- Moving the markets
The first trading day of 2023 turned into a bit of tug-of-war between bulls and bears, as an early bounce gave way to slow and steady selling, but a last hour rebound kept the damage to a minimum.
The same stand-by problems like rising rates and high inflation continued to concern traders and algos alike, but it was the tech heavyweights Tesla and Apple, which carried forward their bearish theme of last year.
Tesla dumped another -12% and hit its lowest level since August 2020 due to less than expected 4th quarter deliveries. Apple struggled as well with the stock losing 3.7% on announcements that it will cut production due to weak demand caused by a struggling economy, as the tech wreck continues.
On the economic front, the US Manufacturing Index slipped at the fastest rate since May 2020 confirming that recessionary warnings are justified.
Despite a drop in bond yields, equities were not able to avoid the mid-day dump, as Terminal Fed rate expectations continued their northerly path. The US Dollar ramped higher today and, surprisingly, Gold followed suit and gained a solid 1%.
Looking at the big picture of the S&P 500, we can clearly see that trading in a narrow range remains the current theme. A breakout will certainly occur, but in which direction is the big unknown.
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 stayed on the bullish side of their respective trend lines with the Domestic one barely hanging on.
This is how we closed 01/03/2023:
Domestic TTI: +0.06% above its M/A (prior close +0.16%)—Buy signal effective 12/1/2022.
International TTI: +2.53% above its M/A (prior close +2.16%)—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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