the Markets Achieve Peak Inflation & Peak Hawkishness?
  • Weekly Market Update:  Can Stocks Hold the Recent Gains?
  • Weekly Economic Cheat Sheet:  All About Growth This Week (And the Data Needs to be Solid)

Futures are modestly lower after Chinese economic data missed estimates and the Chinese central bank cut rates in response.

Chinese economic data was soft as Industrial Production (3.8% vs. (E) 4.3%) and Retail Sales (2.7% vs. (E) 4.9%) both missed estimates.  In response, China’s central bank announced a surprise 10 bps rate cut, a move that signals economic concern but also doesn’t offer a lot of help (a 10 bps cut won’t make a difference as long as “Zero COVID” is an in-force policy).

Focus today will be on the August Empire Manufacturing Survey (E: 5.0) and specifically the price index within the report.  The sharp drop in that price index kicked off the “peak inflation” rally of the last month, so markets will be looking for continued signals that growth is stable (so a solid headline reading) and inflation is falling (another drop in the price index).

We also get the July Housing Market Index (E: 55.0) and we have one Fed speaker,  Waller (10:50 a.m. ET), but they shouldn’t move markets.

Why Stocks Rallied Last Week

What’s in Today’s Report:

  • Why Stocks Rallied Last Week
  • Weekly Market Preview:  Can the Rally Continue?
  • Weekly Economic Cheat Sheet:  More Important Growth Data This Week

Futures are slightly higher mostly on momentum from last week’s rally and following a quiet weekend of news.

In China, the economic reopening continued as Shanghai reported no new COVID cases for the first time in two months while Beijing allowed most schools to reopen on Monday.

Geo-politically, Russia defaulted on a debt payment, but this was widely expected so it’s not impacting markets.

Today focus will be on economic data via Durable Goods (E: 0.5%) and Pending Home Sales (E: -2.5%) and markets will want to see continued moderation in the data (so a slowing of activity, but not a steep drop that might imply a “hard” economic landing).

An Important Technical Level to Watch

What’s in Today’s Report:

  • An Important Technical Level to Watch

Futures are slightly higher despite disappointing economic data and a greater than expected rate hike from another foreign central bank.

June flash PMIs were mixed as the EU flash Composite PMI dropped sharply (51.9 vs. (E) 54.0) while the UK flash Composite PMI slightly beat estimates (53.1 vs. (E) 52.7).

The Norges Bank (Central Bank of Norway) became the latest central bank to hike more than expected (50 bps vs. 25 bps).

Today’s focus will be on economic data via the Flash Composite PMI  (E: 56.3) and Jobless Claims (E: 225K), and the market will be looking for moderation in the data (small declines that imply Fed hikes are working, but not drastic declines that imply economic growth is careening off a cliff).  We also get the second half of Powell’s Congressional Testimony before the House Financial Services Committee, but that shouldn’t yield any surprises.

Finally, oil continues to be one of the most important short-term market influences.  If oil can fall further, that will put a tailwind on stocks.

Is the Outlook Really This Bad?

What’s in Today’s Report:

  • Is the Outlook Really This Bad?
  • Weekly Market Preview:  FOMC Decision Wednesday (Will It Be More Hawkish Than Feared?)
  • Weekly Economic Cheat Sheet:  A Busy and Important Week (ISM Manufacturing PMI today, FOMC Decision Wednesday, Jobs Report Friday)

Futures are enjoying a modest oversold bounce following Friday’s selloff, but there was no improvement over the weekend on the three headwinds pressuring stocks:  Chinese growth worries, Ukraine war and hawkish Fed.

Economic data was mixed as the April Chinese manufacturing PMI dropped further (to 47.4 from 49.5) while the EU PMI slightly beat estimates (55.5 vs. (E) 55.3) and German Retail Sales underwhelmed (-0.1% vs. (E) 0.3%).

Today focus will be on the ISM Manufacturing PMI (E: 58.0) and markets need to see a solid number to push back on stagflation concerns.  If we get a weak number, expect the selling to resume and stagflation fears to grow.

Earnings season will begin to wind down this week but there are still some important results coming and some we’re watching today include:  NXPI ($3,17), CAR ($3.54) and MGM ($-0.09).

Tom Essaye Quoted in Barron’s on December 29, 2020

Still, there exists some probability of a bear market. Factors that could send stocks south include the emergence of a vaccine-resistant, Covid-19 strain, or other bad news on the vaccine front, Tom Essaye, founder of Sevens Report Research, wrote in a Monday research note…Click here to read the full article.

Was that the Bottom? (Technical Update)

What’s in Today’s Report:

  • Technical Update: Was that the Bottom?

Futures are lower and giving back about 1/3 of yesterday’s massive rally on digestion and potentially negative U.S./China headlines.  There was no notable economic data overnight.

The Trump administration is considering an executive order banning U.S. companies from using Huawei and ZTE products (both Chinese firms).  This represents a potential escalation in ongoing U.S,/China tech/trade conflict, although so far China has viewed the trade and tech issues separately, and that needs to continue otherwise this market will face additional headwinds.

Today markets will try and digest yesterday’s massive rally with the best case scenario being a continued rally that sees the Dow and S&P 500 close above near resistance levels.  Economically, we do get multiple reports including  Jobless Claims (E: 217K), FHFA House Price Index (E: 0.2%), New Home Sales (E: 560K) and Consumer Confidence (E: 134.0) although none of those should move markets materially.