- Moving the markets
The Dow kept its winning streak alive for the 12th day in a row, shrugging off mixed earnings and the looming Fed decision on rates. Traders and algos were in a bullish mood, pushing the index to its highest level in six years.
Some earnings highlights: GM skidded 4% even after raising its outlook, GE soared 6% on a strong report card, and UPS slipped despite averting a strike with the Teamsters.
Google and Microsoft are up next after the bell. So far, 79% of S&P 500 companies have beaten the low bar of analyst expectations for Q2.
The Fed is widely expected to raise rates by 0.25% tomorrow, but the big question is what they will do in September? Many hope that inflation is under control and on track to hit the Fed’s 2% target, so no more hikes are needed.
But what if inflation comes back with a vengeance, as I suspect it will? Hmm…
Consumer confidence surged to a two-year high, while inflation expectations dropped to a 10-month low. These numbers boosted the Economic Surprise Index, which had been lagging lately.
But financial conditions are still as easy as they were when the Fed started hiking rates by 0.5% in May 2022. That’s probably not what they had in mind after five hikes totaling 5%. If that didn’t do much, more hikes are likely, and the odds of another one before year-end are now at 50%.
Banks reversed course after yesterday’s bounce, bond yields edged up, the dollar stayed in a tight range, and gold was choppy with its ETF adding +0.53%.
It’s no secret that insiders know best, and they have been bearish while retail investors drove this market melt up, as this chart shows.
Will they be proven right?
- “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 major indexes rose steadily for most of the day but gave back some gains in the final hour of trading. They still ended the day with modest increases.
Our TTIs mirrored this pattern, as investors awaited the Fed’s decision on interest rates tomorrow.
This is how we closed 07/25/2023:
Domestic TTI: +7.11% above its M/A (prior close +7.04%)—Buy signal effective 12/1/2022.
International TTI: +8.88% above its M/A (prior close +8.43%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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