- Moving the markets
The Fed’s dovish statement last week sparked a rally that pushed the S&P 500 close to a record high.
Three rate cuts in 2024, cooling inflation, and lower Treasury yields boosted the market mood in this seasonally strong period for stocks. The Fed thinks it has tamed inflation, but it may be in for a rude awakening.
Oil prices jumped as Yemeni militants attacked ships in the Red Sea, prompting BP to halt its Suez Canal shipments. The U.S. sent more naval forces to protect the vessels.
Housing starts soared unexpectedly, lifting homebuilder stocks. Is this a sign of a housing recovery or a fluke?
SPY, the biggest S&P 500 ETF, saw record inflows of over $40BN in four days, thanks to Powell’s pivot. The most shorted stocks also surged 16% as the bears got squeezed. Bond yields were stable, while gold rose amid uncertainty.
But lower rates are not always good for the market. Lance Roberts, a market guru, points out that the average market drop after a rate cut was 27.25% since 1970. The last three times were even worse.
So, is this rally a gift from the Fed or a trap for the unwary?
2. Current “Buy” Cycles (effective 11/21/2023)
Our Trend Tracking Indexes (TTIs) have both crossed their trend lines with enough strength to trigger new “Buy” signals. That means, Tuesday, 11/21/2023, was the official date for these signals.
If you want to follow our strategy, you should first decide how much you want to invest based on your risk tolerance (percentage of allocation). Then, you should check my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report for suitable ETFs to buy.
3. Trend Tracking Indexes (TTIs)
The market continued to rise this week, boosted by the Fed’s Powell’s announcement of three rate cuts for 2024. This was good news for traders, who hoped to see the bullish trend last until the end of the year.
Our TTIs also showed positive signs, confirming our optimistic outlook for the market.
This is how we closed 12/19/2023:
Domestic TTI: +8.37% above its M/A (prior close +7.47%)—Buy signal effective 11/21/2023.
International TTI: +6.97% above its M/A (prior close +6.23%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
Contact Ulli