- Moving the market
The major indexes edged higher ahead of the Federal Reserve’s interest rate announcement, with the Dow leading the way despite its recent worst performance in 46 years.
Although the index is less than 4% below its all-time high, a shift from “old economy” shares to the tech sector pulled the Dow down. This decline was exacerbated by the Dow’s underweighting of technology stocks.
The Fed’s announcement of a 0.25% rate cut, which was expected to please the markets, had the opposite effect.
Fed Chair Powell’s comments about moving cautiously and seeking progress on inflation contradicted market trends, as inflation has been rising alongside strong economic data since the rate-cut cycle began. Powell’s belief that inflation is transitory or that disinflation is occurring seems to be at odds with market realities.
Traders reacted negatively to the Fed’s hawkish statement, causing rate cut expectations for 2025 to plummet and leading to a market-wide collapse.
The most shorted stocks were dumped, Mega Cap stocks plunged, market breadth worsened, gold fell below its 100-day moving average, and Bitcoin approached its $100k mark but managed to hold steady for now.
Bond yields surged, with the 10-year yield reclaiming its 4.50% level, while the dollar was the only asset class to benefit, rising to its highest level since September 2022.
Our Trend Tracking Indexes (TTIs) also declined but remain above their respective trend lines for now. If this trend reversal continues, we may soon enter “Sell” mode and move back into the safety of our money market accounts.
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)
The markets initially showed promise with a positive start, buoyed by Federal Reserve Chair Powell’s announcement of a 0.25% rate cut.
However, this optimism was short-lived. The accompanying hawkish rhetoric quickly reversed the market’s direction, leading to a downturn across all asset classes and resulting in a red close.
Our TTIs mirrored this movement, edging closer to signaling a “Sell.” Stay tuned for further updates.
This is how we closed 12/18/2024:
Domestic TTI: +2.16% above its M/A (prior close +5.27%)—Buy signal effective 11/21/2023.
International TTI: +1.00% above its M/A (prior close +3.16%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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