Even with Nvidia's (NVDA) solid upside move yesterday, the market took a hit. It needed a hero, but the Artificial Intelligence (AI) giant fell short, and only the Energy (XLE) Sector finished higher.

Eli Lilly (LLY) led Health Care (XLV) lower with its worst session since March 2021. The weight loss drug maker has enjoyed a significant upside momentum, but we are reminded that the wind blows both ways. 

Over Already?

Small-caps have been in the spotlight for a week, but is it over?  It would be like Clint Longley, the substitute quarterback, to lead the Dallas Cowboys to a come-from-behind victory after head quarterback Roger Staubach suffered an injury. Longley was later traded after punching Stauback in the locker room.

The small-caps took it on the chin, but I don’t think it's back to the end of the bench.

The Economy Is Unwell

My most significant concern is the rapid deterioration of the economy. After so much helicopter money, it was bound to happen. Admittedly, the process has taken longer than anyone anticipated because billions of taxpayer dollars continue to pour into the economy, and new tools to prop banks are completely countering efforts by the Fed to take money out of the economy.

All that cash sloshing around has lifted the velocity of money, which has been a good thing, but it's not organic. When something is inorganic, it's not natural and nonrecurring. Meanwhile, savings are faltering.

Real Retail Sales

That retail sales report from last week is a farce partly because it's adjusted for inflation. ‘Real’ retail spending was -0.7% from a year ago. Bank of America's daily spending is in a tailspin.

Look at those declines:  Entertainment, furniture, home improvement, and airlines.

Why Own Stocks?

The stock market is a haven during tough times, the best investment during inflationary times, and the place of opportunity during downturns. If the Fed is too late, there will be unnecessary pressure on stocks.

I would like to see the rate-cutting cycle begin this month and end no later than September. The good news is that I’m confident there will not be a crash, but I will have difficulty convincing subscribers that a 5% pullback isn’t the second coming of Black Friday or Black Monday.

For now, we think owning great companies is the best bet, and we are looking to buy high-flyers where the pendulum swings too far.

The ‘fear’ index is spiking.

The critical support point is that gap and 50-day moving average at 5,400. The Relative Strength Index (RSI) is down from being overbought, and the money flow is holding up nicely.

Today’s Session

Last night, cyber security provider Crowdstrike (CRWD) issued a software update that negatively affected Microsoft’s (MSFT) operating system, and all hell has broken out worldwide.

Crowdstrike insists it's not a security breach but, instead, a bug that has been identified, and a solution is being implemented.

The broad market is looking to settle down at the start of trading, but it will focus more on the Trump Trade after Donald Trump formally accepted his party's nomination.

Breaking news of Biden’s family looking for a graceful exit adds pressure to the market.

Stay Tuned.

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