Sven Henrich: Technical Analysis Says "Remain Bullish, But Be Careful"

As stock valuations are in "la la land"

When Sven Henrich of NorthmanTrader.com was last on this program in July, he shared that he had just closed out all his longs and moved to cash.

That moved paid off, as the S&P fell over 300 points in the following few weeks.

Stocks rebounded after the sell-off and have powered higher since, now back near all-time highs.

So what does his Technical Analysis tell us to expect next?

Especially with near-record valuation multiples, and elevated volatility — both in stocks as measured by the VIX and in bonds as measured by the MOVE index.

To find out, we'll now hear from the man himself.

To do so, click here or on the video below:

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Adam’s Notes: Sven Henrich (recorded 11.1.24)

EXECUTIVE SUMMARY:

• Sven highlights that the U.S. economy shows a disconnect between market highs and economic fundamentals, driven by massive liquidity injections. Fiscal deficits reached $1.8 trillion in 2023, while U.S. government debt rose by over $2.2 trillion in the past year. This liquidity has artificially supported asset prices, pushing the S&P 500 near all-time highs despite high volatility in stocks (VIX) and bonds (MOVE index).

• A sudden spike in U.S. debt by over $600 billion in October raises suspicions of government manipulation to stabilize markets before the election. Typical correlations between asset prices, bond yields, and the dollar have recently broken down, suggesting potential interventions to keep market sentiment positive.

• The top 10% of Americans now own about 90% of U.S. stocks, while average consumers are squeezed by high costs and stagnant wages. Despite GDP growth of 3% and low unemployment, consumer confidence remains at recessionary levels, reflecting uneven benefits from economic policies. Sven warns that wealth inequality poses a risk of social instability.

• Rising interest rates and inflation have severely impacted consumers, with personal interest payments surpassing $500 billion annually, up from pre-COVID levels near $300 billion. The personal savings rate has dropped to 3.4%, leaving many households financially vulnerable. These trends highlight the disparity between Wall Street gains and Main Street struggles.

• In terms of portfolio positioning in this market, Sven emphasizes