Market opens reversing rally while internals continuously flag bullish signals
Market opens the first trading session of the week in rather subdued sentiment with most large caps gapping down, including Apple, Google and Tesla pulling SPY down near 410 while concerns about interest rate pressure on personal loans continue to loom over the market. The clearest reversal signal is probably on internals in the morning when all signals show clear bullish divergence even as SPY nears the 410 bottom after the first hour of the session.
Apple says iPhone 15 production will be delayed
Europe approves Microsoft's acquisition of Activision Blizzard ($ATVI)
FED report shows personal debt growth at slowest pace in past 2 years with concerns over wave of “personal default”
Total personal debt only increases $148B or 0.9% in first 3 months of 2023 with clearly slower growth across all product segments
This is the slowest growth in the past 2 years, raising major concerns about market spending capacity in a credit-driven economy like the US
Mortgage Origination hits lowest level since 2014, although average credit score remains at 765 with most of the decline coming from high credit segment
This shows the real estate market will continue to slow but has not faced a credit crisis like 2008 when mortgage loans still maintain high quality
Meanwhile, auto loans continue at quite high levels, reaching $162 billion
However, average credit score rises to 721 from 711 showing clear tightening of conditions:
Most concerning is the delinquency rate - debt overdue on payments over 30 days starting to accelerate right before Student Loan interest resumes at the beginning of August:
Personal Default with delinquency over 90+ days starting to rise:
If the collection rate starts returning to pre-COVID average after student loan payments resume, the US economy is highly likely to experience “hard landing” with current interest rate policy:
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