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Here Is A Look At The Great Unwind As The Economy Tanks

Art Cashin, Head of Floor Operations at UBS: The Equity Bulls’ early attempt to extend their string of plus days is running into a bit more serious trouble than most had assumed. If you recall in the late morning update, we talked about the potential heavy resistance at 4400, while we didn’t actually reach that, we got to within about 8 points.

A couple of members of the Friends of Fermentation checked in to say that some of their cocktail napkin chartwork hinted that there were two technical cycles that were about to overlap. And it might call for an intermediate top somewhere between here and the end of the week. They said it was of note because the intermediate top would be followed by a more than noticeable pullback.

So far that’s only on a cocktail napkin, but it will make watching today’s action all the more important where the Bulls try to regroup and come back on again, but we may see further weakness. If you see the S&P dip below the 4355 level, put on the “check engine” light, could make for a bit of a sticky afternoon.

But for now the Bulls are on the defensive, the yield on the 10-year has dipped below the 4.55, we were concerned about if it were to break below 4.50 that could cause some real damage.

Also of note, Crude has broken below its 200 day moving average.

So for now, keep the slide rule handy, we might be doing some important testing, as we had mentioned in the late morning update. So stay alert and try to stay safe.


Things Are Tightening All Over

Peter Boockvar: So when looking at the Senior Loan Officer survey that comes out every quarter, as the latest one was published Monday, after a notable move in one direction in any particular quarter in terms of standards and demand, it’s important to follow that by looking at the ‘basically unchanged’ category. This is because after a string of tightening lending standards over the past year, Q3 saw a 63% figure that was ‘basically unchanged’ vs 49% in Q2 meaning that while they haven’t tightened much further, the cumulative tightening in standards remains. In other words, the credit crunch continues on if you need to rely on a bank for a loan.

The Fed said “Regarding loans to businesses, survey respondents, on balance, reported tighter standards and weaker demand for C&I loans to firms of all sizes over the 3rd quarter. Furthermore, banks reported tighter standards and weaker demand for all CRE loan categories.”

“For loans to households, banks reported that lending standards tightened across all categories of residential real estate (RRE) loans other than government residential mortgages, for which standards remained basically unchanged. Meanwhile, demand weakened for all RRE loan categories. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Moreover, for credit card, auto, and other consumer loans, standards reportedly tightened, and demand weakened on balance.”

About The Banks

There was a special question of note that “inquired about banks’ reasons for changing standards for all loan categories in the third quarter of 2023.” And the response back was, “Banks most frequently cited a less favorable or more uncertain economic outlook; reduced tolerance for risk; deterioration in the credit quality of loans and collateral values; and concerns about funding costs as important reasons for tightening lending standards over the third quarter.”

Shifting gears to the transportation sector, pun intended, times remain challenging but just maybe there are some lights of hope out there as the inventory destocking runs its course. I’ll highlight here the earnings comments from Expeditors International, the global freight broker talk about the situation and the signs of hope expressed, along with the October Logistics Managers Index which came out yesterday and saw m/o/m improvement…

Read more: kingworldnews