Major Markets Update

Major Markets Updates are a monthly and as needed piece designed to give us an overview of the broader market and certain sectors. Using Elliott Waves we can effectively show the sentiment of markets in near real time. This allows us to game plan.

Remember, “trader narratives” hit the internet to try to keep you from doing the right things and even do the wrong things. It is “a loose affiliation of millionaires, billionaires and baby.” Retail is the baby.

US DOLLAR INDEX / @DXY

The dollar is rising on broad strength that we have seen since forever and especially since 2012. A breakout in the dollar would push a broader asset price correction. If we see a breakout past the blue line, then we likely see deeper stock market corrections. This is why I have urged folks to accumulate cash and sell covered calls in the past couple months.

S&P 500 / SPY ETF

The strong dollar is putting pressure on the large cap index that half of folks index into. While we do not use the S&P 500 other than as a benchmark, it generally rebounds fairly quickly from corrections.

NASDAQ / QQQ ETF

The top NASDAQ 100 companies hold most of the cash on corporate balance sheets. These are behemoths that take years to challenge. QQQ is always buy the dips, especially the 10% or greater dips.

RUSSELL 2000 / IWM ETF

Small caps are always a pickers market as it is an inefficient index. A strong dollar is giving us a chance to buy another dip (or sell puts) in what has been a 2-year choppy range.

20 Treasuries / TLT

TLT is used for recession insurance. The wrong headed inflation narrative is giving us an opportunity to buy longer term treasuries. When rates are cut, likely beginning this year, and ultimately there is a threat of recession pushing rates down further, TLT can head back to $118 or higher if rates plunge.

Financial / XLF

Banks could be reflecting anticipation of falling interest rates soon. There is also a possibility of a breakout, which for banks usually doesn’t amount to much. More likely, we have entered a choppy zone for banks with falling rates being met by M&A. So, it’s a pickers market.

Utilities / XLU

A breakout in utilities would be bearish for the broader market as it represents a flight to safety.

Bitcoin / @BTC

IBIT 

Bitcoin (BTC-USD) just keeps building up on global adoption. Buy the dips which seem to be holding in a choppy range right now.

Kirk’s Investment Quick Take

Small caps continue to exhibit the best growth to price value characteristics, however, with half the inflows to the S&P 500 (SPY) we must remember to buy the bigger dips on our top large cap stocks as well.

Certain REITs seem to be shaping up as a great opportunity ahead of rate cuts sometime this year. Take a look at the Punch Card Dividend Stocks for REITs.

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