- Moving the markets
Monday was another wild ride for the stock market, as Treasury yields played peek-a-boo with the 5% mark. The 10-year note briefly crossed that threshold, only to retreat when hedge fund honcho Bill Ackman revealed that he had cashed out his bond shorts (with a nice profit) and warned that the economy was cooling off faster than expected.
That sent the bond yield plunging to 4.846%, the biggest intraday swing since the March meltdown. Stocks tried to cheer up, but only the Nasdaq managed to end in the green, while the rest of the market stayed in the red.
Interest rates have been on a tear lately, with the 10-year breaking above 5% for the first time since July 2007. Fed chair Powell’s hawkish remarks added fuel to the fire, as investors worried that monetary policy could tighten further and hurt equities. 5% is a big deal for Wall Street, as it signals that investors are losing faith in the Fed’s ability to cut rates soon. I wouldn’t be surprised if the 10-year yield keeps climbing higher.
In other news:
- Tech giants are gearing up to report their earnings this week, hoping to impress traders and lift the market mood.
- NVDA threw some shade at Intel by announcing its own PC chips.
- The dollar took a dive and gave back half of its recent gains.
- Crude oil gave up some ground, while gold flirted with $2,000 but closed lower.
Financial conditions are getting tighter, but we don’t know how bad it will get. Will earnings season save the day for stocks, or is it just a pipe dream?
2. “Buy” Cycle (12/1/22 to 9/21/2023)
The current Domestic Buy cycle began on December 1, 2022, and concluded on September 21, 2023, at which time we liquidated our holdings in “broadly diversified domestic ETFs and mutual funds”.
Our International TTI has now dipped firmly below its long-term trend line, thereby signaling the end of its current Buy cycle effective 10/3/23.
We have kept some selected sector funds. To make informed investment decisions based on your risk tolerance, you can refer to my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report.
Considering the current turbulent times, it is prudent for conservative investors to remain in money market funds—not bond funds—on the sidelines.
3. Trend Tracking Indexes (TTIs)
The markets had a volatile day, changing colors several times. Even though bond yields eased, equities could not sustain a rally and ended up losing more value.
Our Trend Tracking Indexes (TTIs) fell further into negative territory, reaffirming our decision to stay away from equities and remain in cash.
This is how we closed 10/23/2023:
Domestic TTI: -6.12% below its M/A (prior close –5.52%)—Sell signal effective 9/22/2023.
International TTI: -3.38% below its M/A (prior close -2.11%)—Sell signal effective 10/3/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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