Due to current world events we are making this week’s Market Update free
This week saw the Treasury Bond rates drop slightly. Last week we saw the 2-year Treasury at 5.08%. This week’s rate is 5.04%. 5-year dropped to 4.64% down from 4.76% last week, and the 10-year closed Friday at 4.61%, down from 4.80% the week prior. Reports are mixed for this meager drop but seems to be in connection to the turmoil in the Middle East (which we’ll discuss below).
As our readers know from our past posts, Small Cap stocks have a history of signaling what is coming in the stock market. This history can forecast a Bull market as well as a Bear market. The chart above which is reflecting the Rydex Russell 2000 Fund (Stockcharts has not posted the Russell 2000 Index chart for a while, consequently we are using the Rydex Fund example and is a very similar reflection) which is reflecting a very interesting – and disturbing in our opinion – market trend.
The Small Cap market continued its downward trend again this week, down 1.48% for the week closing at 1,719 on Friday. However – the last 30 days have seen the Small Cap market fall by 7.87%. These stocks are popular choices by investors and is a good indicator for what is (may) about to happen in the overall market. It is what is reflected in this chart above that has us very concerned. Notice the blue line on the chart? This is the 50-day moving average (see last week’s posts on Moving Day Averages). The red line is the 200-day moving average. When the 50-day MA crosses below the 200-day MA, what’s known in the industry as a ‘Death Cross’ forms. The chart above shows that this has now happened. This is a (very) Bearish signal. In other words, the Small Cap market is announcing what could be a dire prediction for the markets.
Despite the S&P 500 still being close to its all-time high, Small Caps are pushing against last year’s Bear market lows.
Speaking of the major indexes, we see that the Dow Jones closed Friday at 33,670, up slightly for the week at +0.79%. The S&P 500 closed at 4,327, +0.45% for the week. The NASDAQ saw a slight decrease of 0.18% for the week ending at 13,407.
The Volatility Index (VIX) which we refer to weekly continues to climb higher these past weeks. You’ll recall that the number 20 or above signals a concern to an investor’s outlook. 30 is getting very nervous and 40 and above sees investors flocking out the door. Friday the VIX closed at 19.32, however it crossed 20 before retreating slightly to close out the week at the aforementioned number.
The Consumer Price Index (CPI) is a measure of the cost of living for the average American and is still showing an aggressive, if not stubborn, pattern of defying the Federal Reserve’s goal of reducing inflation. The chart above includes energy and food prices and also illustrates the CPI’s massive increase since March. The CPI jumped 3.7% in September when compared to a year earlier. Economists had forecasted a 3.6% increase. These numbers scared Wall Street and were partly to blame for Thursday’s and Friday’s down-days. The following chart reflects the recent dramatic swings in the CPI. The red line includes food and energy.
Mortgage rates for a 30-year fixed are now at a national average of 7.57%, the fifth consecutive weekly increase and the highest since November 2000.
This week saw the price of oil spike upward to $87.69 (chart above) up from last week’s price of $82.79 for an increase of 5.7%. See our Commentary below regarding future energy prices.
On Saturday, October 7th, 2023, Israel was attacked by the forces of Hamas. Hundreds of innocent men, women and children were targeted for slaughter. That number is (as of this writing) increasing daily, numbering now well over one thousand.
As a stockbroker for many years, I had the honor of assisting many survivors of the last major attempt to exterminate the Jewish people. As I would listen to their stories about those terrible years, now long ago, I am not ashamed to admit to the tears that rolled down my face as I heard them. It is one thing to read about the Holocaust. It is quite another to come face to face with those who miraculously survived it. I can state unequivocally that the Jewish people will never again allow themselves to be perpetrated against without massive retaliation, and in their righteous might will overcome these demons who seek to destroy their people. Every person who loves democracy and freedom honors the resolve and bravery that once again is demanded from a people persecuted for over two millennia. And prevail they will.
Along with the fight to rid the earth of these assassins, the world – and those of us in the United States - must be willing to sacrifice the comforts that we here in America take so much for granted. We as a country have struggled to climb out of our financial upheaval for the past 19 months. And although the job is not complete, we are nearing it so. However – as the current world situation becomes more and more unstable it is sadly becoming clear that events are beginning to spin nearly out of control and with it the very real possibility that the positive financial steps forward could unravel. Quickly.
The Middle East has been, for want of a better phrase, ‘ground zero’ in the minds of many, if not most, Americans since 1973. It was then that the price of gasoline began its precipitous rise from 20 cents a gallon to $5.00+/gallon at different points of time during these past fifty years. We are, in my opinion, about to see events half a world away once again affect our American economy in a not-welcome way. Our commitment here at GaneWisdom/Market Edge is to follow and analyze a multitude of indicators, not the least of which are Geopolitical events at home and abroad.
Many economists are predicting oil to climb to $100/barrel. Many of them see the very real possibility of $120+ per barrel due to the unrest in the Persian Gulf region. As the Consumer Price Index chart above illustrates, the price of energy has a dramatic effect on the US economy.
Iran has become the focus of many nations across the globe in the wake of Hamas’ attacks on Israel. This is prompting the possibility of large-scale retaliation by Israel, and perhaps the United States, should it become unmistakably clear that Iran was and is indeed behind this mayhem. While any war in the Middle East has the potential of upsetting the world’s oil supply, the massive implications for global oil markets (and financial markets as well) cannot be overstated should an oil producing nation like Iran become involved in a war.
This past week has seen the United States send two strike groups consisting of the new aircraft carrier USS Gerald R. Ford in one and another with the aircraft carrier USS Dwight D, Eisenhower. These battle groups send ominous signals and ones that I cannot believe any warlike nation can – or will – take lightly. The firepower of these two groups is massive to say the least.
The Strait of Hormuz is one of the largest conduits of oil in the world. Over 17 million barrels of oil pass through it – each day! This is equal to about 17% of the world’s oil supply in 2023. 90% of oil from the Middle East passes through the Persian Gulf. For now, according to the American Petroleum Institute, there is a massive oil inventory in the U.S., and this has also been confirmed by the U.S. Energy Information Administration (EIA). This is the reason that oil prices did not increase dramatically last week after the attack in Israel. Should events spin out of control in that part of the world, as the saying goes – ‘All bets are off’.
In the meantime, we need to rely on the wisdom of not only the leaders in our country but those of the world, to safely navigate the shoals of yet another world crises.
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 33,670. The S&P 500 at 4,327. Any profit you made in the market runup of 2023 has either been negligible or has likely disappeared. So much for the ‘Buy and Hold’ theory. Our subscribers have averaged positive returns and by following our column has exited the market weeks ago – while the Buy and Hold crowd hangs on with white knuckles…………
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.
Bearish
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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.
* 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.
Mid-Week Market Alert
For October 18th, 2023
If you have the following available in your retirement plan or current portfolio of funds, money should be transferred into them by the close of business on 10/18/23
A portfolio consisting primarily of NASDAQ – dominated stocks
A portfolio consisting primarily of Internet stocks
A portfolio of primarily of S&P 500 (Large Cap) stocks
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 modest portion of your portfolio and not the total.
