Stocks Becoming More Volatile Due To Growing Liquidity Shortfall | Michael Lebowitz

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**Michael Lebowitz** (0:45)
The point is that liquidity is no longer ample. We don't know where it is on the scale. The Fed doesn't know. So I think your original question is, yes, there's still stress in the market. There are a lot more Fed tools that kind of limit the stress, put a floor and ceiling on some of that stress. So it's not maybe as concerning as it would have been in 2019 But nonetheless, there's liquidity issues and the Fed will be doing some variation of QE. How that plays out? Yeah, I don't think anyone knows including a Fed at this point, but that is coming because there is a liquidity shortfall.

**Adam Taggart** (1:33)
Welcome to Thoughtful Money, I'm Thoughtful Money Founder and your host, Adam Taggart, welcoming you back here at the end of the week for another weekly market recap, this time featuring my good friend, the buffeted portfolio manager, Michael Lebowitz. Mike, how you doing? I'm doing well, Adam.

**Michael Lebowitz** (1:49)
How about you?

**Adam Taggart** (1:50)
I'm doing well. Folks, we got Michael this week because this is one of the weeks that Lance is taking his wife to her chemotherapy treatments, and we're wishing them very well. I think they're past the midpoint on this, so hopefully they're starting to feel like they're in the home stretch. That would be great. Michael, I picked the word buffeted for a couple of reasons. One, out here in my new home in Nevada, we are having a pretty decent rain and windstorm, so my house is getting pretty buffeted by the winds. The market similarly is getting pretty buffeted today, so we'll talk about that, I'm sure. Then lastly, Warren Buffett, a great investor, just announced that we won't be hearing from him much anymore. He's going to be, quote unquote, going silent, understandable. The guy is, what, in his mid-90s at this point in time. He's already handed over the reins to the CEO there at Berkshire Hathaway. So I just want to mark that milestone.

**Michael Lebowitz** (2:48)
So lots of buffeting today.

**Adam Taggart** (2:49)
Lots of buffeting today. So why don't we go straight to the market buffeting? So markets have seemed to sort of switch quickly into risk off here, and you can walk us through anything you like. This is Friday. We're recording this earlier in the day, as we usually do on Fridays. So the market hasn't closed yet, and who knows what will happen between now and the close. It does seem to be off the lows a bit, but today's so far at least been kind of a rough day, unless you owned the VIX or oil.

**Michael Lebowitz** (3:21)
So apparently, Adam, you haven't looked. We are now flat on a day.

**Adam Taggart** (3:27)
Really?

**Michael Lebowitz** (3:27)
The market has done a U-turn. They have bought the dip. The more conservative stocks that were doing much better yesterday are down today. The high-flying tech stocks are up today. So quite the reversal, quite the unbuffeting over the last, I don't know, I looked at it right before I got on with you, and I was kind of surprised as well.

**Adam Taggart** (3:53)
Wow, yes, I think I looked at it about 30 minutes ago before I started working on my list here. So that's been pretty pronounced recovery.

**Michael Lebowitz** (4:00)
Yeah, as you know, 30 minutes in this market can be a whole different ballgame.

**Adam Taggart** (4:07)
Wow. Okay. Well, let's walk through this then, because one of the questions I was going to ask you was, are we seeing any important trend breaks here in the market? And maybe we were, but maybe they're unbroken at this point now. Right.

**Michael Lebowitz** (4:21)
So with that, let me, I created a few graphs. It's probably easiest to show it. What we have here is the SPY, the S&P 500 ETF. And Lance and myself have been talking ad nauseum about the MACD which has been slowly declining in the face of the rising stock market and very similar action in the RSI at the bottom of the graph. Negative divergence and that tends to be a bearish signal. And we've been paying close attention to it. As you can see, I circled up at the top.
We hit a high back in a few weeks ago. The market sold off, came back, but it didn't go back to the higher high. It hit a lower high and now it's selling off again. So, what we want to see today by Friday's close is whether we stay above that prior low or close above it. We don't really want to see a lower low, especially for the week. I then drew a dotted line in there too. That, you know, even if we set a lower low, we'd like to stay above that dotted line, meaning that the market is potentially just working off, consolidating and working off some of this overboughtness. Those are some things we're looking at. And to your question, the moving average is you have your 20, 50, and 200, red, blue, and black. Where, who knows where we are now. I, unfortunately, I did this about an hour ago, so it's, it's off. But we should probably be right above or right on the, probably right above the 50-day moving average. And that's kind of the key one. That's the one that's provided support since April.