- Moving the markets
The stock market seemed to take a break from its recent rally today, as the major indexes barely moved from their opening levels. The S&P 500 and Nasdaq managed to squeeze out some gains, but the Dow closed slightly lower.
Tech stocks were hit hard by disappointing earnings and guidance from Cisco Systems and Palo Alto Networks, which plunged 12% and 7%, respectively. Investors were not impressed by their weak outlooks for the current quarter and the full fiscal year.
Meanwhile, economic data was mixed, with import prices falling more than expected in October, but weekly jobless claims rising last week. Some traders might see this as a sign of easing inflation pressures, but they are ignoring the bigger picture.
Massive government spending and money printing will continue to fuel inflation, which is already running at a 30-year high. The inflation monster is not going away anytime soon, no matter what the Fed says or does.
The bond market also reflected the sluggish economic conditions, with the 10-year yield dropping to 4.441%. The dollar was flat, but gold shone brightly, gaining 1.02% and closing in on its $2k level.
As ZeroHedge pointed out, the 10-year bond yield is following a similar pattern to 1987, when it crashed along with the stock market. But the S&P 500 is not following suit, at least not yet.
Will the bond market be proven right again, or will the stock market defy gravity? That is the question that keeps many traders awake at night.
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 S&P 500 had a volatile day and barely managed to end with a positive return. Our TTIs declined slightly but stayed above their bullish trendlines.
If the market continues to rise, we will exit the bearish phase and invest in equity ETFs again.
This is how we closed 11/16/2023:
Domestic TTI: +0.43% above its M/A (prior close +0.76%)—Sell signal effective 9/22/2023.
International TTI: +2.22% above its M/A (prior close +2.41%)—Sell signal effective 10/3/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
Contact Ulli