- Moving the markets
The major indexes inched higher early in, with the Dow conquering the milestone level of 40,000, a once thought to be an impenetrable level. In the end, momentum waned, and the majors closed off the highs.
The Dow’s progression toward 40,000 comes as unyielding belief of interest rate cuts and enthusiasm around artificial intelligence boosted investor sentiment, a trend that has been in motion for the past year.
Yesterday, the April reading of the CPI, a broad measure of how much goods and services cost at the cash register, increased 0.3% from the prior month, which was below the estimation of 0.4%.
As a result, the major indexes went on a rip, with the S&P 500 closing above 5,300 for the first time, a level which the index surrendered today.
Economic news painted a bleak picture with Industrial Production disappointing, US housing starts/permits coming in below expectations, and the Commodity index hitting its highest in a year, a clear sign that inflation is still out of control. All of this has pulled the Citi ECO Surprise index down to its lowest level since September 2022.
Bond yields rose, with the 10-year bouncing off its trendline. The dollar rebounded a tad, gold pulled back after yesterday’s strong surge, and crude oil rose but fell short of reaching its $80 level.
The economy continues to weaken, while inflation remains ever present, a set up that the Fed will have a hard time dealing with.
After all, if they raise rates, the economy will collapse, if they lower them, inflation will surge.
Which will it be?
2. Current “Buy” Cycles (effective 11/21/2023)
Our Trend Tracking Indexes (TTIs) have both crossed their trend lines with enough strength to trigger new “Buy” signals. That means, Tuesday, 11/21/2023, was the official date for these signals.
If you want to follow our strategy, you should first decide how much you want to invest based on your risk tolerance (percentage of allocation). Then, you should check my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report for suitable ETFs to buy.
3. Trend Tracking Indexes (TTIs)
Early enthusiasm about the Dow conquering its 40k level faded, as the reality of a weak economy affected bullish sentiment. However, given yesterday’s strong advance, today’s pullback was moderate and did not disturb the positive outlook.
Our TTIs slipped immaterially, which did not affect the long-term trend.
This is how we closed 5/16/2024:
Domestic TTI: +9.73% above its M/A (prior close +9.91%)—Buy signal effective 11/21/2023.
International TTI: +10.69% above its M/A (prior close +10.91%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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