- Moving the markets
The stock market began on a positive note but quickly reversed course as investors braced for the upcoming March jobs report.
Rising oil prices and concerns that the Federal Reserve might pause interest rate cuts contributed to negative market sentiment. Midday, crude oil prices surged, with WTI oil reaching over $86 per barrel, its highest since October, fueling worries about inflation’s resurgence.
Last week’s initial jobless claims exceeded expectations, reaching a peak not seen since January. The Commerce Department also reported a trade deficit of $68.9 billion in February, marginally above projections. The possibility of the Federal Reserve maintaining higher interest rates for an extended period has pressured stocks throughout the week.
Federal Reserve Chairman Jerome Powell indicated that while rate cuts are possible this year, more evidence of inflation trending towards the 2% target is needed before any action is taken. Consequently, Wall Street has tempered its expectations for rate reductions.
Despite a strong economy and ongoing inflation concerns, there are signs of a broader market rotation, moving away from the dominant tech giants. Federal Reserve officials echoed Powell’s sentiments, suggesting a cautious approach to rate adjustments:
- Barr: Issues with banks’ commercial real estate will take time to resolve.
- Kugler: A reduction in rates might be appropriate this year.
- Harker: Inflation remains excessively high.
- Barkin: The Fed can afford to wait for more clarity before cutting rates.
- Goolsbee: It’s important to monitor the weakening job market.
- Kashkari: If the economy is strong, why reduce rates?
- Mester: More progress is needed on housing and core services inflation.
However, the market’s mood shifted dramatically when oil prices spiked following news of the UAE severing ties with Israel, prompting a sharp market downturn.
The day ended grimly, with early gains turning into losses of nearly 1.5%, and the Dow and Small Caps down over 3% for the week. Short sellers benefited from the most-shorted stocks, while the MAG7 suffered significant losses after opening strongly.
Bond yields fell, Bitcoin recovered to $69k, and gold reached a new high for the sixth consecutive day before retreating. Gasoline prices soared to a seven-month high, driving up pump prices.
Considering these developments, one might wonder: “Will the S&P reach 4800 first, or will the 10-year yield hit 3.5%?”
This question, thanks to ZeroHedge, arises as we consider whether today’s market reversal is a sign of things to come.
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)
An initial surge in the stock market faded as escalating tensions in the Middle East and rising oil prices led to a decline in equity values.
Despite this downturn, our TTIs decreased but continue to stay above their respective trend lines, indicating an overall positive trend.
This is how we closed 4/04/2024:
Domestic TTI: +9.62% above its M/A (prior close +10.76%)—Buy signal effective 11/21/2023.
International TTI: +9.78% above its M/A (prior close +10.19%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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