ETF Tracker StatSheet
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JOBS REPORT FLOP, BOND YIELD DROP, STOCK MARKET POP: IS THIS A NEW BULL MARKET?
- Moving the markets
The stock market had a blast last week, despite a dismal jobs report that sent bond yields and the dollar plunging. Investors cheered the alleged end of the Fed’s rate hikes and squeezed the bears out of their positions. The major indexes posted their best weekly performance since November 2022, thanks to the largest short squeeze in 12 months.
The October jobs report was a shocker, as the economy added only 150k jobs, less than half of the September figure. And that’s not all, the previous two months were revised down by a whopping 101k jobs. That makes it eight months in a row of downward revisions. Something fishy is going on here…
But the markets don’t care about facts, they care about expectations. And the expectations are that the Fed will be more dovish and less hawkish in the face of weak jobs and wage growth. That’s why stocks and bonds rallied, while the dollar tanked.
Lower bond yields and inflation worries also helped the equity market, which still shows signs of a healthy labor market that is creating more jobs than the break-even rate of 100k. The 10-year Treasury yield dropped by 14 basis points to 4.52%, well below the 5% peak it reached last month.
Apple was one of the few losers, as it fell 1.5% after giving disappointing revenue guidance for the December quarter. The tech giant beat the earnings estimates for the fourth quarter, but its sales declined for the fourth consecutive quarter. However, this did not have a major impact on the overall market sentiment.
The Citi Economic Surprise Index also declined, as global economic data came in weaker than expected. The US macro indicators also slipped, while financial conditions improved significantly by the end of the week.
Lower bond yields, a weaker dollar, and the improved financial conditions should have boosted the oil and gold prices, but surprisingly, they did not. Oil prices dropped, while gold stayed around its $2k level.
After a five-day rally, the S&P 500 recovered all its losses since our last “Sell” signal, and our TTIs are close to triggering a new “Buy” signal (section 3). But the question is:
Are we witnessing a genuine bull market or a fake-out breakout?
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)
Last week, the major indexes had their best performance in a year, with bullish sentiment prevailing. Our TTIs are racing towards their respective unchanged lines, but only the International TTI is close to generating a new “Buy” signal. However, I need to see some staying power above the line before considering exposure in that market arena.
The Domestic TTI needs a little more push, but it’s getting close to crossing into bullish territory. If there’s any follow-through buying next week, we might have some equity exposure again.
Weak economic news and the resulting hope of no more rate hikes this year were the drivers that finally gave the bulls something to cheer about.
This is how we closed 11/03/2023:
Domestic TTI: -1.93% below its M/A (prior close -3.67%)—Sell signal effective 9/22/2023.
International TTI: +0.03% above its M/A (prior close -1.01%)—Sell signal effective 10/3/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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