- Moving the markets
The market went down the drain on Wednesday, thanks to Alphabet’s disappointing cloud numbers that dragged down the whole tech sector. The 10-year Treasury yield also bounced back above 4.95%, spooking growth investors and sending the 30-year above 5% again.
Alphabet stock plunged over 9%, its worst drop since last October, as its cloud revenue fell short of expectations, despite its overall strong performance. Apple and Amazon also slipped 1% and 2.5%, respectively, pushing the S&P 500 to its lowest level since June and breaking the key 4,200 support.
Amazon will report its third-quarter results after the market closes on Thursday. Will it be able to lift the spirits of the tech investors, or will it add more fuel to the fire?
Meanwhile, the bond market remains the center of attention, as the yields are soaring at a rate not seen since 1982. That’s bad news for stocks, especially the high-flying ones.
The short squeeze craze fizzled out today, as the most shorted stocks got hammered. The tech and consumer discretionary sectors were the worst performers today, while energy, staples, and utilities were the best.
Banks had a wild ride, crude oil recovered from its lows, gold flirted with $2k, and the dollar continued its rally.
Can IBM and Meta save the day with their earnings reports this afternoon, or will they join the tech wreck?
2. “Buy” Cycle (12/1/22 to 9/21/2023)
The current Domestic Buy cycle began on December 1, 2022, and concluded on September 21, 2023, at which time we liquidated our holdings in “broadly diversified domestic ETFs and mutual funds”.
Our International TTI has now dipped firmly below its long-term trend line, thereby signaling the end of its current Buy cycle effective 10/3/23.
We have kept some selected sector funds. To make informed investment decisions based on your risk tolerance, you can refer to my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report.
Considering the current turbulent times, it is prudent for conservative investors to remain in money market funds—not bond funds—on the sidelines.
3. Trend Tracking Indexes (TTIs)
The market experienced a sharp decline, erasing the gains from yesterday’s recovery and then some. The short squeeze strategy failed to sustain the momentum, and prices dropped further.
Our TTIs indicate a deepening bear market, with the domestic index performing worse than the international one. A significant change in the market direction is required to trigger a new “Buy” signal.
This is how we closed 10/25/2023:
Domestic TTI: -6.56% below its M/A (prior close –5.52%)—Sell signal effective 9/22/2023.
International TTI: -3.40% below its M/A (prior close -3.38%)—Sell signal effective 10/3/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
Contact Ulli