- Moving the markets
While moderate bullish sentiment dominated market direction throughout the day, traders decided to shift upward momentum into overdrive during the last hour of the session, thereby pushing equities sharply higher.
The major indexes sported solid gains in the end, indicating that tomorrow’s CPI number is expected to come in lower than had been assumed. Should that be the case, we will see the bullish theme grow stronger and provide us with the much longed-for Santa Claus rally.
Bond yields jumped with the 10-year adding 12 bps to close at 3.62%. Rate trajectory expectations rose, as ZeroHedge pointed out, with the terminal rate now back up to 5%.
The US Dollar rode the rollercoaster but managed to eke out a small gain, Crude Oil rebounded after the recent drubbing, and Gold lost its $1,800 level by a small margin.
All eyes are on tomorrow’s CPI release and Wednesday’s FOMC meeting, after which Fed head Powell will likely again elaborate his hawkish stance—higher rates for longer—which may not go over well with the Wall Street crowd, because they have almost desperately anticipated a pause or pivot in rate policy.
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 roared back, as a last our Ramp-A-Thon pulled the TTI’s out of the prior week’s doldrums.
This is how we closed 12/12/2022:
Domestic TTI: +2.41% above its M/A (prior close +0.92%)—Buy signal effective 12/1/2022.
International TTI: +2.43% above its M/A (prior close +2.10%)—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.
Contact Ulli