ETF Tracker Newsletter For February 3, 2023

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  1. Moving the markets

Traders were simply blown away by Friday’s jobs report, which allegedly added some 517k new jobs in January, which was quite the opposite of the expected 187k. The number was so out of line that some analysts referred to it as the seasonal adjustment statement. After all, having witnessed 10s out thousands of layoffs announced in January, these massive job creation numbers simply seem out of line with reality.

Yesterday’s disappointing earnings reports from tech giants like Amazon, Alphabet and Apple, should have crushed that sector, but its impact was far less than expected. In the end, we saw another short squeeze pushing the major indexes higher, with the Nasdaq gaining over 3% prior to the release of big tech earnings. Today’s retreat of only -1.59% was modest given its recent advances, as the squeeze ran out of ammo.

Of course, all this good news about jobs growth, and the unemployment rates sinking to its lowest since 1969, may have unintended consequences in that the Fed, considering this economic strength, may very well continue its tightening path (and not cut this year), as the terminal rate moved back up into hawkish territory.

Stocks reversed and headed south and lingered in the red for the remainder of the session. Bond yields spiked, as did the US Dollar, which pulled Gold off its lofty level and back below the $1,900 mark.

It was simply a chaotic day on Wall Street, which portfolio manager Jeffrey Rosenberg categorized like this:

“This is a reminder of what Powell tried to say, but the market was not listening.”

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 came off their highs, as increased volatility favored the bears.

This is how we closed 02/03/2023:

Domestic TTI: +8.59% above its M/A (prior close +10.10%)—Buy signal effective 12/1/2022.

International TTI: +10.05% above its M/A (prior close +11.16%)—Buy signal effective 12/1/2022.

All linked charts above are courtesy of Bloomberg via ZeroHedge.



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