- Moving the markets
The markets shrugged off Powell’s hawkish speech at Jackson Hole and rallied on Monday, boosted by a massive buy-program in the final hour. Powell reiterated that the Fed is ready to raise rates further if needed, but also said that it would be careful, and data driven.
Lagarde, the ECB chief, echoed her cautious tone and did not hint at any imminent rate hike. Traders are now looking ahead to some key economic indicators later this week, such as the PCE inflation index on Thursday and the non-farm payroll report on Friday.
These data points could influence the Fed’s decision on when to start tapering its bond purchases and raising interest rates. The market action on Monday was also driven by a short squeeze in some stocks, such as Nvidia, which recovered from an early drop.
Bond yields were mixed, with the 2-year yield briefly topping 5.1% before settling above 5%. The dollar was flat, while gold rose to a 3-week high. The volatility is likely to continue as traders brace for more news on the economy and monetary policy.
- “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)
Traders dismissed Powell’s threat of higher rates as a bluff and pushed the markets higher on Monday.
The bullish mood lifted our TTIs, which moved further away from the danger zone of a possible new “Sell” signal. The TTIs are indicators that track the direction and strength of the market trends. They help us decide when to buy or sell ETFs based on the market conditions.
This is how we closed 08/28/2023:
Domestic TTI: +1.91% above its M/A (prior close +1.15%)—Buy signal effective 12/1/2022.
International TTI: +3.41% above its M/A (prior close +2.43%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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