- Moving the markets
Nvidia’s stellar earnings and revenues were not enough to impress the markets today, as the tech giant saw its shares end the session unchanged. This was a classic case of “buy the rumor, sell the fact,” a well-known adage that describes how investors often anticipate good news and then cash out when it is confirmed.
The tech sector in general faced mixed views from traders, with some remaining optimistic and others wary of rising yields. Higher yields tend to hurt valuations and affect more richly valued stocks negatively.
Meanwhile, the economy showed signs of weakness, contrary to the hopeful outlook of some. Retail was hit hard yesterday, and today we learned that Durable Goods orders plunged by the most since the Covid lockdowns. This means that demand for long-lasting items such as cars, appliances, and machinery was very low.
Another sign of trouble was Dollar Tree’s fall after a disappointing earnings report on rising “shrink.” Shrink is a term that refers to inventory loss due to shoplifting or employee theft. Many other retailers like Dick’s Sporting Goods, Foot Locker, Target, Lowe’s, and Walmart have also warned that shrink is getting out of hand at their stores, putting pressure on their margins.
Almost all sectors, except banks, ended the session in the red. As I posted before, this year’s rally has been driven by a few stocks with the breadth, especially on the Nasdaq, being the worst it’s ever been, as this chart shows.
Bond yields resumed their upward trend with the 2-year reaching 5% again. That sent the dollar higher partly due to fears of what the Fed chair might say tomorrow after the conclusion of the Jackson Hole symposium.
Will he sound hawkish or dovish? That is the question that keeps investors on edge.
- “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)
The markets turned from bullish to bearish today, as traders reacted to Nvidia’s results and awaited Fed chair Powell’s speech tomorrow. Nvidia reported record earnings and revenues, but that was not enough to boost the tech sector or the broader market. Instead, investors were nervous about what Powell might say about the economy and monetary policy at the Jackson Hole symposium.
The bears took advantage of the uncertainty and pushed the major indexes lower. This also dragged down our TTIs, which measure the direction and strength of the market trends.
The Domestic TTI is now close to ending its current Buy cycle, which means that we might see a change in the market trend soon.
Stay tuned!
This is how we closed 08/24/2023:
Domestic TTI: +0.68% above its M/A (prior close +1.66%)—Buy signal effective 12/1/2022.
International TTI: +2.57% above its M/A (prior close +3.39%)—Buy signal effective 12/1/2022.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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