Treading Water

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[Chart courtesy of]

  1. Moving the markets

Despite a last hour attempt to prevent another session in the red, after yesterday’s slam, the major indexes managed to climb back to their respective unchanged lines, as dip buyers were conspicuously absent. However, a late Market on Close (MOC) program propelled stocks off their lows.

Economic data points were solid due to persistently strong job openings beating expectations, despite a plunging number of quits. As ZeroHedge pointed out, this was the fifth consecutive beat of expectations, which was disappointing for the ever-present dovish “pause or pivot crowd.”

February’s ADP private payroll report confirmed that the economy stands on firm ground, at least for the time being. That sent rate hike expectations surging towards the 5.70% marker, while the odds of A 50bps hike in March sprinted to 70%.  

In the absence of a short squeeze, the “most shorted stocks” limped lower for the third consecutive day thereby aiding bearish momentum.

Bond yields dipped early on but headed higher late in the session, with the 10-year breaching its 4% level to the upside, but again it was not able to close above it.

The US Dollar bobbed and weaved and closed unchanged, as did Gold, with the precious metal surrendering its early gains.  

While Industrial and Survey data have been plunging, the Labor Market has shown surprising strength, which makes me wonder if some of these numbers are out of whack?

Will that alligator snout snap shut one of these sessions?


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 changed only immaterially, as the markets closed just about unchanged.

This is how we closed 03/08/2023:

Domestic TTI: +3.69% above its M/A (prior close +3.47%)—Buy signal effective 12/1/2022.

International TTI: +7.37% above its M/A (prior close +7.32%)—Buy signal effective 12/1/2022.

All linked charts above are courtesy of Bloomberg via ZeroHedge.

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