Market Update
Market Edge

Market Update for the Week of May 13th, 2024


We are making this week’s Market Update free

On of the primary reason Wall Street continued to surge forward (let’s pretend April wasn’t there) since the second week of January was the result of Artificial Intelligence’s effect on the overall market. Specifically, Nvidia, which specializes in making AI chips. Indeed, Nvidia is up an amazing (for a listed stock) 79% year to date. Although still very early in its development, AI will become more prevalent among users over the next sixty months and will have a profound affect on society as we know it. Hopefully there will be strict oversight into this sector while not hindering both its use as well as its potential profits. The AI sector may very well become the (really) next big thing. But, what about now?

Over 70% of stocks are now trading above their 200-day Moving Average (MA). You’ll recall that over the past few weeks we kept a weather eye toward the storm we hoped we’d miss – a nosedive where stocks are trading below the 200-day MA. April saw the S&P 500, The Dow Jones Industrial Average, The Nasdaq, and the Russell 2000 all fall below their 50-day MA. This could easily signal new lower lows. Consequently, our strategies kicked into gear and we advised transferring into cash. Currently many companies as well as the major indexes are now trading above their 50-day MA – a bullish signal. Lets review the week just past……..

S&P 500 (stockcharts.com)

Closing Friday at 5,222, the S&P 500 saw an increase of 1.85% for the week.

Dow Jones Industrial Average (stockcharts.com)

The DJIA closed out the week at 39,512, up from last week’s close at 38,675.

NASDAQ (stockcharts.com)

The Nasdaq ended trading Friday at 16,340, up from last week’s closing of 16,156.

Russell 2000 (stockcharts.com)

Using the Rydex Russell 2000 chart due to continuing issues between Stock Charts and the reporting company, we see the uptrend that’s formed in the Russell 2000. Closing at 2,59 Friday, we see an increase of 24 points since 5/3/24.

2 – Year Treasury (stockcharts.com)

Yields on U.S. Treasuries flip-flopped this week. Tuesday saw the 10-year Treasury close at 4.4% which was lower than it’s been in weeks (since April 9th). Due to unemployment numbers spiking north, investors are beginning to reassess the possibility of a rate cut by the year’s end. Possibly a few.

By Friday the 2-year Treasury closed at 4.87%, The 5-year at 4.51% and the 10-year increased to 4.50 from Tuesday’s closing rate.

Volatility Index (stockcharts.com)

There is, once again, a feeling among many investors that, after April’s ‘pause’, stocks could once again begin another trip north. This sentiment is reflected in the Volatility Index where on Friday it closed at 12.55 the lowest its been since December 29th, 2023.

The VIX, also known as the ‘Fear Index’ is a gauge used to measure investors current mindset. A number of 20 and above shows investors becoming restless. 30+ fear has set in and a degree of selling has, or will take place shortly. 40 and above will see investors running for the exits. Obviously we’re not near those impulses presently.

30 – Year Mortgages (stockcharts.com)

This week saw mortgage rates nationally close at 7.09%, down a bit from last week’s close of 7.22% According to the Case-Shiller index home prices are now at an all-time high. Although mortgage applications were down 14% this month from a year ago, the rate continues to remain above 7% which is preventing many potential home buyers from purchasing a new home. You’ll recall our simple analysis concerning supply and demand and this is playing out drastically in the home-buying market.

West Texas Intermediate Crude Oil (stockcharts.com)

This week saw WTIC close at $78.26/barrel. We will likely see prices vary between $76.50 and $79.00 during the upcoming week.

Ever wonder where much of West Texas Crude Oil is based? Take a look at the chart below:

Commentary

The last seven weeks have, if anything, proven the validity of managing your money based on analysis and guidance. Were you to review our past updates, you’ll notice that we began to post our suggestions to transfer into a cash position on March the 20th. During the month of April, the S&P 500 slid 4.16%. The Dow by 1.5% and the Nasdaq lost 3.8%. Based on our analysis, we were advising a total cash position (money market) by April 26th, 2024. The following were the results by the exit date:

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

The difficulty of managing money ‘by the seat of your pants’ is not knowing where, when, how, or why. Even a degree in finance may not give you the necessary skills to know when to reposition your portfolio. As a Registered Investment Advisor for many years, I would caution investors about going it alone. The necessary dexterity needed – Time, Training and Temperament – are difficult when your emotions are involved. Especially when it comes to money.

Our philosophy is to take small losses, as you observe above, so as to avoid big losses. There are 11 sectors in the market, and it stands to reason that one or two of them may not be following the trend of the others. At times all sectors can be headed in one direction or another, but our subscribers know that by following our site, they will receive what they may not be receiving from their financial advisor: advice!

What we saw in April was a reaction to the Federal Reserve’s signals of downbeat news concerning lowering interest rates in 2024. After the euphoria (and somewhat unfounded forecasts) that the Gurus on Wall Street touted of 4 – 6 rate cuts in 2024 (which our subscribers know we never bought into), began to settle in toward the end of March, and certainly took over April’s thinking, the market suffered some serious declines. The word ‘Correction’ started to form on many investors’ lips, however market corrections normally see losses of at least 10% and as you can read above, that didn’t happen. Some profit-taking would have been very welcome, but the declines witnessed in April did not involve profit-taking. In hindsight, and especially the market’s overall performance since May 1st, have placed April’s declines as more of a hiccup. Market Breadth is now leading the indexes, and this is a very bullish signal.

The Housing Market

The housing market is once again set to enter center stage. In 2008 the collapse of the stock market was partly attributed to the housing crises. The market share of nonbank mortgage lenders originated 39% of the mortgages and only owned 4% of mortgage balances in that year. And we saw what happened then. Fast forward to 2022 these same nonbank mortgage lenders originated an amazing two-thirds of mortgages in the United States and owned the servicing rights on 54% of mortgage balances! Although these outstanding mortgages are guaranteed by Fannie Mae and Freddie Mac as well as government agency Ginnie Mae, this is causing some (including mine) concern. It is still too early to forecast accurately, however this sector bears watching. Closely.

The Election of 2024

As I’ve stated repeatedly on these pages, when voters cast their ballot on November 5th the economy will likely be the deciding factor in the election. That said, we are in uncharted waters as we see the former president in New York State Supreme Court defending against criminal charges resulting from his alleged ‘Hush-Money’ attempts. Facing three other trials which likely won’t come about before the election, the independent voter will be much more than a major factor than they’ve been in the past.

An online poll conducted by Global Strategy Group and North Star Opinion Research between May 2ns and May 6th to 1,003 registered U.S. voters suggest that the electorate are blaming Biden for higher prices at the pumps and the sky rocketing prices of food. According to FT-Michigan Ross’ poll released on Sunday also bears the same findings. High prices are the biggest concern of 80% of voters. 58% disapprove of the president’s handling of the economy compared with 55% in April. These are not the kind of numbers an incumbent president embraces as they seek reelection. Ironically the overall economy is doing great, and the country is witnessing a strong jobs market as well. There are now just short of six months before the election and certainly anything can transpire to sway voters one way or another. As we know, as the economy goes, so do the major market indexes.

FYI

* Noncompetes are the bane of those seeking employment at a competing company or firm. Before I started my own firm many years ago, I recall needing legal representation when I left one brokerage firm to go to another due to the previous firm suing me for what they said was ‘Breach of Contract’. Although I was successful, noncompetes are unfair to the client who wants to remain with their representative as well as to the individual who is seeking employment elsewhere. They stymie pay, career advancement and the American spirit of free enterprise. 30 million people, including many workers who can’t afford legal help, are currently bound by a Noncompete clause according to the Federal Trade Commission (FTC). If this might be you, you may breathe a bit easier as the FTC is flexing its authority to change what they consider this unfair practice. This could happen soon.

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 39,512. The S&P 500 at 5,222.

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 against moving into an equity position in the middle of a market rally, as we are in right now. This could lead to severe losses – ‘Buying high, selling low’ – is not wise. This is especially true for this current rally. 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:

(As of 5/10/24)

We currently are/or were positioned in the following:Entered
A portfolio consisting primarily of Consumer Products5/3/24
A portfolio consisting primarily of Banking stocks5/3/24
A portfolio consisting primarily of Small Cap (Russell 2000) stocks5/7/24
A portfolio consisting primarily of Nasdaq traded stocks5/8/24
A portfolio consisting primarily of Large Cap (S&P 500) stocks5/8/24

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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