ETF Tracker Newsletter For November 10, 2023

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[Chart courtesy of]

  1. Moving the markets 

The stock market had another good day today, as investors ignored rising bond yields that threaten to ruin their party. The S&P 500 ended the week with a 1% gain, despite losing its winning streak yesterday.

The bond market, on the other hand, was not so happy. The 10-year and 30-year Treasury yields jumped up and down like a yo-yo, ending the day flat. They were spooked by the Fed chair Jerome Powell, who said he was not sure if the central bank had done enough to fight inflation. He also hinted that more stimulus might be needed, which made bond traders wonder if he was printing money in his basement.

The bond market was also rattled by a lousy auction of Treasury bonds yesterday, which showed that the demand for US debt was not as strong as expected. Maybe the buyers were too busy shopping online with their stimulus checks.

Speaking of which, the economy seems to be doing better than expected, at least on the surface. The headlines tell us that the consumer is resilient and spending like there is no tomorrow. But if you look closer, you will see that the consumer is actually living on borrowed money and time. Americans have burned through $1.9 trillion in savings in just two years and are relying on their credit cards to keep them afloat. How long can this last before they sink?

This consumer spending spree has helped the stock market, even though the Fed’s interest rate policy is still unclear. The market thinks that the Fed is done with raising rates and might even cut them again. But the market has been wrong before and might be wrong again. The Fed has a tricky balancing act to do, as inflation is still above its target, but not high enough to scare it.

But the market doesn’t care about the Fed, or the bond market, or the economy. It only cares about the Magnificent 7, the big tech stocks that have been driving the rally. Investors flock to these stocks as if they were a ‘safe haven,’ even though they are anything but. They ignore gold, which is supposed to be the real ‘safe haven.’ Go figure…

The market also doesn’t care about what Powell says, if he doesn’t spoil the fun. Yesterday, he tried to sound cautious and prudent, but the market shrugged it off. The Nasdaq soared to new highs, even though most of its stocks were lagging. This is not a healthy sign, as it shows that the market is narrow and fragile.

But the market has a secret weapon: stock buybacks. The big companies have been buying back their own shares like crazy, boosting their prices and earnings. Goldman Sachs says that the global buybacks this week were $78 billion, and $142 billion over a month. That’s a lot of money that could have been used for something else, like investing, hiring, or paying dividends. But who cares about that when you can make your stock look good?

The S&P 500 closed above 4,400 today, filling the gap that was left by the big drop in September. This is a technical achievement that could signal a trend reversal. Or it could be a false breakout, followed by another plunge. Who knows?

The S&P 500 has also defied the global liquidity trend, which has been declining. This means that the money supply and credit growth are slowing down, which could hurt the economy and the market. The S&P 500 has been able to ignore this so far, but for how long?

Is the S&P 500 an outlier, or is it living in a fantasy world?

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 stock market rebounded today, after a sharp drop yesterday, as investors felt more confident about the economy. Bond yields stopped rising and inflation worries eased.

However, our TTIs are still in negative territory, indicating a bearish outlook.

This is how we closed 11/10/2023:

Domestic TTI: -2.37% below its M/A (prior close -3.64%)—Sell signal effective 9/22/2023.

International TTI: -0.54% below its M/A (prior close -0.82%)—Sell signal effective 10/3/2023.

All linked charts above are courtesy of Bloomberg via ZeroHedge.



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