As predicted (and with a nervous sigh of relief) it appears that the stand-off between the White House and Congress has been resolved regarding the debt ceiling. A tentative agreement was reached on Saturday which averts a litany of disasters that is no longer relevant to our discussion.
We’re now heading into summer 2022 territory. What I mean is this – in August 2022 when we began publishing GaneWisdom/Market Edge, the Dow Jones stood at 33,702 at the close of business on Friday, August 19th while the S&P 500 closed at 4,228 (we began our subscription-based service on Sunday, August 21st, 2022). The advocates of ‘buy and hold’ which most financial advisors hold to, have not fared very well. In fact, as of this writing those who followed that ‘don’t do anything’ approach have not made any money and have actually missed out on some impressive rallies. Were you to visit the ‘Archive’ section on this site, you will be able to view our recommendations these past 9 months and find that those who followed our guidance are up nearly 5% in these past months.
Our goal here at GaneWisdom/Market Edge is to retain as much profit as possible and in order to do so, take small losses (if need be) to avoid large losses. When the buy and hold strategists advocate the B&H theory the investor has to continually make up market losses and give away market rallies and advances as we’ve witnessed recently. Why? Because a rally begins at a certain level and if your level happens to be at a much higher one, you can’t participate. Simple logic, easy to explain, very hard for some investors to accept. The proof, as they say, is in the results and in that we rest. Moving on……………..
Because of the expectation that debt ceiling talks were progressing, the markets saw some impressive results by weeks end. The Dow closed the week at 33,093 up 328 points. The S&P 500 closed Friday at 4,205 up 54 points and the NASDAQ up 277 points to close at 12,975.
The concern we have is due to the fact that just five stocks have been responsible for the upswing in the S&P 500. These stocks (Apple, Nvidia, Microsoft and Amazon)) have been the big movers and should they turn around – not something we are forecasting – the market’s gains could evaporate quickly. This situation bears watching however.
The S&P 500, which as our readers are aware, is the index that holds the most accurate snapshot of the stock market closed above its high for February, which is a very positive ‘bullish’ sign. As we’ve pointed out previously, if the S&P 500 closed above 4,300 the bear market would be over. These next few weeks will be interesting to see if that indeed does take place. History would say that it will be a challenge for this to happen, but we will, as always, continue to adhere to our strategies and go from there.
We have also pointed out that the Bear Market would have spent itself should a Panic Bottom occur. This would cause investors to throw in the towel and just sell everything. We see a ‘Panic Bottom’ around 3,300 give or take. We’ll wait to see what transpires these next few weeks so make sure you continue to tune in here.
As we now approach (hopefully) the ratification of the debt ceiling limit, we believe the Federal Reserve will now refocus on inflation and their concerns over it. The current inflation rate stands in the 4-5% range and this is still too high based on the Fed’s previous statements, which as you’ll recall, is their preferred level be 2%. That said, there is a better than average chance that the Federal Reserve will reinstitute their previous march toward higher interest rates at June’s meeting.
As you know, we watch closely the performance of Small-cap stocks and unlike their big brothers in the Nasdaq, the small cap market is not following their lead. Small caps usually are the market leaders when there are positive upswings and we’re just not seeing this at all. This conundrum bears watching.
Mortgage applications declined again this past week, while re-fi’s were down over 5% in the same time period. The current national average for a 30-year fixed rate mortgage is 6.69%. Home sales were down in excess of 5% as well.
Our current market position