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Portfolio Update: Caution Ahead

Portfolio Update: Caution Ahead

Happy Mother's Day!

Setting aside the stock market stuff for a moment, let's reflect for a moment on the women who made us, literally and figuratively.

My mom died a handful of years ago, but not a day goes by that I don't think of her and reflect on what she taught me about life - in both what she said and did, and in patiently guiding a rambunctious teenage son to adulthood.

My wife Joan is a great partner in life, and a wonderful mom to our 15-year-old son - equal parts tender, loving and tough, as the situation requires. So I go out and buy bunches of flowers - I taught myself how to arrange them years ago. Then I prompt my son to draw up a nice handmade card for her.

Love, appreciation (and forgiveness) are the grease of good relationships.

Stock Market: More Pain Ahead?

As for the stock market, there was plenty of grease - as things slid emphatically lower on Thursday and Friday.

I keep hoping for this ongoing selloff to end with a bang - especially after Thursday's session that saw the Nasdaq reverse lower more than 3%. Yet on Friday - yes that particular index touched new lows for the year, but only grudgingly so.

So think we have 70% odds that instead of a bang, this selloff ends with a whimper in 5 or 6 weeks as stocks keep sliding lower bit-by-painful-bit.

Here's my technical analysis roadmap until proven otherwise:

click to enlarge

See the red downward-pointing "triangle" in the chart?

The main idea here is that until we see the major indexes break free, past the right-hand side of this "wedge" so to speak, they remain trapped and likely to fall further.

The bottom of the triangle coincides with the week of June 27 and the lead-up to the  July 4 holiday - which would seem like a good place for a rally to start.

Here's a closer look at what it might look like in the weeks ahead...

click to enlarge

Let's keep in mind that we still have another Fed meeting coming up June 9-10. It's hard to imagine stocks rallying in a significant way.

Even though Fed chief Jay Powell said last week he wasn't actively considering a 0.75% rate hike, the markets are still laying strong odds we could still see one.

Oil Prices: $110 and Beyond?

The other reason to perhaps expect still-lower stock prices in the interim...is because of the price of oil, which finished last week at $110 a barrel and gives every indication of wanting to go higher.

click to enlarge

From what I understand, a continued rally in oil rests on the potential for a complete EU ban on Russian oil. Most of the EU states want it. Hungary is resisting.

If the ban goes through, I've seen some credible forecasts that oil could work its way to $160 later this summer or even north of $200 a barrel in the latter part of the year, as hard as that might is to believe right now.

But in the background is Putin and the Russian oligarchs - and the prospect of an oil ban cutting off a vast flow of funds supporting the Russian economy and the war in Ukraine.

So if anything could happen to interrupt the narrative of "$200 oil" (which would set off a counter-trend rally in stocks, I presume)...a Russian capitulation of some kind... would be it.

New Stock Buy!

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