- Moving the markets
Apparently, traders found some encouragement from last week’s modest advances, as well as the fact that we made it through the weekend without another bank collapsing, so they pushed equities moderately higher, but the results were mixed, as the graph above shows.
Never mind that Deutsche Bank (DB) and other fellow European bank shares took a dive on Friday, this morning all was well, and European stocks set the tone for a positive US opening.
While this does not mean the banking crisis has been resolved, far from it, it simply has been put on the back burner for the time being. The dominant reason is that Wall Street is still convinced that the Fed is bluffing and a pause or pivot may be in the near future, as the economy points to stagflation.
The reginal banking index ETF KRE managed to add 1.6%, while some of its components did much better, like First Citizens Bank, which soared over 50%. Helping this rebound was improved market sentiment based on irrational hope of policymakers getting a handle on these challenges. Yeah, right…
Traders conveniently overlooked the fact that bond yields surged, and rate hike expectations took on a hawkish tone, as ZH pointed out. The 2-year managed to recapture its 4% level, which it had surrendered 5 days ago.
The US Dollar slid -0.26%, as did Gold, with its $2k level currently functioning as overhead resistance. Crude oil went on a rampage and added +5.40% for the session to close at $73.
Our Domestic Trend Tracking Index (TTI-section 3) has climbed again closer towards its long-term trend line. We are still in the neutral zone but will increase our equity holdings, should this dividing line between bullish and bearish territory be solidly broken to the upside.
Over the past two weeks, all attempts have been nothing but head fakes.
2. “Buy” Cycle Suggestions
For the current Buy cycle, which started on 12/1/2022, I suggested you reference my then current StatSheet for ETF selections. However, if you came on board later, you may want to look at the most recent version, which is published and posted every Thursday at 6:30 pm PST.
I also recommend you consider your risk tolerance when making your selections by dropping down more towards the middle of the M-Index rankings, should you tend to be more risk adverse. Likewise, a partial initial exposure to the markets, say 33% to start with, will reduce your risk in case of a sudden directional turnaround.
We are living in times of great uncertainty, with economic fundamentals steadily deteriorating, which will eventually affect earnings negatively and, by association, stock prices.
In my advisor’s practice, we are therefore looking for limited exposure in value, some growth and dividend ETFs. Of course, gold has been a core holding for a long time.
With all investments, I recommend the use of a trailing sell stop in the range of 8-12% to limit your downside risk.
3. Trend Tracking Indexes (TTIs)
Our TTIs improved with some of the major indexes eking out a small gain. Our Domestic TTI has again moved closer to a potential breakout to the upside but, in the recent past, all attempts have been rebuffed. Will this time be different?
This is how we closed 03/27/2023:
Domestic TTI: -1.20% below its M/A (prior close -1.86%)—Buy signal effective 12/1/2022.
International TTI: +3.57% above its M/A (prior close +2.88%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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