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The Empty Restaurant on Friday Night |
By Prof. Jeffrey Bierman, CMT
The cold hit Chicago hard last week. |
Twenty-one degrees on Black Friday morning. Snow came that evening. Six to seven inches. This weekend it dropped to six degrees. |
I took my daughter to see Zootopia 2 on Friday afternoon. Then we hit the stores with my wife for Black Friday shopping. What fathers do. |
But what I saw the Friday before Thanksgiving changed how I'm thinking about the next six weeks. |
Fulton Market sits a few blocks from where I live in Chicago. On Friday nights it's packed. Looks like Times Square. A billion people crammed into restaurants and bars. The energy is electric. |
The Friday before Thanksgiving it was 55 degrees. Beautiful weather for November in Chicago. Perfect night to be out. |
I walked through Fulton Market and it was completely empty. Not just quiet. Literally empty. |
That's when I knew something shifted. Not in the charts. Not in the technical indicators. In the real economy where real people make real spending decisions. |
This weekend I want to talk about what happens when all three classes stop spending at once. The lower class. The middle class. And even the wealthy. |
Because when Volkswagen's CEO warns that luxury car sales are declining. When the people making hundreds of millions a year cut back their Bentley purchases. That's not a soft patch. |
That's a top. |
The Canary in the Coal Mine |
Volkswagen owns Bentley. The Bentley Continental GT runs about $275,000 to $300,000. A true luxury sports car. |
This past weekend Volkswagen's CEO held an investor meeting. He said something that caught my attention immediately. |
"We are really concerned about the luxury market declining next year." |
Think about what that means. The wealthy don't care when the economy crashes. They have so much money it doesn't matter. They keep buying. They keep spending. They ride it out. |
But when the wealthy worry about the economy. When they cut back on luxury purchases. That signals something different. |
F. Scott Fitzgerald said it best. The rich ain't like you and me. |
When they stop spending, it's not because they can't afford it. It's because they see something coming that makes them want to preserve capital. |
The American consumer at the middle class and below is choking on debt. Dying of it. A thousand deaths every day. |
But that's been true for months. That's not new information. |
What's new is the wealthy joining them. All three classes simultaneously worried about the future. All three pulling back spending at once. |
And Wall Street's response? We don't care. All that matters is getting to the end of the year to beat the clock and get our bonus. |
This is just another Sisyphus move by Wall Street. They're not listening to what's actually happening in the economy. |
What My Mother's Birthday Reminded Me |
Last Wednesday would've been my mother's 90th birthday. She passed away a few years back. |
She fought cancer three times. Beat it every time. The fourth time she couldn't handle it. But she's probably in a better place now. |
She was the sweetest, most generous person. Everybody loved my mom. We all miss her dearly. |
I thought about her that morning before markets opened. About resilience. About fighting through things that seem impossible. About knowing when to push and when to step back. |
The market right now reminds me of that fourth fight. The one where the body just can't take anymore. Where all the technical strength is there but the underlying structure is too damaged. |
Last week was Thanksgiving week. The machines were completely in control. There were no people behind desks. Garrett Baldwin was on the road. Everybody was traveling. |
Just algorithms pressing buttons. Buying anything that was overbought. And everything was overbought. |
I woke up that Wednesday knowing it was her birthday. And I knew I wouldn't be trading aggressively that week. Not because of sentiment. Because the machines were running a one-sided show that had nothing to do with reality. |
The Market That Nobody's Manning |
Last Wednesday the market was up 100 points by mid-morning. Completely parabolic. RSI at 73 on the hourly chart. The two-hour and four-hour charts even more extreme. |
I told everyone in the Genesis COG call that morning: Don't even try to short this market. Don't add to any shorts. If you're short, literally close your screen and walk away. |
Not because I was bullish. Because there was no price discovery happening. Just machines defending positions with no human oversight. |
Consumer confidence hit its lowest point since April. The exact level we saw during the height of tariff fears. People were giving up looking for jobs. Spending data showed stress everywhere. |
And yet we rallied 190 points that week because it was Thanksgiving week in the fourth quarter and the algorithms were programmed to buy during that window regardless of underlying conditions. |
The machines don't feel anything. They don't process consumer sentiment. They don't care about luxury car sales declining. They just trade order flow and slopes. |
So consumer confidence being terrible actually becomes bullish. Bad data gives the Fed room to cut rates. Rate cuts mean liquidity. Liquidity means the algos buy more. |
Blue means red. People feeling awful translates into Fed support which algorithms interpret as permission to rally. |
This is the inverted world we're trading in now. Where weakness becomes strength because it justifies intervention. |
The Retail Numbers That Make No Sense |
The retail numbers that came out last week were stupendous. Consumers spending like drunken sailors according to the data. |
Kohl's exploded 30% on earnings. Abercrombie crushed it. Every retail name left for dead suddenly came roaring back. |
So if the economy's so terrible, why did all these retail stocks gap up 30%? |
Somebody's lying. Either consumer confidence is accurate and people really are pulling back. Or the spending data is accurate and everything's fine. |
They can't both be true. GDP is running at a 4-5% handle. That's inflationary. That's parabolic growth when you want moderate growth at 2-2.5%. |
Here's what actually happened with Kohl's. Nobody would touch it at 7x earnings. Too cheap. Must be broken. Retail is dead. Consumer is tapped out. |
Money managers looked at 9x earnings and said no. They wouldn't buy it even though the S&P trades at 25-26x earnings and Kohl's was trading at single digits. |
The optics were terrible. How do you explain to clients why you're buying something the entire market abandoned? |
Then earnings hit. They reported a dime when expectations were for a loss. The stock exploded. Now it trades at 11-12x earnings and suddenly it's cheap enough to own. |
Money managers would rather pay 30% more after confirmation than buy when valuation offered maximum safety. They trade based on fear of looking stupid. Not based on fundamental analysis. |
And that fear keeps them frozen until the machines force them to chase. |
What I Teach My Students at Loyola |
I teach corporate finance at Loyola on Friday mornings. This semester they gave me 49 students. Normally I get ten. |
Ten is perfect. I know everyone's name. I challenge them individually. We dig deep into applied portfolio management. |
Forty-nine is chaos. I'm trying to scare ten of them out because the workload is massive. |
But here's what bothers me more than class size. These kids have never seen a real correction. They don't know what 2008 looked like. They weren't trading in 2000. |
I posed a question to them last week that most traders never consider. |
If there were no buyers, would there be any capital market at all? |
The answer is no. You need buyers for markets to function. Without buyers, stocks go to zero regardless of how many sellers show up. |
Most people think you need heavy selling to drive prices down. That's wrong. Lack of buyers is enough. |
This matters right now because the algorithms are the only buyers left in many names. Real institutional money stepped away weeks ago. |
The machines create price movement. But they can't create sustainability. When algorithmic support is all that's holding something up, you're watching mechanical manipulation without fundamental demand underneath. |
My students stared at me like I was speaking another language when I explained this. That's the conditioning problem. Everyone's been trained to buy every dip. |
The algorithms don't anchor to cost basis. They calculate probability every millisecond. While you're married to your entry price, the machines are preparing for mean reversion. |
The One Lesson From 38 Years |
I've been doing this 38 years now. Building order flow systems at ThinkorSwim. Teaching technical analysis. Trading every market condition you can imagine. |
If someone asked me to summarize everything I've learned in one sentence, here's what I'd say. |
The slope integrity is never wrong. |
If the slope points up, the position is viable. If the slope points down, it's unviable. If the slope's flat, it's a two-sided market where anything can happen. |
Right now we're fighting a downward slope on the daily. We're threatening to break to a downward slope on the weekly. That's not a prediction. That's just reading what the algorithms are already calculating. |
The machines kept this illusion going all last week because they were programmed to defend it. Fourth quarter buying. Year-end positioning. Window dressing for annual reports. |
But come January the programming resets. The clock strikes midnight. And all the forces we've been ignoring for months come rushing back. |
That's when consumer confidence actually matters. When retail weakness shows up in earnings instead of just sentiment surveys. When empty restaurants on Friday nights translate into missing numbers. |
My Position Right Now |
I'm watching RSIs at 90 and 99 on half the stocks I'm tracking. In the old days, 99 meant sell everything immediately. |
Now it means buy more because you're defended by an algo. These are scary times. |
I can't wait to get this year over. I've done phenomenal on the short side. More on shorts than longs. The problem was last week none of my shorts would work. Not during that five to ten day window. |
So I waited. Raising cash. Holding defensive positions in names like Sysco and Colgate-Palmolive that work when consumers pull back. |
Not forcing trades where there was no order flow. Not trying to fight a one-sided algorithmic machine running on autopilot through Thanksgiving week. |
The Genesis COG System tracks exactly when these algorithmic regimes shift. When machines stop defending support and start attacking resistance. When the programming flips from systematic buying to systematic selling. |
Most traders won't see this until their accounts drop 10% in three days wondering what happened. The machines detected it weeks earlier. They repositioned before the crowd knew there was a problem. |
That's why I'm positioned the way I am. Not because I'm predicting a crash. Because I'm responding to the same calculations the algorithms will eventually process. |
This Weekend's Question |
I took my daughter to see Zootopia 2 on Friday. Then Black Friday shopping with my wife. Family time before the snow hit that evening and the cold really set in. |
While you're with your family this weekend, pay attention to the conversations happening around you. Not what people say about the market. What they say about their actual lives. |
Are they worried about expenses? Cutting back on purchases? Making tradeoffs they didn't make last year? |
That's not data. That's reality. And eventually reality catches up with the machines. |
When January comes and the programming resets, you want to be positioned for what people are actually experiencing. Not what Wall Street celebrates. |
Because empty restaurants on beautiful Friday nights tell you more about the next six months than any chart pattern ever will. |
The warnings are everywhere. In luxury car sales declining. In consumer confidence at decade lows. In Fulton Market empty when it should be packed. |
The question is whether you're listening. Or whether you're waiting for the algorithms to tell you it's too late. |
Enjoy your weekend. Monday comes fast. Be ready. |
Professor Jeffrey Bierman
Creator of the Genesis COG System |
