1. Market
Markets closed the week down overall as the FOMC rate
decision introduced a bout of volatility to the downside. Friday’s jobs report
came in strong despite unemployment rates coming in higher than expected.
Interestingly, we saw a divergence in markets moving higher on Friday, the
dollar heading lower, while the 10-year and 30-year treasury yield remained
steady.
One interpretation of this is that market participants
anticipate that the Fed is going to lose its war on inflation and in the
process is going to raise their target rate form 2% to a higher number. If
inflation remains high, interest rates may also stay elevated, causing
commodities to run higher. IF the market is indeed going to discount a Fed
pivot, interest rates should decline sharply. Whatever the case, this
divergence has caused the markets to enter a state of indecision.
2. Sectors
Many sectors found resistance at key moving averages
(50-SMA, 200-SMA) and headed lower this week. Noticeable areas of strength were
found in XLI, XLB, XLE, SLV, and SLX.
As mentioned earlier, the divergence in the movement between
the market, dollar, and yields would be interesting to note as gold and silver
headed higher last Friday. If the market is indeed discounting future Fed
pivots, we should expect to see yields tanking and gold + silver to continue
moving higher.
Additionally, we are seeing relative weakness in XLK, XLF,
XLY, and XLC – all of which contributes a higher weightage to the S&P 500.
3. Industry Group
Notable strength in Steel Producers this week – climbing 130
ranks compared to last week.
Also notable is that energy remain the strongest industry
group, with 4 of the top 10 ranks coming from energy-related industry groups.
4. Quant Model (Leveraged ETFs)
While I’m still beta-testing this, the quant model did flag
NUGT (Gold, Pocket Pivot Buy) and AGQ (Silver, Buyable Gap Up) as possible candidates
this coming week.
5. Individual Stocks
Stocks generally look ‘wide and loose’ – especially in
energy. Another thing to note was that there is a noticeable lack of stocks
exhibiting CANSLIM characteristics. Stocks that have ran up the right side of
their bases are also extended, leading me to believe that we are probably at
some point this week, due for a correction/consolidation.
Plan This Week
Overall, the best position to be in is cash as we are
trading below the bolded pivot. That said, markets are extremely choppy so it
may be best to preserve mental capital and avoid any activity all together. I
will be relying on feedback on my positions this week to decide whether to cut
it.
6. Misc. Indicators
We saw the Net H/L last week hit a six-day streak – The
longest streak in a while, but it all ended after the Fed Rate Meeting.
Disclaimer: This post is not to be misconstrued as financial advice but for educational and informational purposes ONLY. Please do your own due diligence and exercise risk management.