- Moving the markets
Anxiety reigned supreme ahead of the Fed’s decision on interest rates, with the markets having priced in a meager 0.25% hike. That is despite the countless announcements by a host of speakers that “higher rates for longer” are the current policy theme, yet traders have battled the Fed every step of the way.
It’s likely that the Fed eventually will reverse its tightening schedule, but it’s questionable whether that point in time has been reached already. Wednesday’s release of their decision will shed some light on where they are at with their policies. Will the hawkishness continue? The H2 2023 Rate Cut Expectations seem to indicate so.
Adding to the nervousness in the markets will be the continued earnings barrage with some 20% of the S&P members releasing their report cards this week, including some of the tech giants like Apple, Amazon, Meta, and Alphabet.
At session’s end, today’s reality check erased all of Friday’s gains and then some, as the short squeeze ran out of ammo again.
Bond yields rose due to uncertainty about the Fed’s policy decision, the US Dollar dipped and ripped, which caused Gold to drift modestly lower yet remain firmly anchored above its $1,900 level.
We might see more of the same tomorrow.
2. “Buy” Cycle Suggestions
For the current Buy cycle, which started on 12/1/2022, I suggested you reference my most for ETFs selections. However, if you came 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 pulled back, as the bears ruled this session.
This is how we closed 01/30/2023:
Domestic TTI: +6.00% above its M/A (prior close +7.14%)—Buy signal effective 12/1/2022.
International TTI: +9.63% above its M/A (prior close +10.59%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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