Thriving And Diving

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

After the release of the highly anticipated CPI report, which came in “cooler” than expected, the major indexes stormed ahead with the Dow scoring a quick 400-point gain. The S&P 500 recouped its 200-day M/A but gave back that “victory” later in the session.

The CPI increased just +0.1% from the prior month and +7.1% YoY vs. expectations of +0.3% and +7.3% respectively. The core-CPI (without food and energy) rose +0.2% MoM and +6.1% YoY.

This are still horrific inflation numbers, but they were good enough for bullish juices to be released. However, early enthusiasm faded fast, as the major indexes dove back to their unchanged lines, and only managed to end the session with a moderate rebound but at least eking out a green close.

Helping the bullish theme were lower bond yields, the spanking of the US Dollar, and the everlasting hope that the Fed will become less restrictive, when they announce their interest rate changes tomorrow. Gold was the winner, with the precious metal gaining +1.70% and reclaiming its $1,800 level.

The odds for a 50bps hike tomorrow appears to be a given, but softer readings for next year are expected.

All eyes are now on Fed head Powell causing ZeroHedge to ponder: “Will he spoil the party?

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 improved with the softer than expected CPI report giving a much-needed assist to equities.

This is how we closed 12/13/2022:

Domestic TTI: +3.13% above its M/A (prior close +2.41%%)—Buy signal effective 12/1/2022.

International TTI: +3.54% above its M/A (prior close +2.43%)—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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