- Moving the markets
The stock market rose today after a terrible day yesterday, when the Federal Reserve kept interest rates the same but hinted that it won’t lower them in March.
That made stocks fall, but they bounced back today as investors decided that the Fed might have made a mistake. The Fed has always said that it would rather keep rates too high for too long, than lower them too soon. It hasn’t changed its mind. The market tried to pressure it to do otherwise.
But yesterday, Powell hinted “I won’t be pushed around. We’re in charge here.” New York Community Bank dropped by more than 11% in early trading today, after losing 37% yesterday because of a big loss, a huge amount of bad loans, and a lower dividend. Is this a sign of trouble for the banking sector?
Then we found out that Japan’s Aozora bank collapsed because of too much lending to businesses that own properties like offices, malls, or hotels. This means that the property crisis has spread around the world and could cause more problems. Ouch!
The index that tracks regional banks KRE fell at first but then recovered later in the day and reduced its losses.
You would think that bad news about the banking sector would hurt the market, but no, investors saw it as a reason to hope that the Fed will lower rates sooner. And that’s good for stocks. Makes sense, right?
At the end of the day, stocks went up a lot, bond yields went down, the dollar, which was higher, ended lower, while the gold ETF GLD zoomed ahead and gained more than 1%.
In other news, we saw that the Manufacturing Survey showed an improvement in January, but the problem was that prices went up too. With more people losing their jobs, it was not surprising that Initial and Continuing Jobless Claims increased and had their biggest two-week rise in initial claims since early 2022, as ZeroHedge reported.
Back to the banks. Which one will be the next domino to fall?
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 bounced back from a big loss yesterday, as traders thought that banks might face trouble because they lent too much money to businesses that own buildings like offices, malls, or hotels. This could make the Federal Reserve lower interest rates sooner, which would help stocks go up.
Our TTIs that track the market trends also rose a lot because of this optimism.
This is how we closed 2/01/2024:
Domestic TTI: +7.83% above its M/A (prior close +6.59%)—Buy signal effective 11/21/2023.
International TTI: +7.23% above its M/A (prior close +6.78%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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