The Grand Finale of Intention: Jackson Hole Awaits
Let me be clear: there will be one Pivot. It will either be the Fed, or it will be Stocks. Like this email if you intend to get it right.
Note: Investments is a Team Sport, and I want to be your Captain. I want to help you, if you want my help. Read the opinions shared inside our Community at the bottom of this email. This is the level of dedication, research strategy, and guidance that our Friends inside have experienced for all of 2022. Forward this email to friends and family if you enjoy.
This email may be cut short by Gmail given that its quite long and includes images/charts. Please read this email on the Substack website by clicking the title or on your desktop to ensure you see all the images/charts.
Dear YT Friends & Public Investment Community,
In my past several emails, I have spent quite some time curating emails that integrated the highest forms of literature and history to help you enhance your critical thinking and investment strategy.
In one email, I discussed Icarus from Greek Mythology flying too close to the sun, and how that relates to overconfidence (falling for FOMO).
In another, I discussed the historical lesson from the Tet Offensive (Vietnam War) and how major battle pivots (market shifts) happen at any given moment with little to no warning.
And in a recently popular note, I also helped you to understand the insidious nature of Sirens from Greek Literature, where Sirens seduce their audience into unsuspecting danger (believing the headline media chorus).
This email will be a bit more investment-centric, given that we are approaching a critical market juncture (Jackson Hole).
Look, I’m not a Financial Advisor, so I can’t press the buy/sell button for you. But I can give research based on market direction, and long-time readers of my emails know that I viewed assets like BTC at ~25K or SPX at ~4300 or ARKK at ~52 being out of sync with fundamental and macro considerations.
When the bull market returns, trust me, I will have a powerful list of risk-on strategies to share.
But until then, why pay for high valuations in a weakening economy?
Remember that patience and capital preservation should be your top priority in this environment.
Now more than ever, you should be using this time to advance yourself as an Investor.
Inside my Community where I provide actionable strategy, our members cut equity exposure to the most speculative parts of the market as this week made the basket-of-most-shorted stocks fall more than 6%, according to Bloomberg.
You can see that the title of my most recent Bi-Weekly report to Members indicated that any level near the upper end of 4200-4400 for the S&P 500 (reasoning shared inside) is speculative and prone to reversals.
And with our guidance provided, our friends entered this week psychologically prepared for a pullback and enter this weekend with positioning that is less stressful and more ready for the road that lays ahead.
Now is the counter-trend rally completely dead? I’d say that’s a premature statement, given that the all important Jackson Hole event hasn’t yet occurred.
Even though my general sentiment is one of extreme caution, this one chart below reminds me that price action can go higher if we get unexpectedly lower inflation data.
You can see here that the cash balances of big money investors remain very high, and due to performance-chasing among mutual funds, you have long-only institutional investors that cannot afford to trail their peers.
This is one of the core reasons that the market has been going higher (up until this email) even though the fundamentals and macro setup is out of sync: it’s because of investor positioning
This chart does imply to me that being completely in cash and having no exposure to equities is most likely inappropriate if there is further short covering.
At the same time, this positioning hints to me that Big money sees market risks that retail investors may not. So positioning over aggressively long is nothing more than a gamble as well.
You may not have the army of research analysts that the Big Banks are equipped with, but you do have me (see research opinions & outcomes at bottom of this email), and if you choose me as your Mentor and Strategist, I can assure you that I can advance your market knowledge far beyond what traditional equity research can teach you.
What’s coming next in Markets
Most market participants know that the Jackson Hole event is the catalyst that takes the market to its next stage (either higher or lower).
What most investors don’t fully understand (but we do) is the EXPECTATIONS that the Buyside (big money) has leading up until this event.
This is because we read plenty of institutional surveys to understand big money investor positioning.
Allows me to explain.
In this chart here, we can see that the Buyside does not expect the Fed to actually provide a floor to markets if the index begins falling again (unless it gets to a tragic 3500).
The most important metric that we are watching is whether Core PCE inflation is going to fall under 4%.
Last month, Core PCE Inflation was at 4.8%.
The next Core PCE Inflation Data release date is August 25th, 2022.
Our opinion is always contingent on important macro data that comes out, especially the composition of inflation.
As of this very moment, based on our fundamental, technical, and valuation work, we were nearly sure that a pullback was going to come with the S&P 500 north of 4300.
However, the depth of this sell-off is dependent on future inflation data.
Core PCE Inflation (Excluding Food & Energy) was 4.8% in June. (See bottom row)
Jackson Hole will be the event that will shape market expectations this September and beyond. We will be studying this event closely, and it will provide me yet another tremendous opportunity to provide thoughtful guidance and strategy to our Community.
Investments is a Team Sport, and I want to be your Captain. This year has been an incredible opportunity for me to deepen my relationships with my viewers from Youtube, and help them navigate this market from a perspective of thoughtful strategy and deep patience. See below.
Quick Overview of Major Opinions Shared in 2022 :
*Inside our Community, I write Bi-Weekly Actionable Strategy reports for Members to understand my view of markets*
I want to share with you just a sample list of events of what my friends inside have experienced in 2022.
2nd Half of March 2022: Sharp Counter-Trend Rally in the S&P 500
Opinion shared inside Patreon on March 14th: Now is not the time to give up on the SPX.
Outcome: S&P 500 (Purple Box Below for 2nd of half of March)
2nd Half of May 2022: Another Bounce in the S&P 500
Opinion shared inside Patreon on May 16th: A ST bounce in the context of a Larger Decline may be coming
Outcome: S&P 500 (Purple Box Below for 2nd of half of May)
1st Half of June 2022: Massive selloff in S&P 500
Opinion shared inside Patreon on May 16th: Risk/Reward no longer strong at SPX 4150+
Outcome: S&P 500 (Purple Box Below for 1st of half of June)
2nd Half of July 2022: Epic Short-Squeeze in S&P 500
Opinion shared inside Patreon on July 16th: So long as FAAMG earnings are solid, we may revisit 4000-4200
Outcome: S&P 500 (Purple Box Below for 2nd of half of July)
1st Half of July 2022: Telling our Members that Retail was chasing China and that risk/reward was NOT favorable for China. See below.
Excerpt from July 1st Half (7.1.22-7.15.22) Bi-Weekly Report
Outcome: Alibaba since July 1st Half Bi-Weekly Note
Okay Friends, there’s a lot more research outcomes that I want to share, but this email is getting a bit too long for Gmail. 😂.
Look, I don’t want you to just read my work…I want you to experience it.
What you can expect from me is a long-term committment to your investor education, and an open door approach where you can talk to me directly inside our Community if you have questions. I am not aware of any Strategist/Provider/Creator that allows this level of communication, but I do.
The next stage of the market will be critical to all investors. I am committed to producing the best high-quality actionable research to help you inform your investment strategy.
My work is globally accessible to all. And I want you to be a part of it.
That’ll do for this update. Add me on Instagram and Twitter below. On Youtube, I only get to post once per week. But I am able to be a bit more active on Twitter and Instagram.
Add me! 😊
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Best Investment Platform For HK-Listed Shares for Chinese Internet Companies: Interactive Brokers or Moomoo
❤️ this email if you enjoyed the read. And see you in my next Youtube Video.
Your Investment Strategist,
Larry
Important note: My public letters are not financial advice. You must do your own research. They are designed for educational purposes only.