• Stocks, bonds, crypto, and real estate got hammered.
• The dollar and commodities were up.
• We’ve resumed the bear market after a July respit

Happy Thursday!

One more day to go, and then we celebrate.

I’m extraordinarily concerned about the broad stock market now.

Let me show you why.

First, from a world-class hedge fund manager, courtesy of The Chart Report:

“There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market.”

– Paul Tudor Jones

Nick Reese put that statement into numbers:

Credit: @nicolastreece

With that in mind, let me show you a chart encompassing the last 32 years of the SPX:

The thin line running through the candlesticks is the 200-day moving average.

A sharp sell-off follows when we trade below the 200-day MA for an extended period - about six months.

In 2000: we had about six months before the bottom fell out.
In 2008: we had about six months before the bottom fell out.
In 2022: we’ve traded under the 200-day MA for six of the last seven months.

And the Fed is still hiking.

Ask yourself this: does this look like a safe environment to get long the stock market?

I want you to keep asking yourself that question as you flip through the charts below.

Because although I had to eat crow last month for that sucker’s rally we had, I’m starting to look like my old, prescient self again.

And I think “the last third” is right around the corner.

With that said, let’s get to the meat of the report.

S&P 500

Yes, it was a sucker’s rally, with the SPX losing about 4% in August.

The last three weeks of the month were horrendous for the market.  And now that the real traders are back from vacation, I can’t imagine them looking at this chart and thinking good things.

The macro numbers continue to disappoint.

Despite that, Jay Powell has his “savior’s complex” and will hike at least once more in September.

Nasdaq Composite

Again, the last three weeks of August were unkind to tech stocks.

The Nazzie dropped over 1,000 points, giving back nearly all its gains since June.

For both the SPX and Nazzie, we bounced off the 200-day moving average and are now below the 50-day MA.  From a chart perspective, this is ugly.

Russell 2000 (Small caps)

Yes, again, we were below both the 200-day and 50-day MAs.

With the underlying macro picture and awful energy bills wiping out small businesses, I can’t see the Russell holding up.

Next stop: $160, and I’m still looking at that $140-145 zone.

The US 10-Year Yield

I’m convinced Jay Powell (and Neel Kaskari - the dovish dunce now turned hawkish heretic) will crash the SPX to become the next “Volckers.”

Calling interest rates is a fool’s game.

But I’ll take my chances.

Here goes: We will have a tough time getting back down under 3% from here on out.

I don’t know how high rates will go, but they’ll most likely stay above 3%, thanks to the Fed.

Dollar Index

From three months ago:

My guess is the USD will hover between 98 and 104 until Powell convinces the market he’s going to squash the inflation threat.

Fed Board member Waller wants hikes until rates hit at least 2.5% but is happy to go higher.

If the rest of the Fed Board feels that way, the USD will retest 105 and break through.

And I still stick to what I said last month::

We broke through 104 and headed straight up to 109 before retreating.

I still think the USD has more to go - and I stick to my 120 call.

But Powell’s moves over the next few months will determine whether I’m right.

USG Bonds

We bounced off the overhead supply at 119 and headed back down to 111.

I’m a bond bear, as I can’t find a reason to own the things with inflation this bad.

I’m still looking at $105 for my target level.

Investment Grade Bonds

From last month:

We clearly bounced off my 107 level and proceeded to make the 114s.

Again, this could be the beginning of the end, as we need to break through 115.

My guess is that we’ll head back down to 107 shortly.

Yup.  Nothing to add there.

High Yield Bonds

Yup, a furious sucker’s rally here.

Junk headed right back to where it started.

In bear markets, we see these whipsaws all the time.

It’s essential to stay the course.

Real Estate

Yup, a drubbing in the final weeks of August.

If we get below 86, there’s nothing between there and 72 to hold it up.

Very bearish on this, as housing affordability is going up in smoke.

Base Metals: Copper

From last month:

Dr. Copper made a nice recovery in the last half of the month.

That was after a staggering selloff to end last month and start July.

This looks like a dead cat bounce to me.

Yup, it was indeed a dead cat bounce. It’s probably heading to 2.90.

Precious Metals: Gold

I’m just not talking about gold.

It shits me to tears.

Down again.  That’s all I’ve got to say about that.

Precious Metals: Silver

Yawny McYawnface fell nearly $3 last month.

I imagine that has to do with decreased industrial demand.

Yawn.

Cryptos: Bitcoin

BTC’s chart is broken.

I just don’t see how it’s going to recover this cycle.

I’m still thinking $10,000.  Or below.

Cryptos: Ether

Better than BTC, but still not good.

I’m inclined to think this will also get crushed in due time.

Though I genuinely do love ETH’s use case.

Trad Asset Class Summary

We’ll most likely have one last 75-bp hike from the Fed in September.

Jay Powell’s speech virtually assured us of that, and Mr. Market acted accordingly.

Bonds were trounced, down 5.78%.  The SPX gave away half its gains from July, down 3.97%.

The dollar jumped 3.16%, as the expectations of rising interest rates are dollar positive.

Despite the dollar rising, commodity prices also rose, up 1.50%.

Crypto Class Summary

Ok, crypto flattered to deceive this month after a cracking July.

Ethereum was only down 4.69%.  Not bad, all things considered. But…

Bitcoin got hammered again and, at the time of writing, is trading under $20,000.

The other big coins had pretty large losses this month.  Winter is indeed here.

Wrap Up

Ok, we’ve resumed the downtrend after a month of dead cat bouncing in most asset classes.

It’s not surprising, but perhaps the rate of change took some by surprise.

We’re heading down further in most asset classes, so batten down your portfolio hatches.

I usually post a meme at the end of every Monthly Asset Class Report.  But this time, I’ll post a tweet that is entirely serious… but reads like a meme.:

Credit: @TruthGundlach

Ok, here’s a real meme:

Have a great day ahead!