Category: Newsletter

This week, the market mustered a rally as corporate earnings were not as "terrible as expected." Part of that rally came from short-term oversold conditions and a massive short position in the S&P 500 index.

Is a "rolling recession" helping the markets? Such was a thought proposed by Liz Ann Sonders last week that is worth thinking about. However, before that, let's review the market action from this week.

"Inflation eases" was the headline that consumed the media over the last few days. As discussed in more detail, while inflation eased, did it decline enough to halt the Fed's rate-hiking campaign? Michael Lebowitz noted on Friday that CPI remains well above the long-term trend.

While today's missive will explore why "reverse repo" is continuing to cause banking stress, the markets took a bit of a breather this week, as we suggested would be the case.

We live in interesting times as investors push stocks higher as recession indicators send a strong warning. However, that rise is not broad-based and is a function of a topic we posed in November 2022.

Despite concerns of a banking crisis, the markets triggered multiple buy signals as the market rallied for a second week. These buy signals follow our early February article discussing the "sell signals" at that time.

This week, financial stability was rocked by bank solvency issues starting with Silicon Valley Bank and spreading through Credit Suisse. With that, the market took out the support at the rising trend line and the 200-DMA, which violated our stop-loss levels, where we reduced exposure to equities. With all of the previous bullish support levels broken, the next logical level of support is the December lows. A failure there will then set supports at the June and October lows.

This past week, the market took a double whammy from Jerome Powell's testimony and concerns about a crack in the regional bank sector. We discussed the latter in yesterday's Daily Market Commentary

We discussed in last week's message that the recession countdown started, and if that is the case, forward earnings remain at risk. Such has implications for investors as valuations remain elevated.