![]() ![]() Such is a bad combination for stock prices as we head into 2023. Furthermore, the risk of a recession is increasing, which will slow earnings growth, as we will discuss momentarily. There is certainly downside risk, as we remain concerned the Fed is making a policy mistake by continuing to hike rates. As shown in the WEEKLY chart below, the deeply oversold indicators turned up and are close to triggering “buy signals.” The market is also trading 2-standard deviations below the 50-week moving average. While there was a lot of volatility this week, the market did finish the week in positive territory. I suspect we could see additional selling Monday morning as investors witness their account balances over the weekend and pre-load “sell orders” for the market open. As shown, the MACD signal remains intact but was weakened considerably, and the market is approaching short-term oversold conditions. ![]() While the market started out the week strong and triggered a MACD “buy signal,” Friday’s selloff was brutal. In August, the inflation will drop to 7.9% from 9% in June, and if we assume an average 0.2% monthly increase in the index, CPI will hit the Fed’s 2% target in June 2023. Moving forward, the annual comparisons become more challenging at 0.9%, 0.7%, 0.6%, 0.6%, 0.8%, and 1.2% through March of 2023. Notably, that will be compared to a 0.4% increase in 2021. Current expectations are for a 0.1% Consumer Price Index (CPI) increase. Next week is another opportunity for the bulls as we get the August inflation report. However, a stronger-than-expected employment report on Friday crushed the optimism as the focus returns to a more aggressive Fed, increasing the probability of a 4th rate hike of 0.75% this year. Such was impressive, given the dismal performance in September. ![]() The week started out with a bang, with a market rally of more than 6% in two days. Market Rally & Stumble To Start The Quarter
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