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

If you’ve been following any of my trades in the past few months, I’ve been very loud about the bull trend in gold, and by extension, precious metal stocks. One of my favorite names in the space that I continue to own is AngloGold Ashanti (Ticker: AU). I started buying this stock in late-February, and then in early-March, I issued a “Back up the Truck” alert. The stock has been on a tear all year – it’s up over 60% year-to-date, while the S&P is only up around 16%. But this week, I finally decided to “Park the Truck” on this trade – here’s what I mean… Trading on Cruise Control While it’s true that time in the market matters more than timing the market, timing the market is where one can generate the most alpha. Some people love to disparage the idea of market-timing, mainly because they aren’t very

Well, that sure was a dramatic week! But now that we have the final score from last week’s rollercoaster of trading, a proper assessment can be made. One thing’s for sure – there’s been a total shift in sentiment over the past few weeks. We’re no longer in the feel-good, euphoric environment of mid-July. Now, the trading community’s focus has shifted, completely, from inflation to recession. But as I’ll show you in the updated performance rankings, I think some of that attention may be misplaced. Here’s what I mean… Industrials Emerge as One-Week Leader I’m finally able to report something bullish for stocks in the near-term. Seeing industrials (XLI) emerge as the top-performing sector last week. This isn’t usually a sector that does well if things are about to head south. While industrial outperformance in the near-term may stave off recessionary concerns, it does reopen the door for inflationary pressures.

Hello and Happy Friday TheoTrader! Back in April, I sent you a letter talking about a potential currency crisis, specifically on the Japanese Yen. As it turns out, we were months ahead of the curve, as the Bank of Japan finally lifted off the zero bound recently, which led to a massive rebound in the Japanese Yen. To be clear, these types of moves don’t happen very often. But various cyclical indicators that I use, along with technicals, and a sound understanding of macroeconomic principles had all of my risk indicators flashing red surrounding the Japanese Yen. Now that the “crowd” has caught onto this move, does it mean that most of it is over? It’s side effects spilled over into stocks as I expected, as we saw the biggest spike in volatility since 2020. Is this just the beginning of a greater downturn? Or is the majority of the

Well, by now everyone has pretty much accepted that we’re in a risk-off market environment. The public is starting to panic, as the unwind of the carry trade in the Japanese yen triggers margin calls across the world. I raised a substantial amount of cash over the past couple of weeks, and even had members in chat take some long positions in the Japanese yen. Back in March and April, I did a Mastermind seminar here at TheoTrade where I dubbed 2024 as the biggest opportunity since 2020. The most important thing now is to not make any hasty decisions. In the meantime, let’s review what we’ll want to see from a sector standpoint to signal that a low is near or completed…  Trade the Tape, Not the News To be very clear – this is still a risk-off tape. As evidence, we have utilities as the top-performing sector on