Good Friday morning. On Tuesday I wrote the following; “IMO, US markets are set up for a significant “short squeeze” higher. The combination of investor sentiment, seasonality, analytics and technicals are all aligned. This remains one of the best set-ups of my career, coming out of the bear market bottom on 10/13/22. We are well positioned for it.”
Read MoreGood Thursday morning. Disappointing afternoon action in the markets yesterday following the March CPI report (that was essentially in line), with talking heads reporting that the primary culprit for market weakness was FOMC minutes that forecasted a “mild recession” at the end of the year. If we listened to the talking heads we’d probably keep our heads in the sand and remain 100% in cash.
We continue to be bullish on stocks and look for a solid rest of the month which will likely include Q1 earnings that surprise to the upside. We’ll get a taste of Q1 tomorrow morning with JP Morgan and Citi earnings reports. If I didn’t dislike bank/financial stocks so much I would be a buyer here. I think they might just blow the doors off…certainly the behemoths.
This morning we got more proof that inflation continues to evolve into disinflation. Huge drop in PPI this AM. The Fed will cut rates by year end. Were it not for the Trump Economic Miracle we’d likely be in a deep recession today.
But even with this beat (to both CPI and PPI), the odds have increased that we have a “negative credit impulse” building with rising odds of a recession, certainly after the implosions of SVB and Signature Bank NY. The latest inflation reports did not capture these banking failures and potential credit crunch as it’s inherently backward looking. The CPI report is always a “fade” and I think this report is especially the case. A Fed pause and pivot should now be here. I’ll be surprised if the fed hikes again on 5/3, but we have 3 more weeks of data plus of course earnings reports of Q1.
My forecast (of the last 4 months) remains unchanged; the Fed will start cutting rates in the 4th quarter and by years end the 10 year yield will fall below 3%.
Financial markets and the Fed are reading from two different playbooks but as history has taught us well, the Fed never leads, they only follow.
Chart Review S&P 500
The largest and most important equity index in the world continues to flash “buy me”. From the 10/13 bear market lows…just classic capitulation…SPX has a clear series of higher highs and higher lows as it remains well above its 200 dma and has worked off its overbought levels over the last week. I expect a breakout to take place in the next 1–2 weeks which would lead to a rally to 4300 + (5% + from here).
Semis (SMH)
Full VRA System look at the chart of SMH, which has worked off its extreme overbought levels and looks ready to make its next major move higher.
Well above its 200 dma and advancing steadily from the 10/13 lows using the blue trend line as stellar support.
Check out the supporting trend lines for RSI and MFI. Again, perfection. As goes the semis, so goes the market.
Precious Metals and Miners; overbought but still flashing “BUY”
While the miners are hitting extreme overbought levels on the VRA System, our top buy signal for this group (precious metals) continues to flash strong buy.
Below is a chart of the relative strength of miners (GDX) to gold. When the miners are leading gold higher, its an extraordinarily strong buy signal.
This group has been doing exactly what it’s known for, acting as a discounting mechanism for what comes next; rate cuts and eventually more QE/money printing. The bull market of bull markets is underway for metals and miners.
Rising Housing, Transports, Semis and Bitcoin; discounting mechanisms and high probability correlations that tell us “the markets are headed higher”.
From our new book “The Big Bribe” (below). Housing is a long term bullish mega trend & should continue to propel the US economy. Housing bears are just plain wrong.
VRA Bottom Line: we remain long and strong as we’ve entered a top 2 month of the year and the best year period (pre-election years are highly bullish). As always, we’re keying off of the semis. We have been aggressively long from the 10/13 bear market lows and will likely remain long well into April, although last week we hit overbought levels that we paid attention to. We’ve now worked off those ST overbought levels and the markets reaction to Q1 earnings is “everything”. We look for the rest of April to be stellar.
Heads up; we have a target in mind for potentially taking profits on some of our ETF positions. It rhymes with “sell in May and go away”.
Until next time, thanks again for reading.
Kip
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Good Thursday morning all. A major investing theme, as taught to me in my 20’s by both of my mentors (Ted Parsons and Mike Metz, RIP gentlemen) goes like this;
Read MoreGood Friday morning all. VRA Quick hitters;
1) Weakness in European shares today as Deutsche Bank is down 15%, taking the European bank index down 5% on the day.
Read MoreAnother volatile day of trading yesterday influenced by fears of global bank runs. Of note, in the last two trading sessions the smart money hour was met with strong buying pressure (with tech leading the way).
Read MoreBreaking: Treasury yields lost momentum this AM, with stock markets reversing higher, after the Labor Department reported that initial jobless claims rose to 211K last week, up from 190K the week before and more than the 195K forecast by analysts. The 10-year yield sits at 3.96%, after trading above 4% before the data. The data indicates the labor market may be weakening (due to higher interest rates).
Read MoreThis morning we learned that weekly jobless claims came in at just 190,000, another incredibly low reading which backs up a series of economic data from the last 1–2 months that show the economy is actually accelerating, rather than slowing down.
Read MoreAs our markets complete their overbought “pause”, we believe seasonality is playing a major role as the second half of February is historically weak. It’s actually one of the worst two weeks periods of the year.
But soon, our overbought sell-off will be behind us. Based on VRA System readings, by weeks end we should be hitting oversold levels that typically mark reversals higher, especially near the birth of new bull markets.
Good Thursday morning all. Another day, another "lower open” that was met with buying pressure throughout the day, leading to another strong smart money hour and resulting in (another) troubling pattern for the bears. And it’s not just that its happened every day so far this week, it’s been the repeating pattern of 2023. Add that market internals were right at 2:1 positive…again, another repeating pattern this year…combined with another day where we had more 52 week highs than lows, an event that has taken place every day so far this year.
Read MoreGood Thursday morning all. From the 10/13 capitulation lows it’s been our view that the equity markets have bottomed and that rates, the US dollar and inflation have all peaked. The action in semis/tech and housing have solidified our views. When the most important market/economic elements of the VRA Investing System… are leading the markets higher…
Read MoreThe Jekyll and Hyde that is Fed Chair J Powell made another appearance yesterday, but instead of the ultra-hawisk Powell from the Jackson Hole Wyoming speech of last August (which crashed the markets) we got the sweetheart J Powell that, without question IMO, wanted to see stocks and bonds rise further still.
Read MoreWith 4 days of trading left in the first month of the new year the S&P 500 is up 5.2% with the tech heavy Nasdaq up a massive 9.3%. Should January finish higher it will complete the “bullish trifecta” for the Stock Trader Almanac, joining the Santa Claus rally and first 5 trading days of the new year in being up. When all 3 are higher it bodes exceptionally well for full year results.
Read MoreOver the last 3 trading sessions the Dow Jones has lost close to 1300 points, giving up its gains to date for 2023. If our read is right on the markets for this year, this is about the time when we should begin to see reversal action higher. Headed into last Friday the rubber band simply stretched too far…we hit extreme overbought…as the move higher from the 10/13/22 capitulation lows took the markets to extended readings.
Read MoreGood Friday morning all. From the 10/13/22 capitulation lows we’ve been witness to a textbook “new bull market”. It’s only just the beginning of a new bull market…one that should last years…just know that we have hit heavily overbought readings on the VRA Investing System (more on this later):
Read MoreGood Friday morning all and hope you had a great Christmas. Welcome to the final trading day of 2022. We start today's trading with 3 days left in the Santa Claus rally (today and first 2 days of 2023) and roughly 1 month left for the January effect, where history tells us that small caps outperform big cap stocks by a sizable margin, with tax loss selling in small caps the culprit for their year-end weakness.
Read MoreJ Powell came heavy Wednesday, raising rates as expected by .50%, but hawkish without question, targeting a peak rate of 5.1%. While the Fed broadly likes what they see regarding inflationary trends, their big concern is employment, specifically wage pressure/inflation. This is what has the equity markets concerned…will the Fed break something again…this time the jobs market.
Read MoreGood Thursday afternoon all. The markets look to be setting up for a catapult move higher into year end. The technicals are forming around the 200 dma (after a near parabolic move higher post the 10/13 capitulation into heavily overbought readings), in what looks to me to be a classic consolidation pattern in advance of both the santa claus rally and January effect bullish time frames.
Read MoreGood Thursday morning all. Not only was yesterday's huge move higher in stocks a textbook display of a new bull market (with semis up 5%, nasdaq +4%, leading the way higher), but we saw it in the internals as well with an 88% upside volume day for NYSE and near 7:1 advance/decline. No one was buying J Powells hawkish comments…the markets know what’s coming next (rate cuts).
Read MoreGood Friday morning all. “Shock and awe” might be the best way to describe the short covering melt-up yesterday as stocks had their best day since the end of coronavirus insanity.
Read MoreGood Thursday morning all. If you were as confused as 99% of Wall Street and the English speaking people of the world were by Fed Chair J Powells presser yesterday, where he reverted to previous form and crushed the stock market, I encourage you to listen to Tylers podcast from yesterday afternoon:
Read More
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2008 Libertarian Vice Presidential candidate
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