Special Bulletin: March 1, 2023 (10am Update)

The Moment of Truth, Again

The moment of truth for the bulls has arrived. A significant move from here is likely in short order. “Up or down?” you ask. We will soon find out. The math of the market has been pushed to the brink with this morning’s action. This is where the institutions execute their real intentions. If indeed the market is going down from here, it will happen immediately. But, if this is the last “shakeout,” and they are ready to make a strong push into the end of the first quarter having created a negative tone for retail investors, then an immediate bounce higher will happen and lift the major indexes above their respective key moving averages (mav’s) within days, if not hours. 

The Fed’s interest rate hikes continue to be a serious headwind for growth stocks and the general stock market indexes. The current test of support at the S&P 500’s 50-day moving average is waning. THIS IS A CRITICAL JUNCTURE. If the market reverses and goes positive into today’s close, that would be a major victory for the bulls and possibly negate today’s red signal and change it back to yellow. For now, the economy is still facing a difficult environment due to higher interest rates and investors should prepare mentally for choppy market conditions.

Our Current Market Outlook has been downgraded to “Market in a Correction” with a red light as of 10am (SPX @ 3,963.66). Our “Core Four” (see top of page) sports 2 red and 2 yellow lights with a VIX above it’s 50-day mav.

An old adage that we cling to is “When rates are high stocks will die; when rates are low stocks will grow.” The best case for the general stock market in a period where the Fed is raising rates is for sideways choppy action. A quick look at the chart of the S&P 500 shows it is currently trading at the same price level that it was last May- almost exactly 9 months ago.

While our C.M.O. has changed to a red signal, we fully recognize that being in a volatile stock market environment means that signal will likely not stay static, unless a major breakdown happens. And as we previously stated, our C.M.O. could move back to yellow very soon. The indexes price and volume action in the very near future will determine that.

For the stock market, is it possible that March could come in like a lamb and go out like a lion? Yes. Regarding March, while it is known for its “madness” and we are advised to beware of its Ides, is there anything that lies ahead that could possibly be seen as positive? Yes. Softer inflation data as the Fed’s rate hikes start to work their way into the economy. Window dressing into the end of Q1. Even today’s “first day of the month inflows” are usually bullish.

Know well the condition of your flocks,
And pay attention to your herds;
For riches are not forever,
Nor does a crown endure to all generations. Proverbs 27:23-24 NASB 1995

Game plan: Remain optimistic but put your defensive strategy in motion. Don’t overreact and fully bail out as long as the S&P 500 closes over its 200-day mav (and the Nasdaq’s 50-day mav). See if this week’s test of the key mav’s holds or breaks loose. 

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

Have a Triumphant day! ®