New public postFrom Rogers public Facebook post today; it's a king one but it's the confidence everyone has been looking for and reassurance. Time to load up on the sale price?
The week that was . . .
Following Hurricane Ian recovery in Florida, along with continued internet disruptions my trading desk is still not up and running. And, with other more pressing priorities, I am also not on FB much nor do I have the luxury of following the financial markets as closely. But this too will pass.
The following should offer some explanation of what we are experiencing with Cynthia's LAURION Mineral Exploration Inc. (TSX:LME.V) stock price, and the broader stock markets.
The selling we are experiencing in LAURION Mineral Exploration Inc. is temporary, whereas the broader stock market has more downside (more explanation below).
The current LME selling is being caused by short-term oriented speculators who do not really know the LAURION story. These short-term speculators were thinking that they would hear of a LME buyout by the Sept. 28th shareholder meeting date. And, when a LME buyout announcement did not materialize as per the REDDIT and STOCKHOUSE rumour mill, these short-term oriented speculators are now exiting their LME stock positions.
These short-term oriented speculators will come to regret their LME exit decision, for what they do not realize is that LAURION's fundamentals are at their best position they have ever been (as outlined in Cynthia's LAURION Press Release this week).
What these short-term speculators do not realize is that Cynthia and I are LAURION's largest shareholders (along with the LME's board members being the largest shareholder group). And, as a result unlike other junior miners, LAURION has a very strong shareholder centric focus, in delivering maximum shareholder value.
This is not Cynthia's first junior miner rodeo, but LAURION will be her best GRAND SLAM. A LME buyout will occur, because LAURION is now best positioned as an acquisition target (as outline in Cynthia's LAURION Press Release this week). But, I cannot tell you when.
Once the current sell-off subsides, LAURION stock price will make NEW stock price highs. My 40+ years of stock market experience has taught me that these same short-term speculators will probably find themselves chasing the stock price up.
I cannot say the same for the broader stock market.
The stock market rebounded last week but it is not one that investors should be betting on. The move was driven by a hotter-than-expected US CPI report, read that right, a hotter-than-expected CPI report that was foreshadowed and amplified by a hot US PPI report the day before. The news sparked a major decline in Futures trading on Thursday morning, the market opened with a 1.65% loss, and then it moved lower so what happened?
What happened with the stock market this past week is a purely technical bounce. The US CPI data is bad news, it led the odds for another 75 basis point rate hike above 100% and put a 100 basis point hike back on the table, and the market responded in kind by falling in premarket trading. The open session, however, saw the price action hit the 3,500 level within the first 5 minutes of trading and make an almost immediate reversal. The 3,500 level is a key support target for the broad market, it’s been in play since 2020 because it marks the first post-pandemic all-time high and a major consolidation zone, so a bounce should have been expected but it's just a bounce.
Bottom-fishers, value seekers, and maybe even some short-sellers because there are quite a few of them in the market today as well, are the reason for the bounce and they won’t support it for long. The news was bad and hot, and accelerating US CPI means the FOMC will continue to keep raising rates, rates will go to the max of their outlook and probably beyond, and a recession is going to sap the outlook for earnings as it has been doing for the last few months. That’s why yesterday - Friday there was no follow-through. The rebound is already over. Resistance at the previous lows marks the bottom of the May/September trading range and there are many other bearish indications to take note of.
The S&P 500 (NYSEARCA: SPY) is not only below new resistance at the 3,700 level but it is being pressured lower by the 30-day EMA, the top of a down channel, and the 150-day EMA in successive order. These are all pushing lower off of the neckline of the Head & Shoulders Reversal Pattern I’ve spoken of so frequently and fundamental support is still eroding. Ultimately, last week’s candle is a Doji that indicates indecision. The stock market may move sideways in the very near term but it is being squeezed into an ever-tightening range that will likely break to the downside when it does. The S&P 500 is the chart of the week (see attachment below).
The last thing I want to leave you with this week is mortgage rates. The average rate on a 30-year mortgage hit 7.9% this week and is more than double what it was last year. Heck, the average rate is up 240 basis points since May or 43% which is of major import to the housing industry. The 240 basis point increase is worth hundreds of dollars in monthly payments and taking a toll on the housing market that has only begun to be felt. Eventually, the market will correct and it will become affordable for average people to move again but it could be years before that happens.
Last week’s economic data wasn’t all bad but the good news was sparse and some of it counts as good news is bad news.
So, the NFIB index was good and import prices declined but better-than-expected jobless claims suggest economic activity is still strong, inflation is still present, and FOMC still needs to act. In the bad column, the US PPI and US CPI were horrible with both figures accelerating more than expected and YOY comps hovering at record levels. The US PPI is actually the worst of the news because it suggests negative feedback loops in the economy are still driving inflation in a way that will lead to higher consumer prices later in the year.
Other bad news that came out last week was the FOMC minutes which reveal a still very hawkish US Federal Reserve and retail sales. Retail sales were flat on a month-to-month basis and missed the consensus target by 30 basis points. The whiff is driven by weak motor vehicle sales offset by a 20% increase in sales at gasoline retailers, imagine that. The YOY figure is better at +8.2% but CPI is up 8.2% as well so we’ll call that one flat too.
This next week will be a big week for economic data with reports from the manufacturing complex, the housing sector, the US Beige Book, and the index of leading indicators. The US manufacturing data includes the Philly Fed’s MBOS and the Empire State Manufacturing Survey while the housing data includes Permits & Starts, Existing Home Sales, and the NAHB survey. The US Beige Book should reflect generally strong conditions in the US labour market, inflation, and the impact of rising rates while the Leading Indicators will very likely come in negative for the 6th consecutive month.
Earnings Season, It’s Back!
Earnings season kicked off this past week with reports from 6 of the 10 largest banks in the US and the news is mixed. Most reported decent earnings due to a widening spread for their credit products but the news is not all good. Along with that, a few missed their expectations and the outlook for general economic activity is not robust. The guidance isn’t bad it’s just extra tepid and coupled with increases in capital reserves. The increases make the banks safer but also mean the banks are worried about an increasing number of credit defaults driven by rising interest rates.
This next week will be much busier with most of the rest of the banks reporting their earnings and many others as well. As it is, the consensus estimate for earnings remains in a downtrend, and the expectation for strength this quarter is very low.
Outperformance from the index could lead the stock market to the bottom but it really depends on the guidance. If the guidance worsens the market will move down to set a new low before the end of the reporting season.