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Weekly Economic and Stock Market Commentary – January 22, 2024

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As for the stock market specifically:

The buyers returned to Wall Street, and the strong gains last week pushed the US market averages back to the positive side for the year-to-date returns. Technology stocks propelled the Nasdaq into the lead for the year. It is way too early to say that this will be the case for the remainder of the year.

The week concluded with the Dow Jones Industrial Average and Standard & Poor’s 500 at record levels. We should be happy to see that.

 

The chart excerpt is the S & P 500 since December. The column on the left is the culmination of the movement that started last October. What I like about this pattern is that it shows a series of orderly gains and pullbacks instead of wild snapbacks. I enjoy seeing the market have 4 consecutive buy signals (columns of Xs that exceed the prior column of Xs).

The Nasdaq Composite tells a similar story, although it is on the 3rd consecutive buy signal, not the fourth. The chart will start the next page.

 

 

 

Now that you heard the good news, there is another side of the coin. Last week saw the NYSE and Optionable Bullish Percent Indicators flipped to defense. The OTC Bullish Percent Indicator remains on offense, although it had a significant decline last week. In any event, we have a split recommendation this week with WEALTH ACCUMULATION for OTC stocks, and WEALTH PRESERVATION for NYSE companies. Longer term, relative strength still favors U.S. Equity vs cash and/or fixed income.

 

 

 

Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.

Below is where our indicators stand as of January 19, 2024 (Courtesy Dorsey, Wright, and Associates).

On a general note:

The “Spending Party” continues to win for “our friends in Washington.” The Congressional Budget Office announced the government overspent revenues by $509 billion in the first quarter of the new fiscal year. Am I the only one who remembers the “deal” last May? That deficit is nearly 20% higher than the same quarter in fiscal year 2023. Revenues increased by 8% while spending increased by 12%. Much of the increased spending came in the form of debt service. “Our friends in Washington” used short-term debt to finance the spending party for too many years when they could have locked in slightly higher rates for 10 – 30 years.

I guess we are the ones ultimately at fault since we expect a $1.40 worth of government for a $1.00 of taxation.

The Department of Commerce announced December Retail Sales rose 5.6% compared to December 2022. On a monthly basis, sales rose 0.6%. Economists expected a monthly gain of 0.4%. Much of the monthly gain was related to automobile-related sales, while gasoline sales declined. These numbers are not adjusted for inflation.

The National Association of Realtors informed us about existing home sales for December in particular, and 2023 in general. In general, there were 4.09 million existing homes sold in 2023, which represented a 19% drop from 2022 levels. That was the lowest level since 1995. The report noted there currently is a 3.2-month supply on the market. The median sales price was $382,600, a gain of 4.4% from 2022.

As always, please contact me if you have any questions or need more information.