Market Update
Market Edge

Market Update for the Week of April 22nd, 2024

We are making this week’s Market Update free


There is a Market Alert listed below

For five months, beginning at the end of October, Wall Street experienced what can only be described as an ‘amazing’ rally. The markets struggled for months after the Federal Reserve began raising rates in March of 2022. When we began publishing GaneWisdom/Market Edge on August 21st of 2022, the Dow ended the previous trading day (8/19/24) at 33,706 and the S&P 500 at 4228. For much of the first months of publishing, our advice was to keep your investment portfolio in cash – the money markets your fund or brokerage account offers.

Our guidance has always been with the goal of not having to make up profits through the ‘Buy and Hold’ theory – in other words not repositioning your money so you can avoid losses. Too many financial professionals hold to this buy and hold mentality, the reason usually being that ‘the market always comes back’. That concept has, if one were to look at a long-term market chart, proven correct.

Unfortunately giving away profits (or, heaven forbid, principal) is not the way to make money in the stock market. Our philosophy has been proven accurate once again over these past few weeks as our past Market Updates and Mid-Week Alerts will verify (Please see our Archives). So, for now – what is going on exactly on Wall Street? Let’s take a look…………..

In November, investors were being told by the many Sages and Market Gurus to expect The Fed to lower interest rates in 2024. Many of these experts were of the opinion that those rates would happen shortly after the new year. Then, as 2024 approached, those opinions morphed into rate-cuts beginning in March. Investors were told to expect six rate cuts during the year. The Street responded enthusiastically driving the markets into a full-blown rally. Now however, as the party favors, crepe, the ballons are scattered forlornly about the banquet hall and all the people gone, we are faced with the very distinct possibility of NO RATE REDUCTIONS in 2024! We broached this possibility in last week’s Market Update (4/15/24). Although it is much too early to positively forecast that there will indeed not be any rate reductions this year, Wall Street ended this week with a bit of a hangover because of that possibility.

Facing reality, even a small dose of it, can be painful. The positive factor of all of this is the knowledge that you have our weekly newsletter which always gives you unbiased (read: no anticipated commissions) analysis, opinions, guidance and advice. Now, Let’s review this past week.

S&P 500 (stockcharts.com)

Closing the week out at 4,967, the S&P 500 lost 3.05% over the five trading days. Note in the above chart that the S&P 500 is now trading below its 50 Moving Average (MA)

Dow Jones Industrial Average (stockcharts.com)

The DJIA gained 0.01% this week and closed Friday at 37,986. Note that the Dow is now trading below its 50-day MA.

NASDAQ (stockcharts.com)

Closing at 15,292, the NASDAQ lost a hefty 5.52% this week. The NASDAQ is now trading below its 50-day MA as well.

Russell 2000 (stockcharts.com)

Using the Rydex Russell 2000 chart (due to continuing issues between Stock Charts and the reporting company) which mirrors the Russell 2000, the Small Cap index lost 3.36% for the week, closing trading Friday at 1,946. Please note that the Russell 2000 is also now trading below its 50-day MA.

2 – Year Treasury (stockcharts.com)

With the uncertainty of the current state of the world, the nation, the election, the interest rates and mood of the country, the 2-year Treasuries closed at 4.99%. It wasn’t many weeks ago when these rates were heading south, closing at year-end at 4.25%. The 5-year stands at 4.67% and the 10-year at 4.62%

Volatility Index (stockcharts.com)

In the past few weeks, we’ve observed the Volatility Index go from 12.45 to Friday’s closing at 18.71. You’ll recall that when this index hits 20 and above, investors are genuinely concerned about the market’s direction. 30 and above show fear setting in and a reading of 40 and above an outright panic. Obviously, we are not near those drastic numbers, however we seem to be approaching the number 20 a bit more quickly than we’ve seen in months. Stay tuned.

30 – Year Mortgages (stockcharts.com)

As Treasuries continue to climb, so do the mortgage rates. This week’s close for a 30-year fixed mortgage nationally stood at 7.11%. Home builders are now feeling the effects of the interest rate dilemma which Guy writes about in his ‘Commentary’ below.

West Texas Intermediate Crude Oil (stockcharts.com)

West Texas Crude Oil ended the week a bit below our forecast of the previous week. Friday’s close stood at $82.22/barrel. Next week we should see a variance between $84.00 and $87.50/barrel.

Commentary

What a week. On three separate days this week the market opened strong and by day’s end lost any and all of its steam. As noted above, the S&P 500 lost 3.05%, the Dow somehow gained 0.01% while the Nasdaq and Russell 2000 tanked. The Nasdaq down 5.5% and the Russell 2000 down 3.3%.

Treasury yields climbed as you’ve seen above, as did 30-year mortgages. Construction on new homes has begun to stall with new contracts falling by 14.7% in March. Mortgage rates, simply put, are causing many considering a new built to now do nothing. At least until rates begin the downward journey that was, until a few weeks ago, expected this year.

 Investors are beginning to show concern now as world events are overtaking election news at times as is being reflected in the Volatility Index. We have a former president about to stand for a criminal trial now that the jurors are chosen, on Monday. Gas prices are speeding toward $4.00/gallon, and we have elected officials within Congress doing nearly nothing, however they did pass the aid bill to Ukraine and Israel but decided to throw Tic Tok out of the country with it. That move should be very popular with younger voters.

Because of the realization which now seems to be settling in that the Federal Reserve may, indeed, not lower rates at all this year, (see my Commentary from last week) the market is teetering on turning bearish. As you saw in the above charts ALL of the major indexes are now trading below their 50-day Moving Average (MA). As you might guess this is a bit of a bearish sentiment and should we see these numbers fall below the 200-day MA, we may be looking at a significant correction. This is NOT what an incumbent president running for reelection wants to see but the way things are in the country given that for the first time in American history a former president sits in front of a jury, anything is possible.

I recall, many years ago, sitting in front of my computer on Friday, October 16th, 1987, watching the market begin its descent toward what inevitably took place - a market crash which happened that following Monday (10/19/88). Now please understand, I am NOT forecasting anything like that. My point is however – the ‘average’ investors, what’s known as ‘the mom and pop’ investor would have the weekend to digest what happened that previous Friday the 16th.

I suspect that when the average investor studied the market this weekend, there could be a bit of angst. Or a lot. Or none at all! But what we will likely observe is many investors relying on their emotions to make decisions. This dear reader, is not you. Because you are reading this column and are informed based on analysis, research and data, your decisions will be informed ones!

Where things are now

For many months you’ve read here on GaneWisdom/Market Edge that ‘good news can be bad news, and bad news can be good news’. Sounds crazy however as the economy continues to gain strength (and it IS gaining strength) and the labor market continues its hot streak by adding new jobs and lower unemployment, the Federal Reserve will be less inclined to lower interest rates. This of course is due to more people having the ability to spend more money. This theory, if we call it that, would fall under the ‘Supply and Demand’ hypothesis: the cost of goods and services causing prices to spike upwards because of more demand.

In conjunction with this enigma are the events in the Middle East. Last week the world held its breath as it awaited Israel’s response to the Iranian missile barrage. It was beyond doubt that Israel would respond but with Washington’s (and many of the G-10 members) pressure to respond softly, a major escalation was avoided when Israel sent over a token barrage into Iran. At least for the present. The markets are now fully involved with the developments in that part of the world, be it oil prices, humanitarian interests, political and military actions as well as a combination of any of them.

In conclusion

Over the past few weeks, I’ve spoken about ‘Market Breadth’. This is a term which refers to how many stocks are participating in a particular move in either an index (such as the Nasdaq) or a stock. Participation is the key word here because the more stocks that are participating, the more accurate the reading or forecasting. The breadth has been quite strong but is now beginning to erode. When the market goes down it simply means more people are selling. The concern is – how much selling goes on before a market correction takes place? A 10% decline of the S&P 500 let’s say, would be termed a ‘Correction’. The S&P 500 is down, but only 5.3% from its high reached just a few weeks ago.

By now you know that this newsletter is unique. Although there are a number of financial publications (we submit to several to consider in our analysis) there are very few that focus on the ‘average’ American. By average I mean someone who gets up every day, goes to work, raises a family, pays their bills, attends their children’s or grandchildren’s games, and in short hope to make tomorrow a better day than today. The wealthy, who have financial advisors and accountants on standby, generally have enough information available to make sound financial decisions. This publication is dedicated to those who have no-one to speak with, rarely if ever hear from their broker and although we count many financial advisors as subscribers due to our in-depth analysis, is put forth in language that anyone can understand.

As a stockbroker and Registered Investment Advisor for many years, I had the privilege of serving the financial needs of thousands of clients in my 34-year career in finance. During that time, I discovered that as the markets fell back, declined or crashed (I’ve seen them all) investors flocked to our firm in the hope of obtaining guidance. It’s the scenario that when someone is sick, they go to the doctor. Although the markets have done very well these past months, it is now undeniable to most everyone that change is afoot. As you will notice in our “Positions” below and by comparing the current positions now with those of 8 weeks ago, we are, by the end of trading on Monday, in a cash position (money market). This is what GaneWisdom/Market Edge offers – guidance in up-markets, sideways markets, down-markets, and everything in between.

In the coming weeks we will observe the economy and market direction and base our guidance, opinions, and advice on analysis and not emotions. If the months of January, February, March and April (so far) are any indication of what the remaining three quarters of the year are going to look like – hang on tight!

Have a blessed and prosperous week………

Guy W. Gane, Jr.

From Market Update for January 1st, 2024 

“…….As you know, our investment philosophy follows the guidelines used by Guy Gane when he managed many millions of dollars for many thousands of clients. His results placed him among the premier Registered Investment Advisors in the United States for many years.

Periodically we are asked “How are subscribers to GaneWisdom/Market Edge able to enjoy profits without losing money?” The answer is – they don’t! No-one can accurately know when a market top happens, nor when a market bottom will occur. Our philosophy is to take small losses in order to avoid big losses.

Let’s analyze the stock market for the last two years – 2022 and 2023.

2023 has witnessed an extraordinary runup in the S&P 500 (+24%), the Dow Jones (+13%), the Russell 2000 (+17%) and the most impressive – the Nasdaq (+43%).

If you are participating in your company’s 401k or 403b, you most likely have no one giving you guidance as to what to buy, when to transfer or when to sell. Consequently, you probably just leave the money, and continue to deposit into whatever funds you originally started with. Most Financial professionals advise their clients to ‘Buy and Hold’ their investments because ‘the market always comes back, then goes up!’ Sounds logical as well as sounds good! It’s hard to argue that logic, especially this year when the market did indeed ‘Come back’. But is that the end of the story? Not by a country mile……

Had your portfolio been invested in tech stocks, the Nasdaq let’s say, and you just kept the money there because your advisor said that’s the ‘smart move’, 2022 saw your investment lose 33% of its value (the Nasdaq’s performance in 2022). Your $10,000 investment by December 2022 was now worth $6,700.00. But the market came back – up 43% as we’ve seen. Despite this – YOU STILL LOST MONEY!

Why? Let’s look……

$6,700  x 43% = $2,881

$6,700 + $2,881 = $9,581 !

In order to break even – JUST TO BREAK EVEN – the Nasdaq would have had to increase 49.3% !! You still lost money 2023!

As you can read in our Archive section, we have given sound financial guidance throughout the last 16 months which could have minimized these losses and maximized gains.

This dear reader, is the visual result of Buying and Holding……”

Upon Reflection

When we began publishing GaneWisdom/Market Watch on August 21st, 2022, the Dow on the previous business day (8/19/22) stood at 33,706. The S&P 500 ended trading on the same day at 4,228. As we wrote above, Friday’s close for the Dow Jones was 37,986. The S&P 500 at 4,967.

Having to give back profits, then having to make them back up instead of profiting by building on profits is not the way to win on Wall Street. This is the ‘Buy and Hold’ strategy. Realistically this is the ‘Buy and Hope’ theory.                                                                                                     

Our subscribers have averaged meaningful positive returns and by following our column exited the markets and re-entered them when appropriate – while the Buy and Hold crowd hung on with white knuckles hoping the market would come back and make up what they lost. The current market has offered significant trading opportunities which we’ve taken advantage of throughout the past nineteen months (please refer to the “Archive” Section of our site). We are listing our current positions below. Our market strategy has been taking advantage of upward trends, the advantage being not having to make up for the large losses that can (often) occur in the Buy and Hold strategy. When (not if) the market shifts again, we will issue our analysis, guidance and suggestions at that time.

Our Commitment

When GaneWisdom/Market Edge went live in August 2022, the goal was to provide our subscribers top-tier market analysis and outlook to those with qualified accounts such as: IRAs, ROTH IRAs, 401Ks, and 403Bs. Our desire was to make this service affordable to anyone. Instead of paying thousands of dollars, or a percentage based on investment assets (which is how Guy managed his client’s money as a Registered Investment Advisor) GaneWisdom/Market Edge charges a very affordable $200 per year. Our subscribers now include those with non-qualified accounts as well as financial professionals.                 

Our market analysis consists of market indicators, trends and strategies which allow our followers to avoid large losses usually associated with the traditional ‘Buy and Hold’ method. Our results speak for themselves and each of our Posts since our inauguration are available under the site’s heading: ‘Archive’.

In Conclusion

As a subscriber to GaneWisdom/Market Edge you are being given unequalled access to the latest and most comprehensive market analysis available. Please note the following and move accordingly. We strongly caution moving into an equity position in the middle of any type of market rally. This could lead to severe losses – ‘Buying high, selling low’ – is not wise.  Please watch for our Mid-Week Market Alerts in the event of shifting market conditions.

Wishing, hoping, If only’s and what if’s are based on emotion and you know that we follow the numbers, the indexes, the trend, the fundamentals - not emotions.

Our current positions:

We currently are/or were positioned in the following:EnteredExitProfit/Loss
A portfolio consisting primarily of Consumer Products11/6/234/4/24+0.8%
A portfolio consisting primarily of NASDAQ – dominated stocks11/9/234/17/24+15%
A portfolio consisting primarily of S&P 500 (Large Cap) stocks11/9/234/15/24+23.6%
A portfolio consisting primarily of Financial stocks11/9/234/15/24+1.9%
A portfolio consisting primarily of Small Cap stocks2/2/244/15/24+0.3%
A portfolio consisting primarily of Technology stocks1/22/244/16/24+3.5%
A portfolio consisting primarily of electronic stocks1/23/244/16/24+6.9%
A portfolio consisting primarily of Banking stocks2/2/244/16/24-2.3%
A portfolio consisting primarily of Retailing stocks2/2/244/11/24+9.7%
A portfolio consisting primarily of Energy stocks2/27/244/22/24N/A

Market Alert – Transfer 100% of a portfolio consisting of Energy Stocks into Cash (Money Market) before the close of trading on Monday, April 22nd, 2024

Your particular Mutual Funds and/or Variable Annuities may or may not offer all or any of the positions we recommend from time to time. You MUST do your homework. Doing so and finding the portfolio in accordance with the our analysis may position you to take advantage of what we believe to be the next market rally or opportunity.

* As is the case with any investment, use your discretion and judgement before purchasing and/or transferring. Diversification is always prudent; therefore, our suggestion is using a portion of your portfolio and not the total in any one fund or subaccount. A portion should remain in Cash (Money Markets)

Please watch for our Mid-week Market Alerts should there be any

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