ETF Tracker StatSheet
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INDEXES RETREAT, BOND YIELDS RISE AS INVESTORS EYE FED MEETING
- Moving the markets
This week, the major indexes experienced fluctuations due to options expirations volatility, ultimately closing lower. Technology stocks felt the pressure as inflation concerns persisted, particularly in anticipation of the Federal Reserve’s policy meeting next week.
Tech giants like Apple and Microsoft saw their shares decline by more than 1% and 2%, respectively. Amazon and Alphabet also faced downturns. Nvidia, however, managed to climb more than 1%, despite a volatile week for the stock as traders grappled with valuation concerns and profit-taking.
Traders remained on high alert following a series of economic data releases earlier in the week. The producer price index for February indicated a higher-than-expected rise in wholesale inflation. This contributed to a significant increase in the benchmark 10-year Treasury yield, raising questions about the Federal Reserve’s ability to adjust monetary policy considering the robust economic data. The Fed is set to begin its two-day policy meeting on March 19.
The recent economic reports may lead to speculation about whether the Fed believes inflation has moderated enough to consider reducing interest rates later this year, which could impact long-term borrowing rates.
Today’s trading volumes were higher than usual, and market prices were notably volatile due to the simultaneous expiration of futures and options on stock indexes and individual stocks, an event known as “triple witching” that occurs quarterly.
Inflation data that exceeded expectations, coupled with slower growth and weaker labor market data, not only pulled the indexes from their high levels but also negatively impacted the US macro surprise index. Concurrently, inflation concerns have dampened rate cut expectations for 2024.
Bond yields rose throughout the week, with the 10-year nearing its year-to-date highs, which particularly affected Small Caps and Big-Tech stocks. Banks also struggled as the Federal Reserve’s bailout facility came to an end, while AI stocks experienced a tumultuous week. The higher yields bolstered the dollar but tempered gold’s momentum, at least temporarily. Bitcoin saw modest gains, ending the week slightly higher.
Crude oil prices surged, reaching their highest point since early November, which may not bode well for the upcoming CPI report. Nvidia’s performance this week has kept comparisons to Cisco Systems relevant. Whether Nvidia will break away from this pattern or history will repeat itself remains to be seen.
As we approach the Federal Reserve’s policy meeting, the question on many investors’ minds is:
What will the outcome be for the market’s direction?
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.
2. Trend Tracking Indexes (TTIs)
Volatility due to options expirations resulted in a cautious trading day, with the three major stock indexes fluctuating and ultimately closing below their opening levels. This marked a decline for both the day and the week.
Despite this, our TTIs also experienced a slight pullback, but our overall positive market perspective remains unchanged.”
This is how we closed 3/15/2024:
Domestic TTI: +9.36% above its M/A (prior close +9.90%)—Buy signal effective 11/21/2023.
International TTI: +9.05% above its M/A (prior close +9.65%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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