Special Bulletin: Feb 9, 2023 (2pm Update)

…And Back to Yellow We Go

Our Current Market Outlook has been downgraded to “Uptrend Under Pressure” with a yellow light as of 2pm today with the S&P500 at 4,104.18. Our “Core Four” (see top of page) sports 2 green and 2 yellow lights with a rising VIX.

Two days ago we asked, “Can a strong uptrend and a constrictive Fed coexist for long? Most definitely not.” We added, “For now, the trend is up, strangely enough, for both stocks and interest rates. But at some point, the fog will rise, and one will prevail over the other. In the meantime, shrewd investors would be wise to prepare for a year of choppy swings with a likely sideways grind as a result.” Welcome to choppy.

It appears that market participants are adjusting their models to now include a Fed target range of 5.0 – 5.25% (if not slightly higher) as a result of the stubbornly strong labor market. Mr. Powell has made this projection very clear, but Wall Street was apparently in denial. Those model “adjustments” often cause a reduction in the equity allocation for many mangers and as a result, down it comes.

The short-term trend is still up and the key moving averages have not been violated yet. This is a big test for the bulls. Due to the sloppy tape, we have slightly reduced our stock exposure by 5-10% in our equity strategies.

Game plan: Stay optimistic but be ready to play defense (it wins Super Bowls and preserves your capital). Don’t overreact and fully bail out as long as the S&P 500 is still over its 21 & 50-day mav’s. Expect a test of those mav’s in the near future. 

Note: You can learn more about The Triumphant Core Four risk management system by clicking here.

Have a Triumphant day! ®