3/07/2023T Market listens to Fed Chair’s Hawkish comments and takes a dip

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3/07/2023T    Market listens to Fed Chair’s Hawkish comments and takes a dip  

THE  MARKET’s MESSAGE:  Nasdaq's &S&P500's 50-day lines are holding close to 200-day lines extending sideways action,showing indecision.

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 The market ended Monday with barely a whisper of change as we waited for Federal Reserve Chair Jerome Powell to give his testimony to the Senate on Tuesday and the House on Wednesday (both at 10a.m. in Washington time.)  The market heard his comments and shuddered, rising When the Fed Chair speaks, the stock market typically pauses. Thus, Monday’s lower volume day.  

‍Powell listed his concern that the current labor market is “extremely tight.” That points to a bidding war for a limited number of available workers which is likely to pushup the price of providing services and manufacturing. (Good news for those who are out of work and looking!

Powell expects the tight labor market to cause a rise in employee costs and he suggested (threatened?) higherinterest rates. Stay tuned.

YEAR-TO-DATE ARMCHAIR INVESTOR 2023 RETURNS UPDATE:

In case you missed the weekend year-to-datesummary, here is that recap:

(Spoiler: THE QQQ IS A VERY GOOD PLACE TO BE (at the moment.)

The Nasdaq and Nasdaq100 (ticker QQQ) have outperformed the other major Indexes, as usual in an Uptrend – see chart below. The QQQ is where I usually have my “Market Following” position. And I’m glad to be in the QQQ  (See why below this table.)

As I noted Monday night, the Nasdaq index is outperforming the S&P500 by more than a factor or 2 this year! And is riding above its 50-day moving average red line with a nice 2.0% bounce on Friday putting the “Uptrend under Pressure” to bed on Friday. We’ll see how the market reacts to  

The QQQ’s first quarter return is amazing! (I am not counting on that return each quarter this year.  But I will happily ride it as long as it continues!) 

How did the market take Powell’s warning about a tight employee pool which could push up costs?  A 1.3% drop for the Nasdaq fueled with a 5% increase in volume. And a 1.5% drop for the S&P500 on lighter volume.

On the MARKET ACTION table (above) and FACTOR, COUNTS & RATINGS table below note:  

·       The last 10 trading days (shown in the table below) have only 2 accumulation days and only 1 distribution day (today!).  

>>>>> Those low counts mean 7 days were neither accumulation (buying) days or distribution (selling) days showing INDECISION about the health and future of this market.

An additional note:

An accumulation/distribution rating is at a D or E indicates heavier selling by  institutional investors who have chosen to reduce some of their uncertain positions. >>>> If these ratings do drop to the D or E level, I am likely to reduce some of my weaker holdings.

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Note:  In the table above, you will almost always see only red and green columns across at the bottom of this chart, because as soon as an index hits a new high and then closes down just 1 penny, it is below the prior high. (I might put in a 5% range for “At” the new high.)

Are you holding onto stocks that you like in spite of their chart action? Not me!  Cash is always a safe alternative. But note with this broad rotation (past highly rated stocks being sold and under rated stock sbeing bought,) THERE MAY BE AN OPPORTUNITY TO IDENTIFY NEW RISING STARS!

When you look at the last 4 weeks of the ACCUMULATION/DISTRIBUTION RATINGS table BELOW, what do you see?

>>>>>You should notice the percent of top rated stocks (A or B rated stocks) has declined – ALMOST IN HALF while the D and E rated stocks have DOUBLED. That tells you there is a ROTATION going on.

NOTE: A long time ago, I learned (after paying for thislesson multiple times…..)  I learned two important lessons:

1.    I am NOT smarter than the market. And,

2.    The market does not care about my “fine”opinion.

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Wishing you, “Many Happy Returns.”

Charlotte Hudgin, The Armchair Investor,   (214)995-6702

www.ArmchairInvestor.com   (214)995-6702   editor@armchairinvestor.com  

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