Special Bulletin: January 25, 2024

 The January Effect is Fading? Failing?

Our internal indicators, as measured by our “Core Four,” have quickly shifted back to yellow. A VIX that is creeping up and an elevated investor sentiment reading are the culprits. However, except for a couple days of “stalling” price action on the S&P500 this week, the market’s uptrend still seems intact. But our “Core Four” is detecting a subtle undertow of selling pressure (maybe better said, buyer exhaustion) and has moved back to a caution condition.

It is possible that a move back to green could even happen in a few days. Don’t guess. Let the “math” confirm.

While this type of back and forth between green and yellow reminds us of the lead changes in the Bills-Chiefs game last week, it is a natural part of certain moments in bullish stock market history. Sometimes it leads to a reversal (aka. a lead change) that ushers in a quick 5-10% correction. Other times it acts more like a pause to refresh episode (a timeout). Time will tell. 

Having said that, please understand there are no serious “technical” red lights yet, just one concerning investor sentiment, which is often early. But a little caution is still advised at the present moment.

Our Current Market Outlook was downgraded to “Uptrend Under Pressure” with a yellow light at today’s close (SPX 4,894.16). Our “Core Four” (see top of page) have 2 green, 1 yellow and 1 red light with a VIX over its 50-day mav. 

The advance/decline lines remain unimpressive and need to be monitored. Fortunately for the bulls, the daily new lows on the NYSE are still low.

Keep in mind what we shared earlier this week: the markets are a 6-9 month forward discounting mechanism and may be sniffing out a Trump victory in November. After the Iowa and New Hampshire primary wins (Historic, by the way), and the Governor DeSantis announcement, Trump’s momentum is soaring and so are the major stock indexes with him.

Interest rates continue to argue with stocks and are suggesting a recession is still coming – keep an eye on the 10-year US T-note yield. The economy is slowing while the stock market is climbing – continue to expect a period of volatility.

Finally, while January is typically known for its kindness towards small and mid-cap stocks, both of those categories are posting negative returns year to date. Something to keep on your radar.

“Be of sober spirit, be on the alert. Your adversary, the devil, prowls around like a roaring lion, seeking someone to devour. But resist him, firm in your faith, knowing that the same experiences of suffering are being accomplished by your brethren who are in the world.“  1 Peter 5:8-9 NASB 1995  

Game plan: The stock market likes something it sees in the future. Lower rates? Real leadership returning to Washington? A whirlpool in the “swamp?” The trendlines are properly stacked and support remains at the 21-day mav’s of the major indexes. But be on the alert! Don’t be complacent. Please pray for peace for Jerusalem.

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

Have a Triumphant day! ®