- Moving the markets
The bulls were in charge as the market awaited earnings reports from big banks like BofA, Morgan Stanley and Goldman Sachs.
The major indexes ended the day in positive territory, thanks to another round of short squeezing. Even tech giants like Apple, Tesla and JPMorgan saw their shares rise, despite the gloomy outlook for the earnings season.
Analysts expect a 7% drop in S&P 500 earnings compared to last year, according to FactSet. So how can stocks keep soaring at these lofty levels?
Maybe it’s because of the wishful thinking expressed by Yardeni Research:
“I think the market is kind of overjoyed with the disinflationary, soft-landing scenario. I’ve been thinking for quite some time that we’re in a recession, but I argued that it’s a rolling recession, not an economy-wide recession. Now I think we’re in a rolling recovery.”
Sure, buddy. This week also marks the start of the Fed’s blackout period when Fed officials and staff zip their lips about the economy and monetary policy. The idea is to avoid messing with the market’s expectations or confusing anyone about the Fed’s plans before and after the FOMC meetings, where the Fed decides on interest rates and other monetary tools.
Bond yields were mixed, the US Dollar spiked and then dropped, Gold slid lower but recovered in the end.
Billionaire investor Seth Klarman is not buying into the current hype:
“You had a bubble, it was really a credit bubble, which became an everything bubble, and super-low interest rates, at times zero rates, made capital easily available and incredibly cheap.
That fueled frenzy over startups, SPACs, meme stocks and crypto, and all kinds of risky bets. I’m just not sure why you couldn’t have more trouble.
We haven’t seen a lot of casualties yet, I don’t know what that means, but I’d be worried.”
In other words, don’t get too greedy and be ready to bail if this bubble pops.
- “Buy” Cycle Suggestions
The current Buy cycle began on 12/1/2022, and I gave you some ETF tips based on my StatSheet back then. But if you joined me later, you might want to check out the latest StatSheet, which I update and post every Thursday at 6:30 pm PST.
You should also think about how much risk you can handle when picking your ETFs. If you are more cautious, you might want to go for the ones in the middle of the M-Index rankings. And if you don’t want to go all in, you can start with a 33% exposure and see how it goes.
We are in a crazy time, with the economy going downhill and some earnings taking a hit. That will eventually drag down stock prices too. So, in my advisor’s practice, we are looking for some value, growth and dividend ETFs that can weather the storm. And of course, gold is always a good friend.
Whatever you invest in, don’t forget to use a trailing sell stop of 8-12% to protect yourself from big losses.
- Trend Tracking Indexes (TTIs)
Stocks continue to climb higher even though they are in a bubble and analysts expect a drop in earnings. The major indexes posted a small gain, and our TTIs also edged up slightly.
Our TTIs also pulled back, but they remain firmly in bullish territory.
This is how we closed 07/17/2023:
Domestic TTI: +5.95% above its M/A (prior close +5.75%)—Buy signal effective 12/1/2022.
International TTI: +8.09% above its M/A (prior close +8.00%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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