On more than one occasion in the past three weeks, there have been down sessions in which the financial media blamed economic data for being too strong while ignoring other developments in that same session. Yesterday, there was a different tone. Almost a surrender of sorts, trying to paint a picture of a strong economy that has become futile and dangerous.

The market breadth was as bad as you would imagine, as buyers fled, and stocks fell through a trapdoor.

Market Breadth	NYSE	NASDAQ
Advancers	1,077	1,549
Decliners	2,041	3,112
New Highs	101	115
New Lows	8	27
Up Volume	690.85 million	1.35 billion
Down Volume	3.53 billion	3.90 billion

All eleven S&P 500 sectors were lower as those safe haven names continued to give up big chunks of ground, especially Consumer Staples (XLP) names.

Too Rich?

Yesterday, the biggest decliner in the S&P 500 was Kraft Heinz (KHC), which had become expensive on a relative basis. Moreover, the stock formed a double top and flashed overbought Relative Strength Index (RSI) signals.

Interestingly, Warren Buffett owns a ton of Heinz stock, which is 3.9% of Berkshire Hathaway’s holdings. So, save for the spike in 2020, the stock was changing hands at the highest price-to-earnings (P/E) ratio level in a year. The most important thing to acknowledge is hanging out in would-be safe havens will not necessarily insulate your portfolio. It might put it at a higher risk.

Heat Map

You almost need a telescope to find the green specks on yesterday’s Heat Map. It was a tough day where selling begets selling – pure and simple.

The trendline held again like clockwork. So, getting through that line will be huge and a major buy signal.

Breadth Thrust

I have been pointing out the market breadth thrust using the 20-day moving average. However, Bank of America (BAC) says the number of names holding above their 200-day moving average remains a buy signal.

I do not think the Beige Book pushed stocks lower, but the New York region stands out for the kind of creeping weakness rapidly evolving throughout the nation.

Bonds

Bonds have rebounded, and now the 20+Year Treasury Bond ETF (TLT) is on the cusp of piercing its 200-day moving average. Although stocks stumbled, bond yields were lower throughout the session.

In general, it’s not panic time. Still, a few Fed officials laid it on thick yesterday. You have to believe Powell will as well, as they try to keep the pressure on as evidence mounts their aggressive hikes and post-inflation hangover are slowing the economy at a much faster rate. Note: the Atlanta Fed GDPNow tracker dipped to 3.5% from 4.1%.

Portfolio Approach

We took profits in an Industrial position yesterday in our Hotline Model Portfolio.

Today’s Session

Initial Jobless Claims declined sharply to 190,000 from 205,000 and against consensus of 213,500.  The print sent the market a little lower, although, continuing claims edged higher to 1,647,000.   The Fed wants to see joblessness increase and wages gains stall.  It’s harder to do with limited talent and millions out of the labor force.

Not sure if it’s possible, or an oxymoron, but there has to be more talk of a “full employment’ recession.  Or maybe a soft-landing is in place.

Initial Jobless Claims

Continuing Claims

Philly Fed

The Philly Fed Manufacturing report was slightly better than anticipated but contracted for the fifth consecutive week.

The big news from the report is prices received were higher than prices paid for the first time since April 2020.  This is good news for profits as top line demand pulls back.

Furthermore, the special question on costs for 2023 versus 2022 sees declines across the board.

Comments

Reminds me of a song by STARSHIP, which can be looked at both ways. It Not Over (Til Its Over). ... They play to win! We play for keeps! Terry Dowler on 1/19/2023 8:30:06 AM

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