The market marched into the weekend, still carrying that head of steam from Thursday, with growth sectors leading the way.  Energy (XLE) bounced on China’s reopening news.

Now What?

Warren Buffett is famous for holding long-term and cheering when stocks move lower, but he is not a buy-on-dip investor. Instead, he looks for real value and real bargains. I think there are real bargains out there, and that’s what’s making this market tough. Near-term, do you take a 10% risk for 50% long-term (two-year) gains?  The answer is simple when posed this way, but if that 10% becomes 20% or 30%, then the equation changes.

Therefore, we altered the approach for double-digit pops and the ability for nimbleness to avoid winding up with no cash and all open positions under. Meanwhile, according to J.P. Morgan (JPM), the daily order imbalance suggests a lot of retail investors have bitten the bullet. I hate that because it’s considered the ultimate ‘buy signal’ for professional investors.

Watch the Fed

With all the major economic data out already and midterms behind us, there is even more focus on the Federal Reserve. So, this is what I want to see:

• Acknowledge the Consumer Price Index (CPI) report and peak inflation
• Admit they need to go slower even if their targets remain the same

Portfolio Approach

There are no sector weighting changes this morning in our Hotline Model Portfolio.

Today’s Session

Well, Fed Governor Waller is giving us a preview of how hard the Fed will go this week to sink the stock market.  He admitted Powell laid it on thick during the Q&A session at the FOMC because "we knew the markets were going to jump for joy."  That is why the focus is also on where rates ultimate go is more important than the pace.

https://seekingalpha.com/news/3906892-market-got-ahead-of-itself-after-cpi-report-fed-governor-waller