Discussion
TXN is on the tape this morning after a very poor reaction to its ER last night, and the stock’s relative strength is set to continue to probe 5-6 year lows. Given TXN’s status as an economic bellwether and the precarious macro outlook currently in place, I went back and looked at how SPX traded in the past once TXN hit new relative strength lows. There are roughly 10 cases since 2007 to analyze, 3 of which ultimately proved bullish for SPX, while the other 7 proved bearish. How today’s market environment compares to the 3 bullish cases is in the eye of the beholder. IMO, the heavy bearish weight of the cross-asset market evidence suggests the bearish N=7 should be the focus. But on the other hand, once the equity market becomes fully oversold as defined by the % of stocks above their 50dma moving down to circa 5-10% (preferably 0-5% given the outlook), TXN’s breakdown could portend a sturdy bear market rally in the context of a larger downtrend.