ETF Tracker StatSheet
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MARKETS SHRUG OFF $4.2 TRILLION OPTIONS EXPIRY AND INFLATION DATA, BUT BEWARE OF AI BUBBLE
- Moving the markets
Today was a huge day for options traders, with $4.2 trillion worth of contracts expiring. But the markets didn’t seem too fazed by the massive turnover. They shrugged off some minor losses and held on to most of the gains they made this week. The S&P 500 rose by a respectable 2.7%. Gold and silver also bounced back from a rough start and rallied strongly in the last two days.
The markets got a boost from the CPI data, which matched expectations and eased some inflation fears. They also cheered the Fed’s decision to keep the rates unchanged, ignoring the warnings that the stimulus might taper sooner than later. The markets assumed that Powell was just bluffing and kept pushing higher.
But not everyone is convinced that this rally is sustainable or healthy. Some analysts warn that a recession is looming and that a bull market can’t last in such conditions. They also point out that the rally is driven by a narrow group of stocks in the artificial intelligence sector (AI), which reminds them of last year’s bubble that burst spectacularly.
One of them is BofA’s Michael Hartnett, who thinks that the S&P has more downside than upside potential between now and Labor Day. He thinks that the current situation is like a mix of 2000 and 2008, when a big rally was followed by a big crash. Only time will tell if he’s right.
On the bright side, consumer inflation expectations dropped sharply in June, which suggests that people are less worried about rising prices. But that doesn’t mean that everything is fine with the economy. It could also mean that people are pessimistic about their income and spending prospects.
Personally, I don’t put much stock in that indicator because I prefer to look at the actual prices I must pay for things. And those tell me a different story. They tell me that inflation is still alive and kicking.
- “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.
- Trend Tracking Indexes (TTIs)
The markets survived a huge options expiration day with minimal losses and kept most of the gains they made this week. Our Trend Tracking Indexes (TTIs) dipped slightly but stayed well above their trend lines.
This is how we closed 06/16/2023:
Domestic TTI: +4.66% above its M/A (prior close +4.98%)—Buy signal effective 12/1/2022.
International TTI: +9.12% above its M/A (prior close +9.56%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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