Phony Data Lured Investors Into A Bull Trap
The phony US jobs numbers from Washington have lured millions of market participants into the markets since February, as we explained in previous articles titled “The Fake Employment Statistics Exposed” and “Why the Bullish Employment Report is Complete BS”.
Investors fell for the fairy tale of a “strong economy and job market.” Based on the false statistics from the BLS, billions of dollars flowed into stocks.
Now the bull trap is closing as other parts of the bull trap have been exposed. Let’s look at other important deceptions this year that enticed big investors and money managers into the market.
For example, since January, the big money flowed into the “Magnificent 7” stocks like Apple, Google, and Microsoft among others.
Seven of the 500 stocks in the S&P 500 index were responsible for all the gains in the index this year until June. That means that 493 stocks were basically flat. That fact became well known in the middle of this year and therefore the market manipulation had to broaden out and involve the small cap indices as well.
Here’s the chart we showed our members in our June 11thWellington Letter (via Goldman Sachs)
Apple is often used to draw attention to rallies and entice investors to get into the market. It is the most widely held stock among investors, both institutional and retail. However, now it appears that the manipulated market rally is over.
The big story on Friday (August 4th) was that Apple missed the estimates for their fiscal Q3 earnings report. The stock opened the day on a down-gap, then closed down 4.8%. That is a significant drop for such a high cap firm. When Apple can’t even be supported, we say “watch out below!”
Friday’s drop was Apple’s worst single day loss since September 29, 2022. For the week AAPL fell 7.1%, its worst week since November 2022. See the 2-day chart below.
Everyone has been bullish. And there is a lot of Apple stock to be sold when the decline gets serious. First good chart support is the 170 area. That is also the Fibonacci 38.2% retracement area of the recent rise (blue horizontal line).
Our proprietary Dohmen Money Flow indicator at the bottom has not confirmed the up-move in the stock since April and continues to descend.
Yes, they do ring a bell on Wall Street, if you know where to listen.
Now let’s look at the daily chart of the S&P 500. The rising wedge led to a downside breakout last week. That is usually very bearish. First support is not till the 4300 area (light blue horizontal line). Our proprietary Dohmen Rate of Change indicator at the bottom of the chart is on a “sell” signal.
THE FED: No one mentions that the Fed is NOT “tightening.” They are just hiking rates, which is NOT tightening. The banks are doing the real tightening by rejecting many loan applications. We hear that the desks of the lending department of banks are empty. And that is an important indicator for us that the official recession is near.
That will bring it in line with the unofficial recession we are having now. The Dohmen Theory of Liquidity & Credit says that “liquidity and credit” trends are the primary determinants in setting the trend of the broad stock market. If both contract as they now, the stock market major stock market trend will be down.
For confirmation of banks tightening lending standards, here is the chart from Bloomberg: The beige line (“Banks’ willingness to make consumer loans”) is well below zero.
The LEI (Leading Economic Indicators) have declined for 16 consecutive months and have been at historically accurate recession levels.
The private sector statistic for economic activity, the ISM Manufacturing PMI, is more reliable than what comes out of Washington. Here is the chart which shows that it has been below the neutral 50 level since October last year. That means we’re already in a manufacturing recession.
Readers of our astute research services like the Wellington Letter, which has been in publication since 1977, are kept informed about the falsehoods propagated to fool them by those with conflicts of interest of Wall Street.
Knowing the truth is the difference between making good profits or protecting them from big losses.
Wishing you successful investing
Bert Dohmen
Founder, Dohmen Capital Research
P.S. If you enjoy reading research and insights like this, we encourage you to read our latest award-winning Wellington Letter, titled “The Last Hurrah?” (published July 30th) by signing up today at DohmenCapital.com.
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