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2023-04-29

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Currently, the ISM index is below 50 and declining.</p></li><li><p>Tech is now as expensive as it was before liquidity issues, earnings declines, and a shift to money market funds. I see a clear bear-case set-up right now in the SPY.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/02c06aa3599fc5e9916739a3efa44575\" alt=\"gguy44\" title=\"gguy44\" tg-width=\"750\" tg-height=\"520\"/><span>gguy44</span></p></li></ul><h2 style=\"text-align: left;\">Intro &amp; Thesis</h2><p style=\"text-align: left;\">Events in the markets always move quickly - especially against the backdrop of a rather important reporting season, which so far is going exactly as priced in by the <strong>S&amp;P 500 Index</strong> (NYSEARCA:SPY) (SPX) in the course of its growth of &gt;8% from the March local bottom.</p><p style=\"text-align: left;\">Almost all of the major tech companies that have managed to report to date - Microsoft (MSFT), Google (GOOG) (GOOGL), Amazon (AMZN), and Meta (META) - have significantly beaten analysts&#39; expectations or provided more positive guidance than initially expected. Their shares once again became the main driver of SPY growth and reinforced the general euphoria on the market. However, the technology sector is far from being the only one in the structure of the economy. Undoubtedly, 25.76% of the total SPY&#39;s structure is the largest chunk, but it is only a little more than 1/4. The remaining 3/4 are much more important in assessing what is really happening.</p><p style=\"text-align: left;\">Jim Bianco clearly demonstrates the &#34;illness&#34; of the current rally. The YTD return of the S&amp;P 500 through April 26th was 5.13%, and the top 8 FAANG+MNT stocks contributed 5.57% to the overall return. So the remaining 492 stocks collectively dragged the S&amp;P 500 lower by -0.44%. The crowd points to the stock market&#39;s price action and says that the economy is good as the main index is up more than 5% this year, but the negative contribution of the &#34;other 492&#34; stocks raises actual concerns.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/94b44066bf2c151f97345f1f6f79d510\" alt=\"Chart by @biancoresearch [Twitter]\" title=\"Chart by @biancoresearch [Twitter]\" tg-width=\"640\" tg-height=\"480\"/><span>Chart by @biancoresearch [Twitter]</span></p><p style=\"text-align: left;\">I do not like those who are always shouting about the approaching Armageddon, but perhaps I am gradually becoming such an analyst. From many of the criteria I see in the market today, I believe investors are paying an inordinate amount for the current SPY rally, and the structure of the new uptick itself is only explained by the temporary recovery success of 8 out of the 500 companies.</p><p style=\"text-align: left;\">May is upon us, and historically, many managers close out their positions and lock in some profit to come back after Summer. I see 2023 being no exception to this long-term trend. I reiterate my previously issued &#34;Sell&#34; rating on SPY and remain on the contrarian side of the game.</p><h2 style=\"text-align: left;\">Sell In May And Go Away Stats</h2><p style=\"text-align: left;\">The thesis that you should sell stocks in May originated a very long time ago. Many researchers have tried to study this phenomenon, and the statistical results speak for themselves - this effect is indeed the case, even though the media keeps trying to disprove it every year.</p><blockquote>The three worst days for performance in stock market history occurred in October, two of which were during the crash of 1929, and the other was the 1987 Black Monday crash.From 1990 to 2022, the S&amp;P 500 has returned about 2% from May through October, while November through April has averaged about 7%.A 1998 study on SSRN found that the selling in May and staying away through October held in 36 out of 37 developed and emerging market economies from 1970-1998.A 2013 publication in the Financial Analysts Journal noted that selling in May persisted from 1998 to 2012.The period of 2013 to today has not been as consistent, especially considering the sharp reversal of the trend in 2020, when the S&amp;P 500 index jumped 46% in price from March 23 to November 1, 2020.Source: Seeking Alpha Education</blockquote><p style=\"text-align: left;\">The last point suggests why this effect lost significance at some point - the colossal growth of the market after the pandemic shifted the sample observations and broke the usual pattern. I do not think it&#39;s a mystery to anyone why the market grew so much at that point:</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/206af33ce04623cb9a860d8f2fa0fd4a\" alt=\"Data by YCharts\" title=\"Data by YCharts\" tg-width=\"635\" tg-height=\"417\"/><span>Data by YCharts</span></p><p style=\"text-align: left;\">However, the Federal Reserve can&#39;t just go on today and keep printing money as it has been doing. There are too many nuances that have to be taken into account.</p><h2 style=\"text-align: left;\">Debt And Liquidity Issues</h2><p style=\"text-align: left;\">The M2 money supply remains higher than pre-2020 levels, but the Federal Reserve probably realized it can&#39;t solve economic problems just by printing money. Since early 2022, they have been gradually destroying base money to control price inflation through quantitative tightening [QT], which harmed financial assets [you could see that throughout 2022]. In March 2023, the banking crisis forced the Fed to provide loans to banks while also destroying base money, resulting in a temporary increase in liquidity [now they&#39;re doing QT again]. By the way, the Treasury General Account [TGA] - the general checking account, that the Department of the Treasury uses and from which the U.S. government makes all of its official payments - has been drawing down since September 2022, which is positive for financial system liquidity, and overall domestic liquidity has been relatively flat as the Fed and TGA offset each other. <strong>What may change going forward?</strong></p><p style=\"text-align: left;\">The U.S. Treasury Department could run out of ways to pay its bills in a matter of weeks if Congress fails to act, and financial markets are already flashing warning signs, Reuters reported on April 27, 2023. Indeed, the smart money is moving into the 1-month bill and quickly exiting the 3-month bills, considered by many to be the maturity most likely to be in the eye of the debt ceiling storm. Lower-than-expected tax revenues have pushed forward expectations of when the U.S. might face a default. Credit default swaps on the U.S. are more expensive than ever, according to Seeking Alpha News.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/f632db2f28eb9d162d415c0921cb9da5\" alt=\"Tilo Marotz, LinkedIn\" title=\"Tilo Marotz, LinkedIn\" tg-width=\"640\" tg-height=\"640\"/><span>Tilo Marotz, LinkedIn</span></p><p style=\"text-align: left;\">On April 27, the U.S. House of Representatives passed a bill to raise the government&#39;s debt ceiling with sweeping spending cuts over the next decade. However, the bill is not expected to pass the Senate and President Joe Biden would veto it if it did. The mostly partisan 217-215 vote is a win for Republican House Speaker Kevin McCarthy and could ease concerns among investors and markets about the issue.</p><p style=\"text-align: left;\">Since 1960, Congress has raised or suspended the debt ceiling 78 times, including 29 times under Democratic presidents and 49 times under Republican presidents. Therefore, it is only a matter of time before the current ceiling is raised again. Importantly for us, however, once the debt ceiling is raised, the Treasury will be legally able to raise its general account back to the target level (negatively impacting liquidity when this happens) as the Federal Reserve continues to drain liquidity from the system (also negatively impacting liquidity), according to Lyn Alden Schwartzer [proprietary source].</p><p style=\"text-align: left;\">So May and June promise to be quite difficult for SPY in terms of liquidity and further growth of the &#34;debt risk&#34; - the way the index is behaving now, based on the factual past performance of a small sample of tech companies, seems to me to be too optimistic.</p><h2 style=\"text-align: left;\">Fundamentals Meet Valuation - Both Negative</h2><p style=\"text-align: left;\">For many months in a row, inflation remained on the agenda, moving the market in different directions. This is not surprising, as it has not shown similar growth dynamics [2021-2022] over the past few decades. Recently, however, the problem of inflation is no longer acute - it is cooling, perhaps not to the Fed&#39;s target, but it has done a good job so far. The only question is at what cost the Fed has achieved its goal? Richard Excell from Stay Vigilant points to the fact that the U.S. ISM PMI is in the -20 range, which has indicated recessions in the past:</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/d7ef163716486b9fce6481f4149973bf\" alt=\"Richard Excell from Stay Vigilant [April 24, 2023]\" title=\"Richard Excell from Stay Vigilant [April 24, 2023]\" tg-width=\"640\" tg-height=\"335\"/><span>Richard Excell from Stay Vigilant [April 24, 2023]</span></p><p style=\"text-align: left;\">Richard cited a chart from Credit Suisse, which showed that the only time stocks had negative returns was during a period when the ISM index was below 50 and declining. Currently, the ISM index is below 50 and declining.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/788e647b1c7934d08ed77150d34be80a\" alt=\"Richard Excell from Stay Vigilant [April 24, 2023]\" title=\"Richard Excell from Stay Vigilant [April 24, 2023]\" tg-width=\"443\" tg-height=\"317\"/><span>Richard Excell from Stay Vigilant [April 24, 2023]</span></p><p style=\"text-align: left;\">The stock market has been rallying likely because investors aren&#39;t as worried about inflation, which means the Federal Reserve would not have to raise interest rates. However, the odds of another Fed hike were increased to almost 90% in the last week or so, which is a shift from a month ago. The bond market still sees rate cuts in 2023, but it&#39;s uncertain if this will happen despite slower growth (the labor market is still strong and wage gains are positive, which the Fed is trying to combat).</p><p style=\"text-align: left;\">Tighter lending conditions of commercial banks and the subsequent refinancing of old low-interest household debt at new conditions are likely to put further pressure on margins and therefore lead to downward revisions of EPS in the medium term.</p><p style=\"text-align: left;\">At the same time, what has been driving the market higher and higher lately - the technology sector - is again about as expensive as it was before the problems with market liquidity, earnings erosions, and the exodus of money into money market funds began:</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/618d2219f19ed23ae5f6e255c838ef4f\" alt=\"JP Morgan [April 27, 2023], proprietary source\" title=\"JP Morgan [April 27, 2023], proprietary source\" tg-width=\"640\" tg-height=\"334\"/><span>JP Morgan [April 27, 2023], proprietary source</span></p><p style=\"text-align: left;\">Crescat Capital Fund&#39;s equity model indicates that the growth fundamentals of major technology companies have declined considerably and do not justify their valuations, which are higher than the 2000 tech bubble peak:</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/3cc57c1a1a14da012dbce042d8c61013\" alt=\"Crescat Capital [April 26, 2023]\" title=\"Crescat Capital [April 26, 2023]\" tg-width=\"640\" tg-height=\"455\"/><span>Crescat Capital [April 26, 2023]</span></p><p style=\"text-align: left;\">What we are currently witnessing looks like a classic feast at the time of the plague - the only reason why people&#39;s greed is not at its peak is the fear of demand for junk bonds, if we refer to CNN&#39;s Fear &amp; Greed Index. The put-call option, the volatility, and the breadth of the stock market are all at the level of greed.</p><p style=\"text-align: left;\">Normally, fundamentals are linked to valuation when it comes to making a convincing case - I see a clear bear-case set-up right now in the SPY.</p><h2 style=\"text-align: left;\">Bottom Line</h2><p style=\"text-align: left;\">You are reading my 3rd bearish article on SPY since the beginning of 2023. The last time I linked the risk of a market fall with OPEC&#39;s decisions to cut production to support crude oil prices:</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/a4b3f421c3f34174cfa0db5ecbdf9449\" alt=\"Seeking Alpha, my previous take on SPY\" title=\"Seeking Alpha, my previous take on SPY\" tg-width=\"640\" tg-height=\"356\"/><span>Seeking Alpha, my previous take on SPY</span></p><p style=\"text-align: left;\">However, as time has shown, the oil price could not sustain its unexpected upward breakout and rolled back to pre-announcement levels:</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0018c80b92f42c6cf54d59396f5326c4\" alt=\"Seeking Alpha\" title=\"Seeking Alpha\" tg-width=\"640\" tg-height=\"384\"/><span>Seeking Alpha</span></p><p style=\"text-align: left;\">Why did this happen? Because the oil demand most likely points to the signs I pointed out in my article today - ISM PMI continues to drop in real-time, which will likely be confirmed on May 1:</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/ee1007457d47e890817a2a6cd2eb3eda\" alt=\"TradingEconomics.com, author&#39;s notes\" title=\"TradingEconomics.com, author&#39;s notes\" tg-width=\"640\" tg-height=\"518\"/><span>TradingEconomics.com, author&#39;s notes</span></p><p style=\"text-align: left;\">I expect the smart money to start taking profits in early May, when most companies in the S&amp;P 500 index report, as the bull market diverges sharply from its fundamentals and valuation. But as practice shows, timing is not always on my side. Moreover, perhaps all the fear has already been reflected in the index&#39;s momentum in 2022 - the bottom may be behind us. Keep these upside risks to my thesis in mind before making an investment decision based on the information I have provided in this article.</p><p style=\"text-align: left;\">Despite the risks to my bearish stance, I assume that if the US experiences a recession - the fair P/E multiple should be around 15x. Accounting for a potential 1.5% downward EPS revision, the implied SPY price would be significantly lower than the current levels:</p><blockquote>FY23 P/E * (EPS adjusted for a downward revision of 1.5%) = <strong>fair value</strong>15x * ($218.09 * 0.985) = <strong>$3222.23</strong></blockquote><p style=\"text-align: left;\">The resulting value is 21.9% lower than what I see on my screen at the time of this writing. I confirm my tactical &#34;Sell&#34; rating on SPY/SPX.</p><p><em>This article is written by </em><strong><em>Danil Sereda</em></strong><em> for reference only. Please note the risks.</em></p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>SPY: \"Sell In May\" Should Work Again This Year?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSPY: \"Sell In May\" Should Work Again This Year?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-04-29 09:50 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4597915-spy-sell-in-may-should-work-again-this-year><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryThe YTD return of the S&P 500 through April 26th was 5.13%, and the top 8 FAANG+MNT stocks contributed 5.57% to the overall return.The stock market has been rallying because investors aren't ...</p>\n\n<a href=\"https://seekingalpha.com/article/4597915-spy-sell-in-may-should-work-again-this-year\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"161125":"标普500","513500":"标普500ETF","BK4581":"高盛持仓","BK4504":"桥水持仓","SH":"标普500反向ETF","IVV":"标普500指数ETF","UPRO":"三倍做多标普500ETF","SSO":"两倍做多标普500ETF","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","SPXU":"三倍做空标普500ETF","SPY":"标普500ETF","OEF":"标普100指数ETF-iShares","BK4559":"巴菲特持仓","SDS":"两倍做空标普500ETF","BK4588":"碎股","BK4550":"红杉资本持仓","OEX":"标普100",".SPX":"S&P 500 Index"},"source_url":"https://seekingalpha.com/article/4597915-spy-sell-in-may-should-work-again-this-year","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2331509993","content_text":"SummaryThe YTD return of the S&P 500 through April 26th was 5.13%, and the top 8 FAANG+MNT stocks contributed 5.57% to the overall return.The stock market has been rallying because investors aren't worried about inflation, which means the Federal Reserve would not have to raise interest rates, in my view.However, the odds of another Fed hike have increased to almost 90% in the last week or so, which is a shift from a month ago.The only time stocks had negative returns was during a period when the ISM index was below 50 and declining. Currently, the ISM index is below 50 and declining.Tech is now as expensive as it was before liquidity issues, earnings declines, and a shift to money market funds. I see a clear bear-case set-up right now in the SPY.gguy44Intro & ThesisEvents in the markets always move quickly - especially against the backdrop of a rather important reporting season, which so far is going exactly as priced in by the S&P 500 Index (NYSEARCA:SPY) (SPX) in the course of its growth of >8% from the March local bottom.Almost all of the major tech companies that have managed to report to date - Microsoft (MSFT), Google (GOOG) (GOOGL), Amazon (AMZN), and Meta (META) - have significantly beaten analysts' expectations or provided more positive guidance than initially expected. Their shares once again became the main driver of SPY growth and reinforced the general euphoria on the market. However, the technology sector is far from being the only one in the structure of the economy. Undoubtedly, 25.76% of the total SPY's structure is the largest chunk, but it is only a little more than 1/4. The remaining 3/4 are much more important in assessing what is really happening.Jim Bianco clearly demonstrates the \"illness\" of the current rally. The YTD return of the S&P 500 through April 26th was 5.13%, and the top 8 FAANG+MNT stocks contributed 5.57% to the overall return. So the remaining 492 stocks collectively dragged the S&P 500 lower by -0.44%. The crowd points to the stock market's price action and says that the economy is good as the main index is up more than 5% this year, but the negative contribution of the \"other 492\" stocks raises actual concerns.Chart by @biancoresearch [Twitter]I do not like those who are always shouting about the approaching Armageddon, but perhaps I am gradually becoming such an analyst. From many of the criteria I see in the market today, I believe investors are paying an inordinate amount for the current SPY rally, and the structure of the new uptick itself is only explained by the temporary recovery success of 8 out of the 500 companies.May is upon us, and historically, many managers close out their positions and lock in some profit to come back after Summer. I see 2023 being no exception to this long-term trend. I reiterate my previously issued \"Sell\" rating on SPY and remain on the contrarian side of the game.Sell In May And Go Away StatsThe thesis that you should sell stocks in May originated a very long time ago. Many researchers have tried to study this phenomenon, and the statistical results speak for themselves - this effect is indeed the case, even though the media keeps trying to disprove it every year.The three worst days for performance in stock market history occurred in October, two of which were during the crash of 1929, and the other was the 1987 Black Monday crash.From 1990 to 2022, the S&P 500 has returned about 2% from May through October, while November through April has averaged about 7%.A 1998 study on SSRN found that the selling in May and staying away through October held in 36 out of 37 developed and emerging market economies from 1970-1998.A 2013 publication in the Financial Analysts Journal noted that selling in May persisted from 1998 to 2012.The period of 2013 to today has not been as consistent, especially considering the sharp reversal of the trend in 2020, when the S&P 500 index jumped 46% in price from March 23 to November 1, 2020.Source: Seeking Alpha EducationThe last point suggests why this effect lost significance at some point - the colossal growth of the market after the pandemic shifted the sample observations and broke the usual pattern. I do not think it's a mystery to anyone why the market grew so much at that point:Data by YChartsHowever, the Federal Reserve can't just go on today and keep printing money as it has been doing. There are too many nuances that have to be taken into account.Debt And Liquidity IssuesThe M2 money supply remains higher than pre-2020 levels, but the Federal Reserve probably realized it can't solve economic problems just by printing money. Since early 2022, they have been gradually destroying base money to control price inflation through quantitative tightening [QT], which harmed financial assets [you could see that throughout 2022]. In March 2023, the banking crisis forced the Fed to provide loans to banks while also destroying base money, resulting in a temporary increase in liquidity [now they're doing QT again]. By the way, the Treasury General Account [TGA] - the general checking account, that the Department of the Treasury uses and from which the U.S. government makes all of its official payments - has been drawing down since September 2022, which is positive for financial system liquidity, and overall domestic liquidity has been relatively flat as the Fed and TGA offset each other. What may change going forward?The U.S. Treasury Department could run out of ways to pay its bills in a matter of weeks if Congress fails to act, and financial markets are already flashing warning signs, Reuters reported on April 27, 2023. Indeed, the smart money is moving into the 1-month bill and quickly exiting the 3-month bills, considered by many to be the maturity most likely to be in the eye of the debt ceiling storm. Lower-than-expected tax revenues have pushed forward expectations of when the U.S. might face a default. Credit default swaps on the U.S. are more expensive than ever, according to Seeking Alpha News.Tilo Marotz, LinkedInOn April 27, the U.S. House of Representatives passed a bill to raise the government's debt ceiling with sweeping spending cuts over the next decade. However, the bill is not expected to pass the Senate and President Joe Biden would veto it if it did. The mostly partisan 217-215 vote is a win for Republican House Speaker Kevin McCarthy and could ease concerns among investors and markets about the issue.Since 1960, Congress has raised or suspended the debt ceiling 78 times, including 29 times under Democratic presidents and 49 times under Republican presidents. Therefore, it is only a matter of time before the current ceiling is raised again. Importantly for us, however, once the debt ceiling is raised, the Treasury will be legally able to raise its general account back to the target level (negatively impacting liquidity when this happens) as the Federal Reserve continues to drain liquidity from the system (also negatively impacting liquidity), according to Lyn Alden Schwartzer [proprietary source].So May and June promise to be quite difficult for SPY in terms of liquidity and further growth of the \"debt risk\" - the way the index is behaving now, based on the factual past performance of a small sample of tech companies, seems to me to be too optimistic.Fundamentals Meet Valuation - Both NegativeFor many months in a row, inflation remained on the agenda, moving the market in different directions. This is not surprising, as it has not shown similar growth dynamics [2021-2022] over the past few decades. Recently, however, the problem of inflation is no longer acute - it is cooling, perhaps not to the Fed's target, but it has done a good job so far. The only question is at what cost the Fed has achieved its goal? Richard Excell from Stay Vigilant points to the fact that the U.S. ISM PMI is in the -20 range, which has indicated recessions in the past:Richard Excell from Stay Vigilant [April 24, 2023]Richard cited a chart from Credit Suisse, which showed that the only time stocks had negative returns was during a period when the ISM index was below 50 and declining. Currently, the ISM index is below 50 and declining.Richard Excell from Stay Vigilant [April 24, 2023]The stock market has been rallying likely because investors aren't as worried about inflation, which means the Federal Reserve would not have to raise interest rates. However, the odds of another Fed hike were increased to almost 90% in the last week or so, which is a shift from a month ago. The bond market still sees rate cuts in 2023, but it's uncertain if this will happen despite slower growth (the labor market is still strong and wage gains are positive, which the Fed is trying to combat).Tighter lending conditions of commercial banks and the subsequent refinancing of old low-interest household debt at new conditions are likely to put further pressure on margins and therefore lead to downward revisions of EPS in the medium term.At the same time, what has been driving the market higher and higher lately - the technology sector - is again about as expensive as it was before the problems with market liquidity, earnings erosions, and the exodus of money into money market funds began:JP Morgan [April 27, 2023], proprietary sourceCrescat Capital Fund's equity model indicates that the growth fundamentals of major technology companies have declined considerably and do not justify their valuations, which are higher than the 2000 tech bubble peak:Crescat Capital [April 26, 2023]What we are currently witnessing looks like a classic feast at the time of the plague - the only reason why people's greed is not at its peak is the fear of demand for junk bonds, if we refer to CNN's Fear & Greed Index. The put-call option, the volatility, and the breadth of the stock market are all at the level of greed.Normally, fundamentals are linked to valuation when it comes to making a convincing case - I see a clear bear-case set-up right now in the SPY.Bottom LineYou are reading my 3rd bearish article on SPY since the beginning of 2023. The last time I linked the risk of a market fall with OPEC's decisions to cut production to support crude oil prices:Seeking Alpha, my previous take on SPYHowever, as time has shown, the oil price could not sustain its unexpected upward breakout and rolled back to pre-announcement levels:Seeking AlphaWhy did this happen? Because the oil demand most likely points to the signs I pointed out in my article today - ISM PMI continues to drop in real-time, which will likely be confirmed on May 1:TradingEconomics.com, author's notesI expect the smart money to start taking profits in early May, when most companies in the S&P 500 index report, as the bull market diverges sharply from its fundamentals and valuation. But as practice shows, timing is not always on my side. Moreover, perhaps all the fear has already been reflected in the index's momentum in 2022 - the bottom may be behind us. Keep these upside risks to my thesis in mind before making an investment decision based on the information I have provided in this article.Despite the risks to my bearish stance, I assume that if the US experiences a recession - the fair P/E multiple should be around 15x. Accounting for a potential 1.5% downward EPS revision, the implied SPY price would be significantly lower than the current levels:FY23 P/E * (EPS adjusted for a downward revision of 1.5%) = fair value15x * ($218.09 * 0.985) = $3222.23The resulting value is 21.9% lower than what I see on my screen at the time of this writing. I confirm my tactical \"Sell\" rating on SPY/SPX.This article is written by Danil Sereda for reference only. Please note the risks.","news_type":1},"isVote":1,"tweetType":1,"viewCount":211,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"lives":[]}