Although the market took a mild fall on Friday, the week of January 30th saw fairly solid gains. Wall Street continues to hold the vision that the Fed will ease up on its aggressive policy of higher interest rates for the purpose of reducing inflation, however the U.S. added 517,000 new jobs in January and the unemployment rate dropped 3.4 % - its lowest level since 1969 which although sounding like good news actually adds to an inflationary trend. Confusing, we know.
There is a strong divergence beginning to shape up. That between overly optimistic sentiment and hard reality. We will continue to play the cards currently delt, however we also believe that the time for second guessing your investment performance with anything less than informed analysis is going to be very dangerous. This rally, albeit impressive, strikes us as one that is fueled by “FOMO’ – fear of missing out - when decisions are based solely on emotions. Our subscribers know our opinion about trading by emotions.
This past week saw the Federal Reserve raise rates by only ¼ % and this created a very bullish feeling for investors. After dropping 33.1 % in 2022, the Nasdaq rose 10.7 % in January – it’s best January performance since 2001. Thursday the Nasdaq 100 rose 3.56 %, the S&P 500 up 1.47 % and the Russell 2000 ETFs rose by 3.83 %
Consumers have seen their disposable income drop by $1 Trillion last year which is a very bearish indicator however the market continues to rise! Bear markets – which is what we clearly have been seeing – don’t typically end until a Panic Bottom, where investors throw in the towel and sell everything, emerges. We see that Panic Bottom at around 3,300 in the S&P 500, however investors continue to buy stocks! This despite strong indications that a recession is in the offing. Although we have entered those ‘uncharted waters’ we’ve written about the last few weeks, we just may be seeing a new book being written.
What we seem to be witnessing currently is more like the start of a bull market with no threat of a recession. Th Small Cap market has witnessed a Golden Cross (of which we explained in last week’s update) however this week saw the S&P 500 doing the same. These indicators point to a continued upward trend in the market.
When analyzing market indicators, indexes and trading trends it is imperative to look at them logically and not on an emotional basis. Because we don’t allow emotions to play any part in this analysis, we must focus on what the stock market is showing – and opportunities its giving – us and that observation is a solid current bullish sentiment. Based on this, our current market positions are as follows:
Small Cap Funds
S&P 500 – Large Cap Funds
Nasdaq 100 Index Funds
International Growth Funds
This market is acting contrary to is norms. As such it is extremely important to keep well informed when it comes to managing your money. Put another way – be ready to take steps quickly should the market pivot. This is a (likely) possible scenario.
As always, mid - week alerts and updates are issued as needed.
Please use discretion, good judgement and plain old common sense when positioning money in the market. Avoid putting all your eggs in one basket. Diversify, meaning spread out your portfolio into a few different sectors. We believe the sectors above will continue to show growth in the coming days and weeks. Perhaps months.
When changes become necessary, we will update you.
Market Alert – Tuesday, February 7th, 2023
We are issuing a Market Update regarding the following positions:
Gold Funds – Bearish. Transfer into Cash (Money Market)
Although we did not take a position in the U. S. Dollar, we are advising those subscribers currently invested in the U.S. Dollar to transfer into Cash (Money Market)
These transfers should be initiated before the close of business today 2/7/23