- Moving the markets
The Fed’s July meeting summary was a wake-up call for those traders who were dreaming of a pause in the rate hikes. The summary was as blunt as a hammer:
Inflation is way too high, the labor market is too tight, and we see more risks of inflation going up, so we might have to tighten the monetary policy even more.
The Fed minutes also said that the economy needs to cool down a bit, so that people don’t spend too much. But the recent data on retail sales and GDP show that people are still spending like there’s no tomorrow, so they’ll probably keep raising the rates until we see some signs of a recession.
All the US stock indexes took a dive, with the Nasdaq and Small Caps leading the plunge. The Nasdaq 100 fell below 15,000 for the first time since June, while the S&P, Nasdaq, and Russell 2000 all closed below their 50-day moving averages.
Regional bank stocks also suffered, as bond yields kept climbing higher and higher. The 30-year yield reached its highest level since last October, and the 2-year yield was close to breaking its 5% resistance level.
The dollar was on a roll, gaining for the fifth day in a row, while crude oil dropped below $80, and gold fell below $1,900 to its lowest level since March.
NVDA bounced back as expected and seemed to follow the same pattern as the Covid/Crypto boom/bust cycle, while the S&P 500 vs. High Yield credit HYG showed a similar bearish outlook.
Will the S&P catch up with HYG, or will HYG catch down with the S&P?
- “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 Fed’s minutes from its latest meeting spooked the markets, as they suggested that the Fed might raise interest rates sooner than expected. The major stock indexes, which had started the day on a positive note, reversed course and slid lower throughout the day.
Our TTIs, which measure the overall direction of the market, also declined, with the domestic one getting closer to a “Sell” signal that would indicate a reversal to a bearish trend.
However, we have not reached that point yet, and I will continue to monitor the market conditions closely.
This is how we closed 08/16/2023:
Domestic TTI: +1.93% above its M/A (prior close +2.68%)—Buy signal effective 12/1/2022.
International TTI: +3.33% above its M/A (prior close +4.26%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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