If you think the activity of stocks -- their gyrations and trajectories -- matters at all, I mean, at all, then last week was totally dispiriting.
We had so many breakdowns of so many groups that it was mind-numbing. Plus, the stocks that performed well were the stocks that you would reach for in a recession. In fact, when I perused the charts this weekend, the only winners -- the stocks you could have bought at the beginning of the week and made money -- were utility stocks.
How bad is it? You could have thrown a dart at the utilities and anyone you would have hit would have done well. The stock of FirstEnergy Corp. (FE) , the worst one I follow, performed the best.
In other words, again the "recession" retailers, plain and simple.
The individual carnage is instructive, because while many people are beginning to realize that stocks can't possibly handle the twin pincers of the Fed and tariffs, the vast majority of pundits persist with the assumption that the Fed is so right because the employment numbers have been so strong.
The pundits are so self-assured and are so righteous in their defense of the Fed that, as someone who observes stocks, I have to wonder whether the Fed -- and their lapdog acolytes -- are willing to ignore any negative signals at all from stocks.
Can you just keep insisting that the stocks of Toll Brothers (TOL) and KB Home (KBH) and D.R. Horton (DHI) and Lennar (LEN) mean nothing? I honestly believe that if Jerome Powell were to scrutinize the charts of Weyerhaeuser (W) Y, Vulcan Materials (VMC) , Martin Marietta Materials (MLM) , Home Depot (HD) , Terex (TEX) , United Rentals (URI) , Mohawk (MHK) , PPG Industries (PPG) and dozens of others that are involved in the construction of housing -- both homes, particularly developments -- it would mean NOTHING to him.
He's a like a racehorse with blinkers on.
The "action" means a lot to me, because these kinds of breakdowns have historically been harbingers of a rather severe slowdown in the economy.
Now there are many other charts that say "look out" in the tech world, including any cloud stocks and companies concerning the data center or internet of things that are just getting pummelled. You will get a respite with, say, a good Lam Research (LRCX) quarter, but then the selling begins anew. I think the weakness in tech has a ton to do with too much supply -- too many cloud stocks, for example -- and with the dwindling hopes of M&A in the semiconductor world. Nothing can find its footing in that category at all.
Oh and for the record, Micron Technology (MU) is your best tell in that uninvestable group -- and it is awful.
But it is the Mascos (MAS) and the Fortune Brands Home & Security (FBHS) kinds of stocks that have me really reeling: They are both down about 30% from the highs. Those are just bear moves -- and their charts are indicating that 5% mortgages are not only an anathema to builders but also to remodelers financed by expensive home equity lines.
Perhaps the most egregious performers last week were the industrials, the perfect bookend to the collapse of housing because they are under attack from the tariff war AND the Fed. Can you imagine? How can the Fed get even more hawkish when we have a president who I think has passed the point of no return when it comes to negotiations with China. Sure, the Chinese market put on four percentage points and that did turn around our futures, but talk about fatuous reasoning. We will most likely be excluded from any turn the Chinese have in their economy, not that I expect one, because of politics.
I guess that doesn't matter to Powell either.
Look, maybe the stocks are ALL wrong. Maybe the fact that the stock of CSX (CSX) went down after that fantastic quarter means nothing. Perhaps we shouldn't care about the PPGs or the Wabash Nationals (WNC) . Maybe the Fed thinks that stock performances are arbitrary, capricious and random.
If they do feel that way, then there is no blinking. If they don't, the time is now to say "we will reassess after the December hike." Those words, right now, are the only reasons not to have a maximum cash position for what lies ahead.