It has actually been a tough week for bulls within the S&P 500 (SPY). Over the previous 10 days, we have now had three huge studies all exhibiting hotter-than-expected inflation. And whereas it regarded just like the bulls have been going to have the ability to shake off the primary two, the proof is stacking up in favor of further price hikes, which could make a bull victory way more tough now. This is what I imply.
(Please take pleasure in this up to date model of my weekly commentary initially printed February 24th, 2023 within the POWR Shares Beneath $10 e-newsletter).
Market Commentary
On the finish of final week, each CPI and PPI each reported rising month-over-month costs, in addition to annual value will increase that have been bigger than economists had anticipated.
Even so, bulls saved it pretty collectively, and the S&P 500 (SPY) ended the week just some factors under the necessary 4,100 line.
Regardless of the bears racking up some huge wins final week, it nonetheless regarded like this newest spherical of “tug-o-war” was anybody’s recreation…
After which the Fed minutes have been launched. And a 3rd inflation indicator (and the Fed’s favourite) – the private consumption expenditures (PCE) index – additionally got here in hotter than anybody was anticipating. And extra Fed officers publicly voiced their considerations that inflation stays too excessive.
Look, I will be the primary to say the bulls have placed on a surprisingly robust present the primary weeks of the 12 months. However that is goes to be an enormous hurdle to clear for the rally to proceed.
However I am additionally not going to say it could’t be achieved. These bulls have all the time appeared somewhat bit delusional. There’s not a ton of “bullish” occasions which have occurred… folks have been simply prepared to maneuver right into a extra “threat on” setting.
We have additionally now seen bearish readings from all three indicators I lately spotlighted — the 4,100 stage (damaged under), the January CPI report (scorching), and the CME FedWatch Software (variety of folks anticipating a 50-bps hike in March has practically tripled from 9.2% to 27%).
They are saying the market “climbs a wall of fear.” However how excessive is just too excessive?
I am not 100% sure. Truthfully, anybody who tells you they’re is promoting you a load of, nicely, one thing.
Regardless, the bulls are going to must placed on fairly a present with a lot proof pointing towards further price hikes and a better terminal price.
As such, I need us to take some time to arrange our portfolio for the following leg decrease. I am not able to promote something at the moment, however I spent a while this morning creating commerce triggers for many of our holdings.
These will assist us hold losses beneath management and defend the positive factors we labored onerous for over the previous months.
Conclusion
The most effective factor we are able to do for proper now’s be ready. Shares beneath $10 are such a robust group as a result of they offer us an necessary edge over main shares which are priced all the way down to the penny.
However they’re additionally prone to larger value swings throughout selloffs. That is why we’re preserving issues locked down tight as we navigate what occurs subsequent.
What To Do Subsequent?
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All of the Finest!
Meredith Margrave
Chief Development Strategist, StockNews
Editor, POWR Shares Beneath $10 Publication
SPY shares closed at $396.38 on Friday, down $-4.28 (-1.07%). 12 months-to-date, SPY has gained 3.65%, versus a % rise within the benchmark S&P 500 index throughout the identical interval.
Concerning the Creator: Meredith Margrave
Meredith Margrave has been a famous monetary skilled and market commentator for the previous 20 years. She is presently the Editor of the POWR Development and POWR Shares Beneath $10 newsletters. Study extra about Meredith’s background, together with hyperlinks to her most up-to-date articles.
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