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Strategies & Market Trends : Bear!
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From: Sean Collett11/19/2023 9:33:07 AM
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JohnyP

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My bear sense kicked in on Friday. There is "new bull" optimism being breathed into the market with many hoping we get a Santa rally and/or the fed will cut. I begin to feel we may see a December 2018 more than a true Santa rally. And perhaps with ETF like IWM seeing a 5.43% pop in a week, many already received their presents early.

Finviz has 1,606 small-cap companies listed with 673 (41%) with a D/E of >= 0.5. This chart also highlights the reason to not be bullish small-caps:


18% of the 1,606 have a current ratio less than 1 and 17% with a quick ratio less than 1. If many have not refinanced already then good luck. Only 913 (56%) have reported positive operating margins.

All this on the back of consumers now showing weakness. Unemployment is still <4% and yet credit card delinquencies are already rising.


As the consumer continues to grow their overall credit debt:


There is opportunity I believe for those that have the FCF and termed out debt to survive this and those are the companies I remain bullish on.

The impacts of the ONRRP draining will eventually feed into bank reserves getting hit I believe if not addressed and this will force the fed to end QT sooner than many think. TGA is already below the OCT levels as fiscal spending has not adjusted in any way - who will fund the rest of this fiscal spending? Another +$250B set for auction in November.

I will stand wrong if proven otherwise, but I do believe we have seen the market top. I have adjusted my holdings as I prepare for the market to adjust.

This market run was built off the backs of the "AI" craze and the events this weekend show that like most in the web 3.0 space, take nothing at face value.

-Sean
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