Mish’s Daily: Granddad Russell, Grandma Retail and Grand Debt

Mish’s Daily: Granddad Russell, Grandma Retail and Grand Debt
Written by Michele ‘Mish’ Schneider

On August 1st as many cheered the rise in GDP, partly because consumer spending is 70% of the GDP, another agency did not cheer at all.
With Government Debt to the GDP ratio super high, coupled with high interest rates, Fitch was not having it.
They see this as a huge stress on the economy.
In 2011, the last time the US had a downgrade, the Fed promised to keep rates low. That turned out to create a huge buy opportunity.
Now though, the Fed makes no such promise. They have inflation, a strong labor market, and now a debt downgrade on their hands.
This leaves very little wiggle room for the FED to maneuver.
In 2011, the Fed was not worried about inflation. Now they are.
What do Granny and Gramps of our Economic Modern Family have to say about that?
This is a great time to look at the monthly charts.
Remember, our thesis was that over the 23-month moving average (blue line) the index or sector signals expansion on a 2-year business cycle.

All the indices accomplished that including IWM or the Russell 2000. Yes, Gramps was last of the four, however, he’s gramps.
Now, with the news of the downgrade, IWM is taking a breather. Yet, not too bad at this point.
With a lot of government spending supporting manufacturing and industry in the US, Gramps WANTS to expand. Of course, that is how the government created so much debt in the first place…
But can it last?
August has just begun so we do not really know at this point.
Granny Retail on the other hand, has yet to clear its 23-month MA and convince us that the retail consumer is hanging around for a better second half of the year.
That makes for some interesting diversions.
191 is the level for IWM to hold.
On a shorter timeframe, 193 is the July 6-month calendar range high.
Right now, both levels are intact.
67.40 in XRT is the July 6-month calendar range high-the price sits below that.
69.50 is the 23-month MA. The price sits below that.
Should XRT break 66.00, that is a sign of weakness.
Bottom line:
Granny has the purchasing power and the greater influence on the GDP.
We like where IWM is holding for sure.
Without his bride though, today’s downgrade is a harbinger.
For more detailed trading information about our blended models, tools, and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.
If you find it difficult to execute the MarketGauge strategies or would like to explore how we can do it for you, please email Ben Scheibe at Benny@MGAMLLC.com

You don’t want to miss Mish’s 2023 Market Outlook E-available now

NOT TOO LATE Click here if you’d like a complimentary copy of Mish’s 2023 Market Outlook E-Book in your inbox.

Get your copy of “Plant Your Money Tree: A Guide to Growing Your Wealth”
Grow Your Wealth Today and Plant Your Money Tree!

“I grew my money tree and so can you!”- Mish Schneider
Mish in the Media
CMC Markets Short-term Trading 08-02-23
Business First AM 08-02-23
Business First AM 08-01-23
Yahoo Finance 08-01-23
Your Daily Five StockchartsTV 07-26-23
CMC Markets Gold Oil SPX META 07-26-23
Money FM 89.3 Singapore 07-26-23
Business First AM PCE Inflation Picks 07-25-23
Coming Up:
August 3 TD Ameritrade Macro Show
August 10 Final Bar StockchartsTV
October 29-31 The Money Show Schneider, Michele (moneyshow.com)
ETF Summary
S&P 500 (SPY) Failing the July calendar range hi-follow thru Thursday to downside should be followed
Russell 2000 (IWM) 191 is the 23-month holy grail
Dow (DIA) 35,000 support
Nasdaq (QQQ) Last 2 weeks of pricing wiped out-now we watch 365-380 range
Regional banks (KRE) Back over 48 looks ok and under 44 not so much
Semiconductors (SMH) 161 now more in the rear view-150 in focus
Transportation (IYT) Still very strong as long as it holds its July 6-month calendar range high at 259.30
Biotechnology (IBB) Compression between 123-130
Retail (XRT) 66-67.40 short-term range
20230803