- Moving the markets
Rising bond yields took center stage today and kept equities in a tight trading range, as the first of the last 4 days of trading in 2022 provided no ammunition for the bulls to try to end a brutal year on a positive.
China’s loosening of Covid restrictions helped their stock market, but domestically no upside driver emerged, as Tesla dropped another 8% due to an extended production pause, with the stock now being on target for its worst year ever. Ouch! Southwest Airlines lost around 5%, as thousands of flights had to be cancelled.
Even powerhouse Apple has now come off its recent highs by 29% and is testing its June 2022 lows. A reduction in production and consumption lies at the forefront of its malaise. But top billing for worst performance goes to Meta, which is down 70% from its highs.
Concerns about next year’s economic outlook preoccupied traders’ minds, as the latest Dallas Manufacturing Survey showed a September plunge to -18.8 (vs. -14.4 expected), a number that did nothing to soothe the sour mood on Wall Street.
On the positive, the US Trade Deficit shrank significantly, as ZeroHedge pointed out, which should have been good news, but wasn’t, when considering that the Fed’s “higher for longer” rate narrative may now not be crushed, which might have been the case had the deficit worsened.
The US Dollar went nowhere, but gold was a top performer for the day by gaining 1% and solidifying its position above the $1,800 level.
2. “Buy” Cycle Suggestions
For the current Buy cycle, which starts on 12/1/2022, I suggest you reference my most recent StatSheet for ETFs selections. If you come on board later, you may want to look at the most current version, which is published and posted every Thursday at 6:30 pm PST.
I also recommend for you to consider your risk tolerance when making your selections by dropping down more towards the middle of the M-Index rankings, should you tend to be more risk adverse. Likewise, a partial initial exposure to the markets, say 33% to start with, will reduce your risk in case of a sudden directional turnaround.
We are living in times of great uncertainty, with economic fundamentals steadily deteriorating, which will eventually affect earnings negatively and, by association, stock prices. I can see this current Buy signal to be short lived, say to the end of the year, and would not be surprised if it ends at some point in January.
In my advisor practice, we are therefore looking for limited exposure in value, some growth and dividend ETFs. Of course, gold has been a core holding for a long time.
With all investments, I recommend the use of a trailing sell stop in the range of 8-12% to limit your downside risk.
3. Trend Tracking Indexes (TTIs)
Our TTIs changed immaterially with the Domestic one now sitting right on top of its trend line. That means, the major trend is unclear, and we need to wait until a breakout in either direction determines our next cause of action.
This is how we closed 12/27/2022:
Domestic TTI: -0.02% below its M/A (prior close -0.08%)—Buy signal effective 12/1/2022.
International TTI: +1.73% above its M/A (prior close +1.60%)—Buy signal effective
12/1/2022.
Disclosure: I am obliged to inform you that I, as well as my advisory clients, own some of the ETFs listed in the above table. Furthermore, they do not represent a specific investment recommendation for you, they merely show which ETFs from the universe I track are falling within the specified guidelines.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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