- Moving the markets
The S&P 500 was bored on Monday as investors waited for the Federal Reserve to make up its mind about the interest rates. The S&P 500 and the Nasdaq were both losers for the second week in a row, while the Dow managed to squeeze out a tiny win.
Oil prices soared to their highest levels since November, breaking the $91 barrier. WTI is on fire, rising almost 30% in the third quarter. And if you have filled up your tank lately, you have felt the pain in your wallet. But don’t worry, inflation is just a myth…
Traders are betting that the Fed will do nothing on Wednesday and only have a 31% chance of raising rates in November. Dream on, but I doubt the Fed will sit on its hands while inflation is running wild, no matter how they measure it.
On the economic front, we saw that homebuilders finally woke up from their fantasy as confidence crashed in September. More and more builders had to cut home prices to attract buyers. It will take a long time for homebuilder confidence to match homebuyer confidence, especially with 7% mortgage rates looming over them. Ouch indeed!
Regional banks kept sliding and hit 20-month lows. The most shorted stocks also took a hit as squeeze attempts failed miserably. Nvidia’s drop erased its gains for the last 3 months, while bond yields were mixed. The dollar was flat, but Gold shined a bit in this dull session and reclaimed its $1,950 level.
Oil prices stayed high despite a mid-day sell-off. Lastly, the rate expectations have changed lately. This year is still dovish (no more hikes), but next year is turning hawkish. That means fewer and fewer cuts, as the Fed’s “higher for longer” talk becomes reality.
How will the markets react to this unexpected twist?
2. “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.
3. Trend Tracking Indexes (TTIs)
The major indexes closed flat today, but our Domestic TTI fell slightly below the +1% warning zone. This means we are close to another “Sell” signal for our domestic holdings.
However, we will not act until the TTI shows a clear break below its trend line. The market’s future direction will depend on the Fed’s decision on Wednesday about the interest rates. Will they increase, hold, or skip? That is the big question.
This is how we closed 09/18/2023:
Domestic TTI: +0.42% above its M/A (prior close +1.10%)—Buy signal effective 12/1/2022.
International TTI: +3.53% above its M/A (prior close +3.91%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.Contact Ulli