The Fed finally went ahead and cut rates by 50 basis points last week, officially signaling that we’ve entered a new round of monetary easing. We knew this was coming, and that the market discounts future events. Remember that interest rates, at their core, are simply the cost of money. I’ve had some concerns with respect to the sector leadership rankings over the past few weeks, and you may be surprised to see what sector popped after this rate cut…  Powell’s Fed May Add Fuel to Inflation The top-performing sector last week was energy, as tracked by the SPDR Select Sector Energy ETF (XLE). This is a noteworthy development, because it’s been months since this sector was displayed in the Tale of the Tape’s ranking table. With the Fed easing and printing money again, we must be alert for a reignition of inflationary pressures. I’ve been warning about this danger

If you ever follow any of my live sessions here at TheoTrade, you’ve probably heard me poke some innocent fun at the crypto crowd. Let me assure you that it’s with the sincerest intentions – I don’t enjoy seeing people getting caught on the downside in market manias. But at the end of the day, it’s all part of what makes a market. That said, I think it’s time that we start looking at opportunities in the crypto space again. Let’s take a look at what some of the recent macroeconomic developments mean for this sector…  The Return of the Crypto Carry Trade In recent weeks, the blowup of the carry trade in the Japanese yen has been on everyone’s mind. In fact, it’s something that I pounded the table about in these newsletters before it all happened. Now I’m here to tell you about another carry trade that could

Markets closed out last week near the highs, courtesy of the tech sector. This is the exact type of leadership we need to see if this bull market is going to continue.  To be clear, one-week leadership isn’t as significant as 30-day or even year-to-date leadership. So even with tech’s solid rebound and the plethora of setups I keep seeing under the surface, let’s check in on the sector performance scores to see if there’s anything else worth noting…  Tech Opened the Window – Can Bulls Plow Through It? In recent weeks, I talked about how it was absolutely necessary for tech to make a comeback in order to save this market from a further decline. Well, that’s exactly what happened last week, as the XLK tech-sector ETF stormed back into fourth place amongst the 11 S&P sectors. But if we look across a longer time horizon, we note that

After a year of being with the TheoTrade team, I finally got the opportunity to meet Don and the rest of the team. It’s always great to put a name to a face, especially when you’re talking to people on a daily basis. Not to mention, I’ve had the chance to meet many TheoTrade members, and believe me when I say the ideas are flowing. Even though we’ve gathered here in Scottsdale, markets have stayed on the move. I’ll be straight up with you and say that there’s been significant improvements in the market’s tape over the past week.  Here’s what I mean…  Why the Macro Picture Could Help Tech In recent weeks, I was warning about the deterioration in the tech sector and how it had slipped all the way down to 7th place in the sector performance rankings. But that was last week – tech surged higher in

  Hello TheoTrader, Markets went out at the lows last week, and made sure that we didn’t fall asleep at the wheel over the holiday weekend. What matters now (and what concerns me most) when it comes to stocks is what’s happening at an internal level. Over the past few weeks, I’ve shared some of these worries, especially regarding the tech sector.  But now, there are other mounting problems in equities you need to be aware of. Check it out…  Flights to Safety Accelerate If you take a look at these sector leadership rankings across various time intervals, you’ll see that none of these are sectors that outperform in a bull market. So, where does that leave us? The Fed is set to start easing, and the yield curve is steepening. Is this a one-way ticket to an economic slowdown? We’ll see if the Fed’s able to pivot in time.

Well, one of the most significant macroeconomic developments in the past couple of years just unfolded. I’m talking about the “re-steepening” of the yield curve. A couple of years back, there was a fair bit of hysteria in the market when the curve inverted. That is, the 10-year Treasury yield began offering less return than the two-year Treasury yield. This is considered a sign that economic storm clouds are gathering on the horizon.  With the latest labor market reports showing notable slowdowns, should we start being concerned about the historical correlation between recessions and the yield curve’s behavior? Let’s dive in further…  The Most Dreaded Words in Markets   I wouldn’t dare say that this time is different when it comes to the yield curve re-steepening. Check out this long-term chart of the yield curve below. We’re looking at the spread between the two-year and 10-year Treasury yields. The blue

Now that we’ve got Nvidia’s earnings out of the way, our focus needs to be on a broader rebound in the tech sector, and specifically on the Nasdaq. This will be key especially in terms of the sustainability of this bull market in stocks. This is the Sector Bullseye newsletter, after all. And if you didn’t know by now, the tech sector is the largest and, consequently, the most important sector for the overall market. What I’m saying is that if the tech sector, and by extension, the Nasdaq, doesn’t make a new high in the coming months, we could be in serious trouble. Check this out… This is the Moment for Tech Bulls   During the market’s latest decline, tech led to the downside. This raised my alarm bells given the sector’s tendency to lead both to the upside and the downside. In other words, tech typically has the

  Bears are still stuck playing defense in this market following the volatility earlier this month. But on Friday, Fed Chair Powell came out and confirmed what we already knew: Rate cuts are coming in September. To be clear, markets have already priced in these cuts. That’s why we’ve been seeing sectors associated with monetary easing start to outperform over the past several weeks, and if anything, the trend is only accelerating. Check it out…  Doom and Gloom Hide Opportunity Is it just me or is it nothing but doom and gloom on the real estate front from a sentiment standpoint? I understand that inventory levels are starting to rise, but if you’re paying attention, you’ll see that mortgage rates are at the lows of the year, and now hovering in the 6.5% zone. I think we’ll see mortgage rates drop another 50-100 basis points from here, and once we

The recent stock market rally seems to contradict predictions of an imminent economic slowdown. This illustrates the principle that sentiment follows price, not vice versa. Just a couple of weeks ago, many were anticipating an economic downturn by year-end. Even my A.I. Timing Webs model had me at over 40% cash at the beginning of the week of August 5, but by week’s end, this had decreased to around 10%. As I analyze the markets entering the final week of August, I continue to see signs that this bull market may have significant potential for growth. This perspective is based on the idea that we experienced a recession in 2022.  Let me explain… Why Was 2020 a Recession if 2022 Wasn’t?   Recently, I’ve heard many market commentators claim, “We haven’t had a recession since 2020.” It’s unclear whether these individuals are misinformed or intentionally promoting a specific narrative. This

Bears felt the heat and were squeezed the entirety of last week, as bulls forced a close near the highs of the week on Friday. Markets also digested soft labor data, as well as retail spending numbers that came in above estimates. So, just like that – is the recession canceled? Not so fast – I think that policymakers are walking right into an inflationary trap in the coming months, which could seriously harm the Fed’s credibility in the long-run. But we’ll worry about that later. We have to trade today’s price action above everything else, and ignore the rest of the noise. Fortunately, I’m pleased to report some positive developments on the sector leadership front after last week. Take a look… Technology Surges as One-Week Leader Remember last week when I reported that we had a “risk-on” signal due to industrials outperforming at the one-week interval? Well, last week