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Question of the Week

The stats say inflation is cooling - is that your own personal experience?

Has it impacted your holiday plans?

Post your answer below.

Morning Commentary

POWELL, DONíT BE ANGRY

By Charles Payne, CEO & Principal Analyst
12/14/2022 9:43 AM

 It was the tale of a few narratives yesterday across several assets, and when the closing bell rang, there wasn’t a clear-cut answer to what it all meant.

Still, ten of eleven S&P 500 sectors finished higher, although well off the highest points of the session.  Materials (XLB) continues to be a stealth winner, but Communication Services (XLC) edged higher as Goldman Sachs (GS) and Citibank (C) called Meta (META) a top pick for 2023.

Image

Market breadth was encouraging as advancers bested decliners and up volume doubled down on the NASDAQ Composite. In addition, there were even more 52-week highs than lows on the New York Exchange (NYSE).

Market Breadth

NYSE

NASDAQ

Advancers

2,227

2,806

Decliners

936

1,890

New Highs

91

126

New Lows

56

249

Up Volume

3.10 billion

4.09 billion

Down Volume

2.03 billion

2.02 billion

Mixed Messages of the Market

Crude Oil -continues to edge higher, which isn’t a recession, although it’s not signaling global growth yet.

10-     Year Bond Yield – keeps edging lower – the ‘canary’ is saying the Fed pivots early next year.

CBOE Volatility Index (VIX) –points to a calm market ready to rally.

Gold – has shined brightly but gotten very little press (a good thing). This suggests inflation is still an issue, but the Fed might pause.

The U.S. Dollar (DXY) is now below its 50, 100, and 200-day moving averages

Bitcoin (BTC) has held up well in the one month since the FTX scandal broke open.

The Market

The S&P 500 tickled that 4,100 resistance point then came tumbling down. However, it

closed right at the 200-day moving average. That gap created yesterday could still turn out to be a breakaway gap – the kind investors end up chasing later. If so, look for a move to 4,300.

Chart

Tax Loss Selling

On the conference call last week, I said we would soon publish a list of potential tax loss sales in the model portfolio (before making such a move, always reach out to a tax professional). That selling also plays a role as investors are encouraged to sell the rips, not buy the dips.

Retail investors are selling big time – the capitulation the Street wanted so they can make stocks like META (down more than 70%,) the stock of the year (think about it).

https://assets.zerohedge.com/s3fs-public/styles/inline_image_mobile/public/inline-images/retail%20net%20purchases_0.png?itok=oxrgOZ5-

On that note, Tesla (TSLA) was the ultimate retail darling and cost the shorts $40 billion in 2020.  The establishment never forgets. Right now, selling begets selling.

I will be a buyer at some point if it keeps feeding on itself.

TSLA

Portfolio Approach

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

Today’s Session

Well Powell is at bat today, and everyone is hiding in dugouts, while spying the exits. Since the last FOMC gathering, we learned it was Powell’s goal to curb the enthusiasm of investors.

Moreover, James Bullard has called for rates in a range of 5 % to 7% setting the so-called Taylor Rule, a popular monetary policy guideline developed by Stanford University’s John Taylor.

The Taylor Rule and Sector Views Ė Global X ETFs

Meanwhile, market reaction to FOMC meetings/decisions has gone from cheers to jeers.

Image

Message from Bond Market

Recession – Yes

All key yield spreads are in an inversion in the United States.

Image

Rate Hike Pause – Soon

By the same token, bond yields are rapidly pulling back

Hang on folks – it’s a coin toss, but the Fed should hint at a stepping down and maybe a pause.

 


Comments
The only real noticeable change is Gas prices

Rlopez on 12/14/2022 11:30:33 AM
I have seen a small cooling but more of a stagnation. But for me still getting what is needed and less of what is wanted. The holiday plans are as always to enjoy the time with some lights and good food. Hope for a "Santa Clause Rally" and a "Christmas Miracle" Merry Christmas

William Blanken on 12/14/2022 11:35:26 AM
Grocery prices are thru the roof. Already numb to fuel prices. Although fortunate enough not to be in doing with out much as a result, I am constantly reminded that there is no way the average family keeping up with the Jones beyond there means, arent living life with more debt and significantly high stress levels.

Colette Wiest on 12/15/2022 9:22:02 AM
Two points, we own a business but have not increased our retail prices. This will be our third time in one year. Second experience was ordering a hamburger, order of fries, and a soda: $19.33.

George Verstraete on 12/21/2022 10:30:39 PM
 

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