Last Friday we posited that stocks generally don’t go higher as rates rise when we wrote, “Higher interest rates and a rising stock market generally don’t go together, at least not for long. Remember the old adage “When rates are high stocks will die; when rates are low stocks will grow” in our last post? No doubt you have also heard the phrase, “Don’t fight the Fed.” So, shouldn’t this mean that the market is going to fail at the key moving averages and fall sharply?
We went on to note that the current conditions at that moment had improved ever so slightly but enough to cause an upgrade in our C.M.O. signal to yellow. We also shared that that was happening, “…even in the face of a 4% yield on the 10-year US Treasury note. Hence, the stock market is not doing “what it is supposed to do.”
Today the market is not doing what it is “supposed” to do if you are bullish. A key clue of that is the absolutely awful action in the bank sector. As of noon, the KBE etf (a proxy for bank stocks) is trading down over a whopping 5%!! Even the more stoic XLF etf is off over 2% while the KRE etf is crashing 6% lower. This is not a component of a healthy stock market.
Our Current Market Outlook has been downgraded to “Market in a Correction” with a red light as of 12pm (SPX @ 3,993.57). Our “Core Four” (see top of page) sports 2 yellow and 2 red lights with a rising VIX.
THIS REMAINS A CRITICAL JUNCTURE. The Fed’s stern talk about the direction of interest rates continues 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 failing. All eyes are on tomorrow’s employment data. The economy continues to face a difficult environment due to the Fed’s draining of liquidity.
Tomorrow morning the market will receive the February employment data and “boy will it be a market mover!” Personally, I would have preferred to delay today’s post until after that announcement, but the technical internal facts in the stock market have changed today, and now so does our signal. If the institutions “hear” something they like tomorrow which causes them to reverse course and begin to employ capital back into the stock market, then our C.M.O. will immediately catch that and be upgraded. That is the beauty of our signal and process; we are never “out of sync” for long because the “math of the market” dictates the outcome of our research, not our opinions.
One more thing. In the post from March 1st, we shared, “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.” That insightful comment still very much applies.
“Do not weary yourself to gain wealth, cease from your consideration of it.
When you set your eyes on it, it is gone.
For wealth certainly makes itself wings like an eagle that flies toward the heavens.” Proverbs 23:4-5 NASB 1995*
Game plan: Put your “defensive unit back on the field.” Closely monitor the S&P 500’s 50-day and 200-day mav’s as a risk management exit strategy (RED alert today!). The US Treasury 10-year note yield remains a major tell.
(* This originally intended Bible verse was inserted 2 days after the original post was published.)
Note: You can learn more about The Triumphant Core Four risk management system by clicking here.
Have a Triumphant day! ®
The information in this article is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Not to be used as legal or tax advice. ©2023 Triumphant Portfolio Management, LLC.
Where Are Woodward and Bernstein When We Need Them? This article was written by Newt