- Moving the market
The major indexes faced early declines as disappointing quarterly reports from two tech giants dampened any bullish sentiment. Microsoft’s shares fell over 5%, while Meta slipped 2.2% due to missed user growth expectations and a warning of significantly increased expenditures next year.
Throughout the week, mega-cap earnings painted a mixed picture. Alphabet saw a nearly 3% rise on Wednesday, but AMD plummeted over 10% following disappointing guidance. Investors are now eagerly awaiting reports from Apple and Amazon, which are due after the market closes today.
The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, came in slightly hotter than expected for September at 2.7% versus the anticipated 2.6%. The headline PCE rose 0.2% month-over-month, bringing the year-over-year PCE down to 2.1%, its lowest since February 2021. Overall, these figures were in line with estimates.
Increased volatility was evident on this last day of October, a month historically known for significant downside surprises. Today’s sell-off pushed the S&P 500 into the red for the month, albeit by a modest 1%, with all major indexes experiencing losses.
Inflation concerns were prominent, as the Bloomberg Economic Inflation Data Surprise index accelerated after a September downturn, leading to a slower pace of rate cuts.
The Nasdaq led today’s downturn, with all Mag7 stocks slipping. For the month, the basket surrendered nearly all gains, unsurprising given the spike in bond yields, with the 10-year yield up 0.6%, contrary to the Fed’s expectations following a 0.5% rate cut.
This anomaly extended to the mortgage market, where rates soared above the critical 7% level in October, despite the Fed’s rate cut.
The dollar also surged higher, and interestingly, gold followed suit, gaining for the eighth month out of the last nine and setting several record highs. This suggests that inflation fears remain significant, and the Fed’s aggressive cut may have been a policy misstep.
Despite today’s weakness, Bitcoin had its best month since May, rallying close to its record highs near $74,000 yesterday, supported by record BTC ETF inflows during October. Oil prices, after an early October rally, lost momentum but managed to close in the green over the past two days.
With the aggressive Fed cut leading to various unintended consequences, the USA’s sovereign risk of default has surged, unsettling traders as we move into November.
Do we need to brace for impact?
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)
On the final trading day of October, the market was notably lacking bullish sentiment, with bearish forces firmly steering the direction downward. The Nasdaq bore the brunt of this downturn, largely due to disappointing earnings reports from companies within that sector.
Our TTIs were not immune to the sell-off, experiencing declines alongside the broader market. However, it’s worth noting that despite the day’s losses, the TTIs managed to stay above their respective trend lines.
This is how we closed 10/31/2024:
Domestic TTI: +5.27% above its M/A (prior close +6.74%)—Buy signal effective 11/21/2023.
International TTI: +3.46% above its M/A (prior close +4.51%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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