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It has definitely been a tough week for bulls within the S&P 500 (SPY). Over the previous 10 days, we have now had three large experiences all exhibiting hotter-than-expected inflation. And whereas it regarded just like the bulls had been going to have the ability to shake off the primary two, the proof is stacking up in favor of extra price hikes, which could make a bull victory way more troublesome now. This is what I imply.
(Please get pleasure from this up to date model of my weekly commentary initially revealed February 24th, 2023 within the POWR Shares Below $10 publication).
Market Commentary
On the finish of final week, each CPI and PPI each reported rising month-over-month costs, in addition to annual worth will increase that had been bigger than economists had anticipated.
Even so, bulls stored it pretty collectively, and the S&P 500 (SPY) ended the week only a few factors under the vital 4,100 line.
Regardless of the bears racking up some large wins final week, it nonetheless regarded like this newest spherical of “tug-o-war” was anybody’s recreation…
After which the Fed minutes had 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 issues 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 yr. However that is goes to be a giant hurdle to clear for the rally to proceed.
However I am additionally not going to say it may well’t be executed. These bulls have at all times appeared somewhat bit delusional. There’s not a ton of “bullish” occasions which have occurred… folks had been simply prepared to maneuver right into a extra “danger on” atmosphere.
We have additionally now seen bearish readings from all three indicators I just lately spotlighted — the 4,100 degree (damaged under), the January CPI report (sizzling), and the CME FedWatch Instrument (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, properly, one thing.
Regardless, the bulls are going to must placed on fairly a present with a lot proof pointing towards extra price hikes and a better terminal price.
As such, I need us to take a while to arrange our portfolio for the following leg decrease. I am not able to promote something as we speak, however I spent a while this morning creating commerce triggers for many of our holdings.
These will assist us maintain losses beneath management and defend the features we labored onerous for over the previous months.
Conclusion
The most effective factor we will do for proper now’s be ready. Shares beneath $10 are such a robust group as a result of they offer us an vital edge over main shares which might be priced all the way down to the penny.
However they’re additionally vulnerable to larger worth swings throughout selloffs. That is why we’re holding issues locked down tight as we navigate what occurs subsequent.
What To Do Subsequent?
If you would like to see extra prime shares beneath $10, then it’s best to take a look at our free particular report:
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First, as a result of they’re all low priced firms with essentially the most upside potential in as we speak’s unstable markets.
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All of the Finest!
Meredith Margrave
Chief Progress Strategist, StockNews
Editor, POWR Shares Below $10 E-newsletter
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 Writer: 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 Progress and POWR Shares Below $10 newsletters. Be taught extra about Meredith’s background, together with hyperlinks to her most up-to-date articles.
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