Congress Clears Debt Hurdle, Traders Cheer And Fear

Ulli Market Commentary Contact

[Chart courtesy of]

  1. Moving the markets

After weeks of political drama, Congress finally passed the debt ceiling bill last night, much to the relief of the traders who celebrated with a rally. The bill is now heading to the Senate, where it is expected to sail through smoothly. Sources say the Senate won’t rest until Biden signs it into law.

This is a big win for the traders, who can breathe easier without the looming threat of a default. But they shouldn’t get too comfortable, because another challenge awaits them in a few weeks: the Fed’s decision on whether to raise interest rates again.

The Fed has a tough choice to make, as the economic data is sending mixed signals. On one hand, jobless claims rose slightly from last week, staying near 18-month highs. On the other hand, ADP reported stronger than expected job gains, which would be great if not for the sluggish wage growth. So, what will the Fed do? My guess is they will go for a modest 0.25% hike.

Today’s rally was not a one-man show, but a team effort with most sectors joining in. Even the regional banking sector ETF KRE bounced back from yesterday’s losses. Bond yields fell back, but the US dollar took a bigger hit, dropping to its lowest level since January, as ZeroHedge noted. That gave Gold a chance to shine, as it flirted with the $2k mark but couldn’t seal the deal.

  1. “Buy” Cycle Suggestions

The current Buy cycle began on 12/1/2022, and I gave you some ETF tips based on my StatSheet back then. But if you joined me later, you might want to check out the latest StatSheet, which I update and post every Thursday at 6:30 pm PST.

You should also think about how much risk you can handle when picking your ETFs. If you are more cautious, you might want to go for the ones in the middle of the M-Index rankings. And if you don’t want to go all in, you can start with a 33% exposure and see how it goes.

We are in a crazy time, with the economy going downhill and some earnings taking a hit. That will eventually drag down stock prices too. So, in my advisor’s practice, we are looking for some value, growth and dividend ETFs that can weather the storm. And of course, gold is always a good friend.

Whatever you invest in, don’t forget to use a trailing sell stop of 8-12% to protect yourself from big losses.

  1. Trend Tracking Indexes (TTIs)

Our TTIs followed the bullish theme of the day, but the domestic one was still not able to break its trend line to the upside. We remain in neutral territory.

This is how we closed 06/01/2023:

Domestic TTI: -0.74% below its M/A (prior close -1.48%)—Buy signal effective 12/1/2022.

International TTI: +4.20% above its M/A (prior close +2.82%)—Buy signal effective 12/1/2022.

All linked charts above are courtesy of Bloomberg via ZeroHedge.

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