- Moving the markets
The race to getting nowhere fast continued, as Disney’s earnings showed that subscriber growth was anything but acceptable causing the stock to puke by losing over 8%.
Then it was PacWest which confirmed that the banking troubles are far from being over by acknowledging in a regulatory filing that its deposits fell 9.5% last week. The punishment was quick and harsh, as its stock plummeted another 22%, despite the bank’s assurances that it had $15 million in immediate liquidity available.
Ah yes, and the much-awaited Producer Price Index (PPI) was almost shoved into the background due to its number not revealing any earthshattering changes. The index increased just 0.2% in April vs. estimates of 0.3%.
Jobless claims soared unexpectedly, when whopping initial claims of 264k were reported, which was a spike from last week’s 242k and a big miss to expectations of 245k. ZeroHedge added that this was the highest point since October 2021.
Bond yields continued their journey to lower levels, but the US Dollar decoupled, despite dovish headlines, and rebounded to one-week highs. Gold could not handle that diversion, and, after an initial surge, the precious metal was dumped, despite growing uncertainties with the debt ceiling crisis as well as continued banking problems. Go figure…
Back to the banking crisis. The most relevant question I am being asked in the environment of unsafe banks is this one:
How safe is my money in a brokerage firm, should the situation worsen?
This article explains the differences between the various insurances banks and brokerage firms use to make sure clients’ assets are protected.
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)
While the release of the PPI had no effect on market direction, Disney and PacWest took center stage, as they got slammed. Two of the three major indexes closed in the red and took our Domestic TTI down with them.
As we have seen numerous times before, the tiny drop below the line is not convincing enough to consider this an end to the current “Buy” cycle.
This is how we closed 05/11/2023:
Domestic TTI: -0.39% below its M/A (prior close +0.11%)—Buy signal effective 12/1/2022.
International TTI: +5.43% above its M/A (prior close +6.10%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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