Market update

Lets look at the probabilities of easier money in 2024 – and at the neartermed technical profile for US & CDN markets.

Higher for longer?

The consensus is pretty mixed insofar as when the US Fed will start to cut, and how many cuts they will make. Contrast this to the confidence in falling rates on the street just a month ago! Higher for longer seems to be the concept now… even in the third quarter (see July & Sept. 2024 consensus) its a pretty low confidence level for even one cut. We don’t see any confidence for a single cut until Nov./ Dec. – and almost no confidence for 2 cuts this year.

Consequences of no cuts in 2024? Lets face it, a rate cut has been baked in for a while. If it ain’t coming yet…expect lower returns for buy n’ hold investors.

 

What could change?

1: You could see political pressure to cut as the election approaches. Yeah, the Fed is supposed to be independent. But we know the truth….Biden has been making tones to push Powell to ease, just as Trump did during his tenure.

2: You could also see more signs of slowing appear (see the loan delinquency data I posted recently). Wall St. economists are now seeing less chance of recession. Which means there is probably going to be a recession. Contrarian thinking, baby!

 

Either or both of these situations (political pressure, slower economy) would influence a cut.

Meanwhile – damn the inflation, full spend ahead! Inflation will remain near 3% average.

Current correction may find support

SPX

Here’s the broad-based NYSE index. Old resistance near 17,400 becomes new support–per my red horizontal line. You might see the market find a landing spot here for the time being. However (there’s always a “but”, isn’t there?), momentum indicators (moneyflow momentum via MFI, price momentum via MACD/RSI) have hooked down from overbought status.

Which will win? Support, or momentum? Recall my trading rules: Trend trumps all. If support holds, all is good. If not, look out below!! Don’t predict. Do prepare.

The SPX looks more vulnerable than the broad market. Old resistance / new support lies near 4800. That’s roughly 200 points from current levels. You’ve heard me say for quite some time that my target for the SPX is 4800. If that breaks, look for mid-4600’s. But for now, the SPX has more downside than the broad NYSE index, obviously because of its overweight-ness in tech (30%).

TSX

After bouncing off the prior (early 2022) highs, the TSX is pulling back. Its holding its 50 day / 10 week SMA per my last market commentary blog. That’s near 21,600. In fact it successfully bounced off of that level this week.

If 21,600 breaks, we can expect a return to somewhere between the 200 day/40 week SMA at 20,600, and old resistance/ new support near 21,000. In the TSX’s favor is the energy sector, which I view as bullish, despite the neartermed potential for a pullback. I blogged on this sector, including the XEG producers ETF in this blog. We hold a position in XEG.

I recently recorded a video on this sector, which should be released shortly. If you don’t already, I humbly recommend you subscribe to the video’s here to see them commercial-free, or on the ValueTrend YouTube channel. Also—if you don’t subscribe to this blog and the newsletter, you can do so here.

4 Comments

  • Thank you for this analysis. Are you keeping a specific percentage in cash, and are you thinking of adjusting that soon?

    Reply
    • We hold about 15% cash now, may increase that if as when support levels mentioned are cracked by 3+ days (which is one of our trading rules–pls take the Online Trading Course for details). I’m typing this at 8:30 am EST on the 19th–Iran was bombed, market futures down. That may indicate markets take the first step to cracking support on charts – but that is to be seen. We work within the parameters discussed in the course. Those rules have served me well over the past 30++ years.

      Reply
      • Thanks. I took your course and recommend it to anyone reading this. It’s well worth the time and price.

        I’m holding about 15% as well, btw.

        Reply
        • Thanks Finn. I am quite proud of that course–it spells out a usable trading system for ordinary investors in a way that I have never seen done in this industry.

          Reply

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