Republic Risk: A Rare Midday Warning

The purpose of this letter is to warn when things are on the verge of chaos. A few technical warnings ahead before I check out for the day.

Dear Fellow Expat:

This is a rare second letter to you. But it’s necessary. As you know, I’ve felt bearish for two weeks, and I did warn about April. We are a few days away from April 5, which was a terrible day in 2022.

What happened? The stock market melted up after the March 2022 Fed meeting. And then, we hit this market top and rotation at the start of the quarter. It began a period of heavy hedge fund shorting and culminated with the largest selloff in 15 years by hedge funds starting on June 8 and running into June 17.

The chart below shows the start of higher rates in 2022… with an emphasis on the post-March 2022 Fed meeting when our signals turn positive. Note it didn’t go negative until a few days after the top - signaling an acceleration of outflows.

Let’s Look At What’s Wrong Today

I said I wouldn’t be cynical on my Birthday…

But this is the job, and a few things…

First, the core indicators we follow are trending in the wrong direction.

The S&P 500 SPDR ETF (SPY) is above its …