It was an intriguing session on Friday that underscores how desperately the market wants to see the conversations shift from inflation to recession.  The FedEx (FDX) bombshell hammered the market like an exclamation point from a week of negative shocks.

When the University of Michigan sentiment survey showed a decline in inflation expectations (see first circle) the market staged a swift rally.  Once it ran out of steam, unable to seduce more buyers, that same level had to hold again – and it did.  This time more fence-sitters took the bait.

Market breadth was horrific even with late buying.

Heat Map

Energy was becoming a de facto haven, but it took the biggest hit on Friday.  Industrials were slammed on the FedEx warning and Materials once again just couldn’t follow through after signs of picking up momentum.

Instead, traditional safe-havens, including Real Estate and Consumer Staples finished higher.

When mega caps are red, there is a good chance the board market will close in the red.  That said, there was some compelling action in Nvidia (NVDA) and Netflix (NFLX).

Recession?

With Transportation (IYT) gapping down significantly, there is just one more level of support, but it can already be argued the IYT is signaling recession.

The Fear & Greed indicators was in the neutral zone, but now it is beating a hasty retreat toward extreme fear.

Portfolio Approach

We have made several adjustments to our sector weightings; however, our current buys remain suspended in our Hotline Model Portfolio.  

Today’s Session

Not much going on this morning, picking up on the theme of the calm before the next wave.  On that note, buyers emerged big time late Friday, and I suspect would-be buyers are not going to show their hands early in today’s session.