Going Nowhere Ahead Of The CPI Report

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[Chart courtesy of MarketWatch.com]

  1. Moving the markets

Despite the Dow and the S&P bouncing above their respective unchanged lines throughout the session, in the end not much was gained, as traders tried to elude possible negative consequences ahead of key inflation data.

It’s worth noting that tomorrow’s CPI and Thursday’s PPI report are the last critical inflation data points before the Fed meets next, which will be on May 3rd.

At that point, they will re-evaluate their fight to control inflation via rate hikes, whether their current policy is on target, or if it needs to be adjusted. The latter is what traders are looking for, while hoping that any adjustment will tilt towards a dovish stance, which will then give a boost to equities—at least in theory.

Also on deck is the earnings season, with banks starting to post their report cards this coming Friday, so traders are eager to find out if last month’s banking crisis impeded their bottom lines.

Bond yields inched higher for the 3rd straight day, while the odds of a 0.25% hike in May stayed around the 70% level. The US Dollar dropped, and Gold popped another +0.80% to close at $2,020.

Today’s activity seemed dull and uninspiring, but the next two days could change that in a hurry.

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 you 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.

In my advisor’s 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)

Despite the major indexes not going anywhere, our TTIs moved a little deeper into bullish territory. 

This is how we closed 04/11/2023:

Domestic TTI: +2.47% above its M/A (prior close +1.80%)—Buy signal effective 12/1/2022.

International TTI: +7.88% above its M/A (prior close +7.18%)—Buy signal effective 12/1/2022.

All linked charts above are courtesy of Bloomberg via ZeroHedge.

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