- Moving the markets
Observing the markets daily, sometimes I have to laugh out loud, and at other times I simply have to shake my head in disbelief. The latter occurred yesterday, after Fed head Powell had announced that the banking system was “sound and resilient.”
It was only a few hours later when the next cockroach surfaced, namely PacWest bank, which has been assessing “strategic options,” including a sale. To me, that means that the “sound and resilient” nonsense is simply another failed Fed assessment like “inflation is transitory.”
On that topic, Powell uttered the following:
“We on the committee have a view that inflation is going to come down not so quickly. It will take some time, and in that world, if that forecast is broadly right, it would not be appropriate to cut rates and we won’t cut rates.”
Mixing his hawkish outlook with the constantly worsening banking crisis, you now have the perfect combination of what might give equities a knock-out punch. Today’s sell-off added another notch to the bearish bedpost, as the markets again were unable to stage any meaningful rebound, with the regional banking index KRE taking another hit, as some of its members, like WAL and PACW, were severely clubbed.
The usual short squeeze was conspicuously absent, Bond yields went sideways, with the 2-year closing at its lowest since September 2022, as ZeroHedge elaborated.
The US Dollar went nowhere, but Gold saved the day again by being the “go to” asset class for safe haven seekers.
Apple earnings, due out after the close, could be a game changer tomorrow. Looking at the big picture, however, I am more in tune with the Goldman Sachs trader, who uttered this spot-on remark:
What’s coming in the markets is like when Indiana Jones was running from the boulder.
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)
Again, our TTIs pulled back with the Domestic one now having dropped 1% below its trend line. As you know, I will need to see more staying power in bearish territory before pulling the plug on the current “Buy” signal. This could happen in a hurry, so tune in regularly, if you follow my strategy on your own.
This is how we closed 05/04/2023:
Domestic TTI: -1.00% below its M/A (prior close -0.05%)—Buy signal effective 12/1/2022.
International TTI: +5.19% above its M/A (prior close +6.03%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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