Global risk assets peaked at the end of July, fell for three weeks and bounced into the end of August. We are seeing three wave retracements across the board in every risk asset class from Tech stocks, to EM markets, and junk bonds. Nvidia made a new high last week post earnings, but the rest of the AI trade got obliterated in August. And now we see the minor bounce.
Don't tell bulls that the AI trade actually peaked over a year and a half ago. They still haven't figured it out.
In August, the government of China went to great lengths to support their markets, but still the Hang Seng fell into bear market. Apparently, very few people remember 2015 when the Chinese government did everything possible to keep markets from imploding, but nothing worked. Among the desperate gimmicks they tried, was banning short selling, then banning institutions from selling. Shutting down the market for days at a time.
Here we see that none of that worked last time and it's not working this time either.
Nevertheless, entering the worst month of the year seasonally, the onus is as usual back on the bears to prove this is not a great new bull market. Leave aside the fact that the market is set-up almost exactly as it was last year. The oscillator bounced at the same level as last August and has now rebounded back to the same retracement level - while the S&P backtested the 50 dma. Relative to last year, this decline is ahead of schedule. That selloff reached its low in October, whereas this one will likely reach its selling climax in September.
Between now and the next FOMC meeting in September, there are several key economic reports, any one of which could reinforce Powell's hawkish view and explode markets.
The stock market has no leadership anymore. The Tech generals all sky-rocketed in July and crashed back to Earth in August. All except Nvidia of course which made its high last week and has been attempting to make new highs this week. Alas, so far that has not happened. When the leading stock cannot confirm its own breakout, then the market has no leadership.
On the economic front, bulls are now literally praying for a collapsed economy. This week we got news that job openings are falling, which sparked a manic rally in stocks. It never occurs to these people that job openings may have fallen because more people got jobs. We'll find out on Friday.
In summary, the great global deleveraging has already begun, in China. Soon it will spread to the rest of the world as the panic rate hikes begin to take effect. Only a fool would believe that the country lowering interest rates will be forced to delever, but the economies that are panic raising interest rates will not.
Hence, that's the consensus view for 2023.
Soft landing for super cycle fraud.