- Moving the markets
The stock market reached new heights today, following up on Friday’s record-breaking rally. The Dow breached the 38,000 mark for the first time ever, gaining 145 points or 0.4%. The S&P 500 also rose 0.4%, hitting another all-time high.
But not everyone is buying the bull run. Hedge funds have been betting heavily against stocks, with shorts outnumbering longs 2:1 this week and 3:1 this year. Are they in for a rude awakening?
The fate of Wall Street may hinge on the Fed’s ability to land the economy softly, easing inflation without triggering a recession. The odds of a Fed rate cut in March have dropped sharply, from 81% to 40%, in the past week. Meanwhile, the probability of no change has jumped from 19% to 58%.
Traders will be eyeing several key economic indicators this week, such as the fourth quarter GDP on Thursday and the Fed’s preferred inflation gauge, the PCE price index, on Friday. These reports will influence how the Fed shapes its monetary policy going forward.
The market got a boost today from falling bond yields, which signaled weak economic growth, but this was offset by rising oil prices, as tensions in the Middle East flared up again.
US stocks were mixed, with small caps surging at the open but fading later, while the large caps held on to modest gains. China’s market, however, tanked overnight.
Ultimately, it’s still a game of a few big players, whose momentum has been impressive. This is evident from the fact that the S&P 500, weighted by market cap, climbed steadily in January, while the equal-weighted version has fallen. This is a divergence that began a few weeks ago.
How long can it go on?
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 stock market continued to rise today after a strong performance on Friday. The main indicators showed modest increases.
Our Trend Tracking Indexes (TTIs) also improved slightly and stayed above their respective moving averages.
This is how we closed 1/22/2024:
Domestic TTI: +6.99% above its M/A (prior close +6.43%)—Buy signal effective 11/21/2023.
International TTI: +5.86% above its M/A (prior close +5.64%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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