For any trend to continue, there needs to be a fairly consistent follow-through of the same trajectory. This week saw such a trajectory. We’re happy to report a Bullish trajectory.
The S&P 500 finished the week at 4,514, up 2.24% for the previous 5 days. The S&P 500 is, as you know, one of the best barometers of the stock market as a whole, consisting of 500 companies. The chart above clearly shows the rally we’ve seen in the S&P. The breakout that we are seeing here is a very bullish indicator and it may (just may) continue through to the New Year. November and December have a history of increasing stock prices, some call it the ‘Santa Claus’ rally but whatever we want to refer to this upswing as, we see this as a time for growth. Watch for the next resistance level for the S&P 500 which us at 4,540. This number was what we saw in the late summer. Should this occur, we could see a breakout to the highs of the mid-summer (4,607 on July 27th) and a positive entrance into 2024 for the broader market.
The DJIA closed Friday at 34,947, up 1.94% for the week. Looking closely at the chart above, we are seeing the possible formation of what’s known as a ‘Death Cross’. This happens when the 50-day Moving Average (MA) crosses beneath the 200-day MA. We’ve discussed this previously but in essence, a Death Cross is not what investors want to see. At least if you are invested at that moment. As we closely watched this chart during the week, we saw a reverse trend taking place. As you can see, the market seemed to shrug off the dire warning of a possible downturn and reversed into a positive uptrend. Rest assured – we will be keeping an eye out for this barometer.
The NASDAQ is currently standing at 14,125, up 2,37% for the week. Although we are still over 300 points below the summer high for the NASDAQ, we have seen a healthy uptrend since the end of October. Trading above both the 50-Day MA as well as the 200-Day MA, we are seeing strong current support for a continued advance.
The Russell 2000 ended trading on Friday at 1,797, up an amazing 5.42%. As we’ve pointed out many times here, for the broader market to show advances, solid advances, the Small Cap markets need to ‘plow the road’ by breaking out and that is what occurred this week. Small Caps broke their 50-day MA with solid and heavy volume – a good sign for the health of this present rally.
The VIX closed Friday at 13.80 indicating that investors are showing their support that this current uptrend is for real. As you’ve read here previously, a number below 20 on the VIX announces little concern for investors. Above 20 begins a period of concern. Above 30 begins a very real feeling of something not being quite right and 40 above in the VIX is a stampede out of the door.
The 2-year Treasuries ended the week at 4.89%. The 5-year T-Bond at 4.44% as was the 10-year T-bond with a 4.44% rate as well. We are beginning to see something extremely interesting in the Treasury market. As you noticed over the last weeks, the rates have been coming down on the 2-year, 5-year, and 10-year bonds. This is a possible beginning of lower short-term rates and although we are still in an Inverted Yield Curve, this may be the reversal that brings these rates into a more favorable position economically as well as a signal that the broader markets may be at the beginning of a sustained uptrend. We are NOT stating this unequivocally, but we are hopeful.
West Texas crude stood at 76.94 per barrel on Friday’s close. It wasn’t so long ago that the price of oil was being pushed to the $100 per barrel level. Instead, what we’ve seen over the last few weeks is a downturn from $90 + per barrel to where the price landed on Friday. Look for West Texas Intermediate oil to hover between $74.00 and $70.00 per barrel this coming holiday week.
There is a growing consensus among stock traders that the economy will survive the Fed’s war on inflation, meaning either a very soft recession landing, or no recession at all. The markets have been spasmatic since the spring – “There is a recession coming!” “There will be a soft landing!” “There isn’t going to be a recession!!” Each gyration seems to feel like the right one. But, you see, there is that word – feel. Feelings are an emotional response and when you are discussing money, it’s (very) difficult to not become emotional. This is why we offer such a simple alternative – we do the research; you judge the accuracy of that research and act on it or not.
As a viewer of social media, I am always amused by watching some money - guys pitching their service. Not because they are marketing themselves - after all I am doing so with Market Edge – but because they are charging some heavy commissions to do so. When I managed money as a Registered Investment Advisor (RIA) I charged a 2% yearly fee. HOWEVER, I only charged my clients a fee IF I made them money for the previous 12 months. Otherwise, I managed their money at no charge until I did – and until they were satisfied. One view I saw recently was where the gentleman spoke about ‘asset-clutter’. Being in the business for 34 years, I was unaware of something called ‘asset-clutter’. I had the thought that maybe he was referring to so many investment options within the economy as well as the sector. But I’m not sure. But you see, that’s the problem – “Where do I invest my money?” Before we answer that, let’s take a further look at the current financial situation.
Since February 2022 Small Cap stocks have been on a rollercoaster, but they are very indicative of the ebb and flow of the markets, especially since the pandemic.
The current revival on the Street is tied to the excitement (aka: Hope) that the Federal Reserve can overcome inflation without initiating a recession. GaneWisdom/Market Edge however offers you the opportunity to reallocate your money into either a cash position (money market) or into another sector of the economy whichever way the economy goes and offers the best and most advantageous options through our analysis. Our newsletter offers a method to change (‘reallocate’ is what its called in the investment business) your investments in case the deep thinkers and hopeless optimists are wrong. This, I believe, is what sets our service apart from the ‘Buy - and - Hold’ crowd. Why? Because in my years in the business I saw too many instances where ‘best forecasts’ ended up misplaced!
I am of the opinion that the economy will continue to grow, and inflation will grow as it does, which will cause the Federal Reserve to either continue their rate hikes or begin new ones. That would not be good to put it mildly. OR the economy does indeed endure the so-called ‘soft landing’ which could become a widespread as well as deeper, economic slowdown. You as an investor must be informed and then be proactive. To do otherwise could be a mistake. Again, another reason to carefully read our Weekly Market Updates and Mid-Week Market Alerts (if any).
What a few weeks ago was disparaged(index sectors), is now attractive, and this my friends is happening much too fast. Trading sentiment rarely happens this quickly. If you were to ask ‘the man on the street’ about the economy (which in my opinion will be the number one factor in the 2024 presidential election) they will say ‘its bad’. When Bank of America asked investors their opinion on a possible recession recently, 75% said they believe that it would be of a ‘soft-landing’ variety. The markets themselves now are pricing an assumption (and you know what assuming does) of 92% that the Fed will be reducing rates next year. Oh, the weeping and gnashing of teeth that will occur on Wall Street should those reductions not become fact!
We are now into the holiday buying season. Retailers have been skittish for months and early Black Friday discounts are everywhere as you’ve noticed. Promotions are prevalent throughout the retail sector with appliances, apparel and computers leading the way. According to Adobe Analytics, the price of apparel decreased by 9% throughout October, although consumer spending dropped in October as well. Promotions are expected to peak between Black Friday and Cyber Monday, however.
Online sales have now become firmly entrenched in the country, which of course has given rise to the continuing closure of shopping malls. Once the staple of American holiday spending, malls are quickly becoming a nostalgic memory for Baby Boomers, Generation Xers, and Millennials. Instagram and Tic Tok are happy to bring back ‘the good old days’ of shopping in days of yore. Meanwhile sales online grew 6% to $76 BILLION! compared to last year!
I point this all out because it’s my belief that these discounts will come back to haunt retailers and online stores as well. The reason being that consumers will expect these discount prices to remain somewhat stable as well as available and if one retailer can’t offer that option, another will. Point in fact – keep a weather eye on the retail sector in 2024 because of this noticeable and developing trend.
The geopolitical landscape continues to remain erratic and precarious. The show of overwhelming force by the Unted States has been a major factor in preventing the spill - over from the Israeli - Hamas fight. Divisions are continuing to grow in the U.S. College campuses have become, once again, ground zero for demonstrations and counter - demonstrations. How anyone cannot be abhorred by what happened in Israel or condone what Hamas has done, not only recently but in the past, is beyond comprehension. Happily, major donors to the ‘higher learning’ institutions are now speaking their minds with their checkbooks, but I digress. Despite the upheaval in the Middle East, the U.S. continues to see a downward trend in the price of oil and consequently the price of gas, which is having a positive effect on the American economy.
The time now is for rational and strategic thinking when it involves your investments. Emotions should not be a part of your investment decisions. We will continue to monitor the markets, the economy, and the world at large and give you our weekly outlook and Mid-Week Market Alerts (if needed) as we’ve done since August 2022………….
Guy W. Gane, Jr.
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 34,947. The S&P 500 at 4,514. Any profit you made in the market runup of 2023 – the past few weeks notwithstanding - has either been negligible or possibly disappeared. So much for the ‘Buy and Hold’ theory. Our subscribers have averaged 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. The current market is offering a few trading opportunities, and we are listing them below. Our market strategy has been taking advantage of this upward trend, the advantage being of not having to make up the large losses of a few weeks ago.
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’.
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. 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.
| This week we are positioned in the following: | Entered To view the rest of this article, sign in to Market Edge. | 11/16/23 |
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 our analysis may position you to take advantage of what we believe to be the next market rally.
* 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.
