- Moving the markets
After a brief sprint above their respective unchanged lines, the major indexes reversed and hit the skids, with the Dow dumping over 500 points for the second time this week, as traders braced for tomorrow’s payroll report.
Remember that good news is bad news, which means a better-than-expected payroll print directly translates into the Fed pursuing their hawkish monetary policy, and that will result in lower equity prices.
Jobless claims for the week rose more than expected, a sign that the Labor market may be slowing, but yesterday’s ADP payroll report and JOLTS data painted a picture of economic strength. Some traders expect that this tie could be broken with tomorrow’s payroll numbers.
Negative bank headlines spooked the markets with KBW banking index plunging over 7% to a level last seen early 2021, as the Silicone Valley financial group SIVB collapsed around 60%. JP Morgan also got taken to barn and spanked over 5%, while realty trust Vornado, which already had been in a downswing, touched its lowest point since 1996.
Bond yields retreated, as the 10-year again pierced the 4% level yet slipped later in the session to close at 3.91%.
Despite the chaotic moves in the market, the US Dollar dipped, which allowed Gold to stage a nice rebound of almost 1%, with bank stresses being a main contributor to the precious metals’ bullishness.
Of course, all the above could reverse with lightning speed in an instant tomorrow, should the payroll report be a disaster, which would send equities on an ascending trajectory. Remember that bad economic news is good news for the markets.
2. “Buy” Cycle Suggestions
For the current Buy cycle, which started on 12/1/2022, I suggested you reference my then current StatSheet for ETF selections. However, if you came on board later, you may want to look at the most recent 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 tanked, as the Domestic one move to within striking distance of a “Sell” signal.
This is how we closed 03/09/2023:
Domestic TTI: +1.40% above its M/A (prior close +3.69%)—Buy signal effective 12/1/2022.
International TTI: +6.55% above its M/A (prior close +7.37%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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