Intra Week update, I am hedging here...

Powell tone: "I am rather wrong on the economy than on inflation"

Looks like Quad 3-4 will hit until Friday.

The tone from Powell was "I am rather wrong on the economy than on inflation, e.g. we will rather risk a mild recession than getting inflation wrong." At this market tape (new highs) he can afford that. He does not believe in a soft landing e.g. something (mild) must break before we get inflation in check… He needs to get scared (and then pressured by politics) and he will... until then no rate cuts.

That is a disappointment to the market, a growth scare is coming, and the tape is showing it.

I am hedging here; I will be net long about 55%.

Daily Quads are already in 3-4, and they weakened since 1/25/2024:

Weekly Quads deteriorating as well (look on the right):

QQQs and SVIX did not confirm the new high of SPY:

XMI (lower beta price weighted index) showing strength (not good):

All my breadth indicators are pitching a sell:

Left above: Volume, if cumulative volume is stronger than price (which it is, red line is relative strength) that means it does not take a lot of volume to push price down.

Middle above: same with advance and decliners, if they are stronger than price, it means there is weakness under the hood.

Right above: stocks above 40-day PMA are tanking (if they are weak, the Russel 2000 follows!).

Same with higher cap advance decline line, big caps stronger than small caps, not good:

QQQs and SPYs had a significant distribution day (higher volume sell off)…

… and defensives (e.g. their relative strength) are curling up (UUP, XMI, XLP etc.) in the first time of a long time (they have been week for ages…).

My best guess is, the market is worried that the FED acts too late here, the presser was a disaster, it is always the same, Powell gets annoyed by the questions and the longer the presser the more hawkish he gets. There was no indication when they lower rates.

I had a good run, up about 40% since 11/3/2023, so I am protecting profits here…

I know, I know, this is the third hedge attempt, but that happens ;-). Quads can be stable for weeks and then have times where they flip flop. Tops are bitches (bottoms are more easy…).

Again: long term —> #secularbullmarketUSA (Liquidity is up, Inflation comes down, I am constructive for 2024 and 2025 and will be very aggressive in every bullish tape), but as always: it will not be a straight line.

All the best and best regards

Andreas

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