Special Bulletin: July 19, 2023 (12p Update)

Selling (Profit Taking) Beginning to Make Itself Felt

With stealth selling starting to take place under the stock market’s surface (especially in Tech-land), our Current Market Outlook was downgraded to “Uptrend Under Pressure” with a yellow light as of noon today (SPX at 4,574.31). Our “Core Four” (see top of page) now has 2 green, 1 Yellow and 1 red light with a waking (?) VIX.

In our post from July 13th, we stated, “The broader market is beginning to play catch up with the so called “magnificent 7” and that is good news for the burgeoning rally. Recent outperformance by the “equal weight” proxies and the small to mid-cap indexes is a positive for the bulls. It appears to our team that the massive rally in the “magnificent 7” is now being used as a subtle cash register to fund purchases of the broader market. In other words, the big guys and gals on Wall Street are taking profits and moving that capital into areas that have not yet rallied meaningfully. In a word this is often referred to as “rotation.” That may bode well for a sustained second half rally. But beware the tech behemoths!” Pay close attention to how this plays out – the unwinding of the big-tech trade, or so called “Mag-7.”

That “cash register,” or “ATM” effect, is more noticeable today. It is interesting to note that MSFT made a big splash yesterday with a new service offering and Wall Street ran the whole list up. Yet, today the semi’s and certain other tech sectors on the Nasdaq are experiencing selling pressures. If the market’s rally is to expand broadly in the weeks ahead, the tech’s will have to participate. Otherwise, if the selling in Tech-land continues (rotation), investors might expect a sideways-choppy trend for a while at best.

Separately, our team has noticed that the rate charged for shipping containers of dry bulk freight around the world by sea, known as the Baltic Dry Bulk rate, has been dropping significantly since April and has hit the lowest level since May of 2020. FYI: The dry bulk rate began collapsing in November of 2019, right before the Covid crisis and resulting stock market collapse. Food for thought.

Be alert out there. Seasonal trends during August and September can lead to a soft patch before a strong year-end rally. Know thy self!

“…and in your knowledge, self-control, and in your self-control, perseverance, and in your perseverance, godliness,…”

2 Peter 1:6 NASB 1995

Game plan: Keep watching the major indexes for signs of distribution on any pullbacks. Prepare an exit strategy and consider partial profit taking. If the number of Distribution Days jumps in the days ahead, don’t be complacent! The 10-year US Treasury note yield – how it acts around the 4% level – is a big tell.

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

Have a Triumphant day! ®