- Moving the markets
The Dow Jones Industrial Average rose on Tuesday, but it was hardly a cause for celebration. Wall Street was busy digesting the latest earnings reports and the Fed’s reluctance to cut rates anytime soon. The S&P 500 and Nasdaq barely scraped by with positive returns, thanks to some last-minute shopping by bargain hunters.
Traders were left scratching their heads after Fed Chair Powell poured cold water on their hopes for a March rate cut. He also warned that some banks may go bust due to the shift in downtown real estate demand. Powell’s comments sent bond yields lower, but it still dampened the mood of the bulls.
The market rally also lacked breadth, as only a few stocks carried the weight of the gains. This raised doubts about the sustainability of the uptrend, especially as volatility looms on the horizon. The last two days have been a taste of what’s to come in the next few weeks.
ZeroHedge summed up the mixed messages from the Fed speakers as follows:
The Good: KASHKARI: Inflation is on target; we don’t care about politics or elections.
The Bad: MESTER: We may cut rates later this year; no need to hurry or ease the balance sheet.
The Ugly: YELLEN: The dollar is losing its appeal; some countries are looking for alternatives; but don’t worry, it’s not a big deal.
The regional banks were not impressed by the Fed’s rhetoric. The KRE index plunged 12% in the last 5 days, signaling trouble in the sector. The NY Community bank was the worst performer, dropping like a rock. Is this the first domino to fall, or just a blip on the radar? Gold bounced back as bond yields retreated, while the Mag7 stocks slid lower.
Powell’s Sunday remarks also included this gem:
“Some banks will have to close or merge because of this. They’ll be smaller banks, mostly. These are losses. It’s a change in how people use downtown real estate. And the result will be losses for the owners and the lenders, but it should be manageable.”
Sounds like he’s preparing us for the worst.
Maybe it’s time to avoid banks altogether?
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 S&P 500 and Nasdaq barely managed to end the day with gains, after a surge of buying in the final minutes. They had been stagnant for most of the day.
Our TTIs also rose and maintained their positive trend.
This is how we closed 2/06/2024:
Domestic TTI: +7.17% above its M/A (prior close +6.50%)—Buy signal effective 11/21/2023.
International TTI: +7.19% above its M/A (prior close +6.43%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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