The level to watch in the S&P… awful consumer sentiment numbers… more data showing a deteriorating U.S. consumer… Amazon’s $50B AI spend for the government… a free AI stock from Luke to buy today VIEW IN BROWSER As I write late-morning on Monday, the S&P trades just below a critical fork-in-the-road level: $6,850. If we can break and close above it over the next few days, we’re likely heading to new all-time highs by Christmas. But if the market doesn’t break that level, it could mean retesting November's lows – or worse. To make sure we’re all on the same page, about two weeks ago, the S&P ended a historic run… It closed below its 50-day moving average for the first time since April 30. That stretch – 198 days – clocks in as the 5th longest uptrend since 1950. But as you’ll see below, we didn’t stay below that line for long. As quickly as we lost the 50-day MA, we recaptured it last week… 
Losing the 50-day MA doesn’t automatically mean we’re destined to fall further, but it certainly wasn’t bullish. And it adds weight to what happens at $6,850. To help contextualize the importance of this level, in the chart below, notice the following: - The S&P set an all-time closing high at $6,890 on October 28
- It then fell, carving out a new series of “lower highs” and “lower lows” into mid-November
- The recent bottom
- The rally back to $6,849 as of last Friday, which was just a shade below the first “lower high” at $6,850.
Why this matters If we keep rallying, pushing north of $6,850, we’ll break the recent series of lower highs and lower lows – an important step for the continuation of this bull market into December. But if $6,850 becomes resistance, the recent downtrend strengthens and amplifies the potential for an entrenched new trend line of “lower highs” and lower lows” as the chart below illustrates… 
This would mean it’s more likely we’ll retest $6,540 in the coming weeks – potentially, setting a new “lower low” if we don’t hold. In this scenario, we’re less likely to enjoy a Santa Rally to close out the year. So, where we close today and how we trade over the next several days are essential for December’s price action. As I write late morning, the S&P is headed in the wrong direction. We’ll report back. Last week, the consumer sentiment report was a disaster, hitting its lowest level since April Let’s go to our hypergrowth expert, Luke Lango, editor of Early Stage Investor, for details: The consumer is down – like, really down. The Conference Board Survey was ugly. Consumer Confidence plunged from 95.5 to 88.7, very close to a 10-year low. Present Situation index plunged from 131.2 to 126.9, the second lowest since early 2021. The Expectations index plunged from 71.8 to 63.2, the second-lowest in the last 10 years. Not good numbers – but the consumer is still spending, and that’s really all that matters. Luke is correct in saying that spending is what matters for our economy – even if sentiment is deteriorating. Still, we want to track this because strained sentiment can eventually crystallize into closed-up pocketbooks. So, what’s driving today’s bad sentiment readings? To begin, the number of Americans falling seriously behind on their credit card payments is soaring, nearly setting a 15-year high. Here’s Newsweek from last week: Credit card balances alone jumped $24 billion, reaching an all-time high, while the share of balances in serious delinquency – 90 days past due – climbed to a nearly financial-crash level of 7.1%. It’s the same story with auto loans. “Serious delinquency” rates are at 3%, the highest rate since 2010. This is resulting in a spike in repossessions. From a recent report from the Consumer Federation of America: Delinquencies, defaults, and repossessions have shot up in recent years and look alarmingly similar to trends that were apparent before the Great Recession. Meanwhile, as we touched on last week, Americans with student loans are increasingly struggling financially. Back to Newsweek: Student loan delinquencies, often a precursor to broader consumer financial troubles, have accelerated at an unprecedented pace. Rates surged to 14.3% in the third quarter from only 0.8% in the fourth quarter of last year… According to a separate analysis of Department of Education data by the American Enterprise Institute, 5.5 million student borrowers are in default on their loans, with another 3.7 million over 270 days delinquent. Why this matters: The U.S. consumer is still 70% of our economy Two weeks ago in the Digest, I highlighted a growing concern… AI is phenomenal at efficiency – but it’s terrible at consumption. So, what happens to our economy when the very consumers who fuel it have reduced spending power? Now, before we go too far here, a disclaimer… It’s not yet proven that AI is replacing human workers on a broad scale. Today’s labor-market weakness reflects a mix of macro forces – inflation, elevated interest rates, and slowing demand – not just AI. But we’d be foolish not to connect at least some of the labor-market tightness to AI and pay attention to the direction the data is pointing. Consider the outplacement firm Challenger, Gray & Christmas, in its November 6 report: JOB CUTS SURPASS 1 MILLION; HIGHEST OCTOBER TOTAL SINCE 2003. COMPANIES CITE COST-CUTTING, AI IN OCTOBER In October alone, Cost-Cutting was the top reason employers cited for job reductions, responsible for 50,437 announced layoffs. Artificial Intelligence (AI) was the second-most cited factor, leading to 31,039 job cuts as companies continue to restructure and automate. “Cost-cutting” sure sounds like a polite way of saying “AI” when management doesn’t want to admit the truth. After all, what does AI do better than cut costs? This is a real risk factor – a structural shift that could amplify the cracks we’re already seeing in consumer credit and sentiment. All eyes on Tuesday, December 16, when we’ll get the delayed BLS jobs report. Bottom line: AI can automate, optimize, and replace employees – but it cannot spend like a consumer. And with rising delinquencies in credit-card bills, car loans, and student loans suggesting that many American consumers are under strain, this is critical to watch. While it may be just ugly sentiment today, the risk that it turns into ugly spending behavior tomorrow is rising. Now for spending that’s anything but ugly… Last week, Amazon (AMZN) announced it will invest as much as $50 billion on AI infrastructure that supports U.S. government agencies (disclaimer: I own AMZN). Let’s return to Luke for the significance: [This is] a sweeping expansion of AI compute infrastructure purpose-built for U.S. government customers. That wasn’t capex for capex’s sake – that was Amazon laying down a sovereign AI runway for Washington. Overnight, the narrative jumped from “AI Bubble?” to “AI as State-Backed Strategic Priority.” That jump in narrative matters – because it’s the same dynamic now shaping Luke’s newest body of research. Luke believes headlines like this one from Amazon aren’t one-offs. They’re symptoms of something much bigger… The federal government’s campaign to secure U.S. dominance in AI, semiconductors, critical minerals, nuclear tech, drones, and more. From Luke: A new war is underway – not on battlefields, but in silicon, code, and data. It’s the race for AI dominance. And once again, Washington has stepped in to pick winners. This year, the biggest force in the markets isn’t the Fed. It’s not Wall Street. It’s the U.S. government. It’s already triggered triple-digit moves in AI stocks… and it’s only getting stronger. To illustrate, Luke points to Intel (INTC), MP Materials (MP), Lithium Americas (LAC), and Trilogy Metals (TMQ). Following the government’s announced investments in these companies, their stocks soared between 70% and 400% in just a matter of days. But here’s the key… These investments aren’t random. Luke points out that the Office of Strategic Capital has published a detailed investment roadmap… It shows exactly which industries, chokepoints, and technologies are next in line for funding. Few investors even know this document exists. But Luke has spent months analyzing federal plans, connecting agency disclosures, CHIPS Act allocations, supply-chain bottlenecks, and contractor pipelines. And one company rose above all others. It’s already on Washington’s radar… supplies a critical AI chokepoint… has direct federal touchpoints… and, according to Luke, could be positioned for a 10X-type move if selected. He’s revealing this company’s name and ticker – free – in his latest White House AI Briefing, available now for a limited time. Click here to watch Luke’s presentation and discover his free AI stock pick. Shifting over to Fed news, how fast things change As I write Monday morning, Wall Street has done an amazing reversal of expectations about rate-cut expectations at the Fed’s FOMC meeting next week. According to the CME Group’s FedWatch Tool, as recently as Wednesday, November 19, traders put only 30.7% odds on a quarter-point cut in December (which would lower the target range to 3.50% - 3.75%). But today, those odds have exploded to 87.4%. This reflects a shift by influential Fed voices (especially John Williams) toward a more dovish tone, and various economic signals reinforcing concerns about a growth slowdown. Coming full circle to our technical analysis that opened today’s Digest, all this new rate-cut enthusiasm lands right on the doorstep of $6,850. If the Fed plays along next week, it could embolden the bulls, turning $6,850 into a launchpad, and ushering in an early visit from Santa… But with the consensus expectation now being a cut, if the Fed disappoints, $6,850 becomes a ceiling, and December turns less “Santa” and more “Grinch.” We’ll keep you updated on all these stories here in the Digest. Have a good evening, Jeff Remsburg | 
0 التعليقات:
إرسال تعليق