Special Bulletin: January 18, 2022 (10am Update)

Brace Yourself

Last week the stock market’s weakness grew as the bulls had little or no ammunition to ignite a snap-back rally and drive prices higher by “buying the dip.” The market’s character continues to change… for the worse.

Our Current Market Outlook has been downgraded to “Market in a Correction” with a red light as of the open this morning. Our “Core Four” has 2 red and 2 yellow lights currently (see top of page), and with the VIX retaking its 50-day mav, the tie-breaker changes our signal to “red.” This remains a dangerous market in which the bears are gaining traction.

Our C.M.O. signal actually slipped to “red” as of last Thursday’s close, but then barely shifted back to “yellow” on Fridays close. We had written earlier this month that this was a “whipsaw market” – the market has not disappointed. Today it appears to have picked sides.

What to do now? Remain calm and dust off your patience. The markets tailwind (low rates and plenty of new stimulus) has now flipped to a headwind (higher rates and an end to frivolous stimulus). Be patient. Do NOT try to force it. The market can not go up decisively from here unless it moves back above its 50-day mav and then holds above it for several days. That’s likely a long way off. It may take longer for the market to heal this time. Relax- you will have an opportunity to get back onboard. Focus on the yield of the US 10-year note. A close over 2% may become a catalyst.

Have a Triumphant day! ®