Special Bulletin: July 28, 2022 (11am Update)

When Bad News is Good? 

Based on the response by big money managers in the stock market yesterday to the Fed’s rate hike and to today’s economic release at 10am, our Current Market Outlook has been upgraded to “Market in an Uptrend” with a green light. (S&P 500 @ 4026.27)

While the Fed’s interest rate hikes remain a serious headwind for growth, underlying technical conditions in the stock market have begun to show improvement on the hopes of fewer future hikes. Even though the current environment for investing in growth stocks and the general stock market indexes still reflects higher than normal risks, the S&P500 and Nasdaq continue to enjoy a “bargain hunters” bounce. As you employ capital, keep in mind the economy is still in a difficult economic environment – and stock returns will be “data dependent.” 

It is important to recognize that even in a green condition the stock market could just chop sideways for several weeks or months. A straight up blast to new all-time highs is very unlikely. Additionally, a third (and potentially final) down leg in stocks could develop at any time on a negative surprise.

Our “Core Four” (see top of page) has improved to 2 green and 2 yellow, with the VIX casting the tie-breaking vote to signal a green condition. Be aware that this outlook may not last for very long: Be prepared to act defensively if conditions change violently.

Finally, we have noticed that on several recent occasions what appeared to be bad news for stocks was shaken off or dismissed quickly by the market- a definite change in character. We will soon see if that trend continues and even strengthens. 

Game plan: Begin committing capital into obvious leaders from your watch list, and into the strongest sectors. Stay focused on the 50-day moving average as a key level to hold on any future pullbacks.

Have a Triumphant day! ® 

Ps. Happy birthday #3 sweet Nora!