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Weekly Economic and Stock Market Commentary – September 11, 2023


As for the stock market specifically:

Last week gave us the full September experience with the markets moving in reverse. Each of the major market averages fell at least one percentage point, and we had a decline in excess of 2 percentage points for the Nasdaq Composite. In other words, the defense gave up some points, but it was not a rout like many of the football games this past weekend.

That is part of what makes this month so much fun.

Another aspect of the month is that this week we get another dose of quadruple witching, when derivative trades, including options trades, expire. These often are accompanied by more of a roller coaster ride than other weeks of the quarter, but we will have to wait to see if this is a wild week or a sleeper. The bad news is that we start the week on defense.

Readers who have been here more than a few months know that I occasionally speak of stocks being in a positive or negative trend. As one may infer from the names, we like positive trends and prefer not to have negative trends.

Another truism of the industry is not to have many negative trends.

Last week the Optionable group of stocks moved to a column of Os, below the 50% level. That joins the Nasdaq stocks being in Os, and the NYSE is close to going into Os.

In English, less than half of the stocks available to trade are what we want to own, which narrows the pool of things to buy.

Positive trends are characterized by a series of upward movements that are higher than the prior upward movement, and downward movements that are less down than the prior movement.

Negative trends are characterized by a series of movements that are lower than the prior downward movement, and upward movements that go up less than the prior upward move.

Here are two examples.

Above is a section of chart in a positive trend. Think of this as being on I-95 going from Florida to Maine.

Here is an example of a negative trend.

To emphasize a point, the only way a stock gets in a negative trend is for its price to drop repeatedly.

The defense is on the field, and we lost yardage for the week. Clients should continue with WEALTH PRESERVATION strategies.

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

Below is where our indicators stand as of September 8, 2023 (Courtesy Dorsey, Wright, and Associates).

On a general note:

No economic news of value came to my attention last week. That will give me an opportunity to return to perhaps my least favorite discussion, “our friends in Washington.”

A few months ago they celebrated “a deal” where they once again promised a return to fiscal rectitude. Since the fiscal year is about to end, we find ourselves in a situation where they failed to produce the spending bills for next year, and they don’t seem to be in much of a hurry to do so.

In a further extension of a rude gesture, a group of Senators are trying to classify routine spending as “emergency” so that money won’t be subject to the “deal” they made a few months ago.

I often write that I am not in the prediction business, but I’m fairly confident that I will be right in saying a portion of the government will shut down and there will be wailing and gnashing of teeth for some time.

After that, “our friends in Washington” will decide to spend, spend, and spend some more.

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