[Market Outlook] Remembering The Past - Looking To The Future

And the Winner Is? [Company Logo] Remembering The Past - Looking To The Future And the Winner Is? By Donn Goodman [image] To the Men and Women of the Armed Forces: thank you for your service to our country. You have made a national promise to defend our freedoms and protect our way of life. You are the men and women who answered our call to duty, and you have served with distinction. Your courage, your sacrifice, your patriotism will never be forgotten. Hello Gaugers. Hope that you were able to take advantage of a few of our profit-taking targets we hit on several stocks and ETFs in our investment strategies this past week. It was an unprecedented week after the malaise the markets had been going through over the past 16 months. Our quantitative and dynamic investment strategies once again identified emerging trends and momentum that allowed our subscribers and investors to reap the rewards from a few stocks/ETFs that had parabolic type moves. More on that later. Economic Update US inflation and consumer spending accelerated last month, highlighting steady price pressures and demand that might force the Federal Reserve to keep tightening - something we have repeated in this column recently. Coming in at 4.7% YOY, the PCE indicated that inflation is persistent and not coming down anywhere close to targets soon. Many of the media talking heads, along with economists and analysts at the major firms, had been talking about the low chances of additional Fed interest rate hikes. In fact, many of these same people have been forecasting interest rate cuts in the second half of 2023. We have pointed out that interest rates are likely to stay higher for longer. Now the “betting” community has once again turned hawkish by the wholesale inflation numbers reported this week. The odds have now risen to 58% that the Fed will raise again at their next Open Market Committee Meeting in June and possibly July. I recall Mish telling her followers and readers back in late 2021 that when inflation spikes it is very difficult to bring down. With 10 unprecedented Fed hikes in a 12-month period and inflation not trending down as expected, look to the Fed to cause more pain before things get much better. The Fed’s hikes have led to an extremely inverted yield curve as measured by the 10-year Treasury minus the Fed Funds Rate. This is one reason why we maintain a position that a recession may be baked into the cake. Since 1971, this spread has inverted 7 times and each time was followed by a recession. That is a perfect track record. The chart below shows this relationship since 2000 with the last 3 recessions marked in gray. It also illustrates how deep the inversion is currently. [image] The early in the week head fake. Our commentary last week included some technical interpretations that the markets were not seeing robust participation and the breadth of the markets was weak. One might have concluded that the markets were headed for a correction. In fact, in evaluating many technical indicators that a large number of investment folks utilize, you might have concluded that the “rangebound” markets were still bouncing off of resistance at 4200. Then we got stellar, unexpected earnings from several companies, including Nvidia (NVDA) and the markets shook off the malaise and took off, yet again. The broad market (S&P 500) finally had a close above 4200, the top of the range that it had consistently been bouncing off. See chart below: [image] This week’s Big Winners. The big winner was the NASDAQ 100 with the Semiconductor and Tech stocks, up over 3% for the week, while the Russell 2000 (IWM), Dow Jones (DIA), and S&P 500 were essentially flat on the week. A narrow field. [image] As previously pointed out, it was the big Mega Cap Technology stocks that won out over the last week. In our different investment strategies (NASDAQ All Stars, GEMS and Large Cap Leaders) we owned several of these, including Nvidia, which was a ballistic rocket. Nvidia reported earnings on Wednesday night, and long before the market opened on Thursday, it was up over 25% in the pre-market. [image] I do not believe there is a time in history that a company increased its market cap by $250 billion in one day. It was such a big bump that the market cap appreciation from that one day was worth more in market cap value than the WHOLE value of 9 other large companies. See chart below [image] Additionally, our subscribers and asset management clients were the other winners. Exposure to these explosive trends has led to a profitable week. Our investment strategies recognized the start of these trends a while ago and rotated to these growth areas of the market. The Mega Cap Big Stocks just keep Getting Bigger The mega caps’ influence on the indexes' performance is not limited to Nvida, and it’s at a record high. Click the links below to continue reading about: - The concerning concentration of stocks responsible for the market’s gains, - The historical precedent for further gains after market conditions similar to our current situation, and... - A surprisingly big loser in the tech asset management space considering the recent "AI buying frenzy." [Click here to continue to the FREE analysis and video.]( [Click here to continue to the PREMIUM analysis and video](. Best wishes for your trading, Donn Goodman CMO, Market Gauge Asset Management P.S. When you’re ready, here are 3 free ways we can help you reach your trading goals… - [Book a call with our Chief Strategy Consultant](=), Rob Quinn. 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