Special Bulletin: April 26, 2024

As Serious as a Heart Attack

As the human heart is in desperate need of strong blood flow to remain healthy and to work properly/fruitfully, the same is true of the capital markets, and in particular of equities. 

We seem to be at a “who’s gonna blink first” moment.

Big investors are sure rate cuts are coming. It’s the life-blood of stocks! They don’t want to sell because of what history shows that type of capital rush (“blood flow”) will mean to stocks and their future earnings. But they will only hold on for so long before accessing that the risks of a recession grow with each day that passes without the blockage (high interest rates) being removed.

The Fed is sure (or maybe better, hoping) the right economic backdrop for rate cuts is coming. They have already expressed that publicly and ignited the recent stock market rally. Unfortunately, that upward vaunt in stocks has added to inflationary pressures which is thwarting their own battle against it. The Fed knows they cannot casually cut rates at this moment without running the risk of creating even more economic “high blood pressure” (inflation) and causing a nightmarish “cardiac event” – stagflation.

Our research has revealed that in many prior instances (not all) the stock market (actually Wall Street’s big elephants) takes the lead by selling, causing a sharp and immediate decline (and a whole lot of political wailing), which forces the Fed to “blink” and immediately apply a financial “stent” (Dec 2018) or in the case of the Covid panic, a full blown economic “open-heart surgery” intended to save the patient (stocks/investors) and limit the damage. This is done by freeing up or urgently infusing that sweet precious flow of fresh new “blood” – capital.

So, if it soon seems as though the markets are blinking first (by selling off), while it may happen that way chronologically, it might be by design to force the Fed to do so in response to any sharp economic pain caused by a mini panic, or worse, a crash (a “Widow Maker”), especially in front of an election. 

The stock market is in the midst of a new rally attempt. The next 4 to 5 days will be crucial for the bulls to assert their case and push the main indexes back up and over their respective 50-day mav’s. 

Our Current Market Outlook remains “Market in a Correction” with a red light (SPX 5,099.96). Our “Core Four” (see top of page) has 1 yellow and 3 red lights. The VIX remains elevated but only barely above its 50-day mav.

Last week we wrote, “Nothing ever goes in a straight line when analyzing the stock market. What does that mean? Odds are high that a bounce may develop next week. Maybe for just a day and a half, or maybe for a few days. It may not even come for another week or later. But a bounce will develop, and the banks are already experiencing a mini one. Gauging the internals during any bounce will reveal much about the true health of the stock market. Be patient before rushing back in. Go slow and make it prove that it is worth putting your hard-earned capital back to work in it.” (emphasis added) That bounce did indeed happen, but the internals have not confirmed serious institutional demand yet. Be wary of the first bounce, unless it proves it can hold.

“Hope deferred makes the heart sick, but desire fulfilled is a tree of life.”

“The heart is more deceitful than all else and is desperately sick; who can understand it?”

Proverbs 13:12 and Jeremiah 17:9 NASB 1995

Game plan: Monitor this week’s bounce to see if it holds, and demand a strong up move in higher volume to confirm a new uptrend. A strong showing of institutional support must develop immediately. Please pray for the peace of Jerusalem, for all of Israel (Psalm 122:6-7). May they prosper who love her.

Ps. Hey Big S! I hope you are feeling better! Grandpa loves you!

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

Have a Triumphant day! ®