[Market Outlook] Inflation Drops, Stocks Pop

Time to Celebrate? Or Not? [Company Logo] Inflation Drops, Stocks Pop Time to Celebrate? Or Not? By Donn Goodman and Keith Schneider [image] Good day Gaugers. Hope that your week was productive, profitable and pleasurable. We are coming off a positive week in the markets and at MarketGauge we are excited and grateful to have locked in quite a few profit targets over these past few weeks. More about that in a minute. We want to emphasize that you should review the Big View summary at the bottom. The perspective that Big View brings, along with many of the technical indicators, strength in sectors and where weakness is emerging can be one of the best ways to get a “leg up” and advance your trading plan for the coming week. What we are covering this week: - Recent market activity - Earnings season begins. - Stocks above their moving averages - New highs in various sectors - Why sentiment and money flows may be driving this market - The decline of the US Dollar - Taking Profit Targets. Why this is so important to our investment strategies. - A few notes of caution. - Big View Summary Market Activity US Stocks were mixed on Friday but traded solidly higher for the week. The markets rallied hard based on two upbeat June inflation reports released on Wednesday (CPI) and Thursday (PPI). We spent a fair amount of time in last week’s Market Outlook addressing the reasons that we thought inflation would surprise to the downside. We used charts and graphs prepared by Fisher Investments and showed compelling reasons why the inflation numbers were likely to come in way below expectations. If you did not yet have a chance to read last week’s commentary, you may [click here to reread or review the July 12, 2023 Market Outlook.]() A significant drop in headline consumer inflation (we expected) drove the Consumer Price Index (CPI) to a two-year low and gave the markets a boost of energy on Wednesday. Thursday morning the Producer Price Index (PPI) for June came in at 0.1% undershooting most economic guru’s expectations. Additionally, Labor Department data showed the number of American filing new claims for unemployment benefits unexpectedly fell last week. This cooldown in inflation may give the Federal Reserve reason to ease up on its rate hike campaign and that, along with a falling dollar, gave investors a reason to cheer. However, we caution the euphoria as the CME futures rates shows most traders still see odds above 90% for an increase in July. Pepsico and Delta Air Lines got the earnings season off to a good start on Thursday. Continuing with the banks on Friday, JP Morgan, Wells Fargo and Blackrock all beat expectations, but Citigroup had mixed results. Nonetheless, the S&P 500 rose 2.5% for the week and the tech-heavy Nasdaq 100 (QQQ) jumped more than 3%. The cooler June inflation reports most likely altered future expectations with investors now pricing in just one more interest rate hike from the Federal Reserve this year. Friday’s mixed market results were negatively influenced by Fed Governor Waller who came out Friday morning suggesting he, and other Fed Governors, were still looking for two (2) more rate hikes this year. Some areas of the market are making new highs. I am amazed at how much I am still reading about the narrow breadth of the market and the heavy influence of just a few stocks. While this has been true during most of 2023, the number of S&P stocks that are above their 50- and 200-day moving averages continues to grow indicating that this is a much healthier and robust market than many suggest. See charts below. (These are unique MarketGauge charts that show the # of stocks expanding or contracting above their respective moving averages. The expanding blue area on a positive slope is considered positive for investing in this market segment. When this slope breaks and begins to decline for more than a few days, it is time to get cautious. We will have these and other market indices available weekly in our upcoming launch of MarketGauge Pro) # of Stocks in the S&P 500 above their 50 Day Moving Averages [image] # of Stocks in the S&P 500 above their 200 Day Moving Averages [image] A note of caution above. The number of stocks above the 200 slope is going straight up and may be indicating a stretched market beginning. Along with the algorithms we run and constantly monitor for Alpha Rotation and other S&P 500 trading systems, at MarketGauge we have a good handle on the “temperature” of the stock markets, and our strategies/models can and will adapt quickly. Speaking of signs that the market is far healthier than many investors believe (especially short sellers who have been trounced this year), we offer the following: The engine of our economy includes these important sectors: Technology, Semiconductors, and Home Builders. All 3 of these sectors just hit new highs. We believe this is a major positive for the markets. See below: [image] [image] [image] [image] The industrial sector, a major component of our economy, has broken out to new highs as well. See below. [image] Investor Sentiment has recently turned positive. We have been addressing this in detail in most of the Market Outlooks in 2023. This is proof that investors are willing to take more risk and are deploying assets into more aggressive investment strategies. Part of this is the FOMO (Fear of Missing Out) crowd who feels that they better get “into the action”. This also helped fuel the rise in the Big 7 stocks earlier in the year, as these same investors bought the biggest mega cap stocks as they deployed capital and got more invested. See the investor sentiment chart below. Use the links below to continue reading about high sentiment readings, the importance of the US Dollar, our S.M.A.R.T investment methodology, and the Big View bullets and video by Keith. [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 Keith Schneider CEO, MarketGauge 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. He can quickly guide you to the resources that you'd like best. - Get the foundational building blocks of many of our strategies from Mish's book, [Plant Your Money Tree: A Guide to Building Your Wealth](=), and accompanying bonus training. - [Review quick descriptions]( of our indicators, strategies, services and trading systems here. Get more - follow us here... Twitter [@marketgauge]( and [@marketminute]() and [Facebook]( To stop receiving this go [here.]( Got Questions?Office hours 9-5 ET (New York time) Email: info@marketgauge.com Live Chat: Go to bottom right corner of our [home page.](=) Call: 888-241-3060 or 973-729-0485 There is substantial risk of loss associated with trading any securities including and not limited to stocks, ETFs, futures, and options. Only risk capital should be used to trade. Trading securities is not suitable for everyone. No representation is being made that the use of this strategy or any system or trading methodology will generate profits. 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