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RoboStreet – September 9, 2021
Rates and Yields Looking Up
September is already turning out to be the month of the market conundrum where inflationary pressures are colliding with the dampening effects of the Delta variant and global supply chain bottlenecks that are crimping growth prospects for multitudes of industries. Raw materials and most commodity prices are hovering at the upper end of their respective ranges, keeping margin pressure on finished goods that lead to higher prices to businesses and consumers.
Bond traders are closely monitoring every data point crossing the tape for clues as to how the Fed will shape its fiscal policy statement at the upcoming FOMC meeting on September 21-22. While the August payrolls report badly missed estimates, the weekly jobless claims numbers are falling to the best levels since the pandemic broke out in early 2020. Some of this is due to federal benefits expiring this week as well as the latest JOLTS report showing almost 11 million job openings in the U.S. during July.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
There is a lot of pressure on the Fed to get the taper talk just right, or the market will react negatively. Taking away the punch bowl too early as Wall Street is in the process of lowering GDP estimates can be a toxic brew for stocks. At the same time, upward pressure in wages and services lends to inflation being more than transitory. As a result, the market has taken on a more cautious tone this week.
CURRENT TRADING LANDSCAPE
The $SPY continued to lose momentum and reached the $451 level. The value/reflationary stocks were flat while technology stocks have been selling off.
The $DXY started to break down its multi-month bullish momentum, but short-term oversold. The next level of resistance is at $93. The $TLT was trading below the 50-day moving average (the bullish medium-term for the market).
Based on the steep correction in the reflationary stocks, strong dollar, and overbought technology stocks, the market will continue the pullback in September. The $SPY short-term support level is at $445, followed by $441. The SPY overhead resistance is at $455. I expect the next stage of pullback to resume this week or next. I would be a buyer of value stocks on pullbacks and sell technology stocks on rallies.
I would consider rebalancing portfolio at this point to be more market neutral. The second wave of the sell will continue for the next 2-4 weeks. Market corrections are never a one-way trade.
Based on our models, the $SPY can pull back 3-5% from the all-time highs in the next 2-4 weeks. Based on our models, the market (SPY) will trade in the range between $435 and $455 for the next 2-4 weeks.
My AI-driven algorithms that are the guts of our RoboInvestor advisory service are signaling that bond yields will continue to ratchet higher in the weeks ahead. Whether from inflation, tapering, tightening, or other forces, our models are predicting for bond prices to fall and rates to rise.
The one non-commodity-related sector that benefits most from a move higher in bond yields is the banking sector. Borrowing short and lending long when rates rise creates a wider spread and more Net Interest Income that feeds the bottom line. Plus, banks can easily raise the amounts of what they charge for most of their lines of credit and credit cards thereby adding to profits as well.
Shares of the SPDR S&P Regional Banking ETF are the most widely traded pure bank ETF that has the highest correlation to when interest rates and bond yields push upward. The ETF’s holdings are 100% domestic banks, thereby avoiding currency and forex risks, and are an ideal holding as a hedge against inflation.
Our AI platform shows a nice setup trade in the making for shares of KRE. Our Seasonal Chart has KRE consolidating further for the next 20 days and then resuming its upside bias thereafter for the next six weeks. Hence, we have KRE on our watch list of ETFs to add when our AI indicators signal us to act.
This is what makes RoboInvestor such a unique advisory service, the precision of the timing that goes into every buy point and every selling point of every trade. We maintain a portfolio of roughly 15-25 positions that include blue-chip stocks and ETFs that represent market indexes, specific sectors in common stocks, commodities, interest rates, currencies, precious metals, and inverse ETFs for bearish trades.
It’s our mission to make money for our clients in all market conditions and our track record speaks to that point precisely. Our Winning Trades Percentage is a torrid 91.87% of all closed trades. I know of no other service to the retail investor that can compete with this winning streak that goes back three and a half years.
Our most recent trades provide a sample of the high-quality leadership stocks we trade – only the very best names.
We publish RoboInvestor every two weeks, delivered over the weekend with two new recommendations for members to act on come Monday’s opening bell. If making money on every 9 out of 10 trades makes sense for your portfolio, then join RoboInvestor and charge up your portfolio wealth-building plan. I put my personal capital into every trade along with our community of members and thus am fully engaged in everything this service delivers. I hope to be able to welcome all readers of this blog abroad and come alongside those that want to gain the full benefits of what RoboInvestor offers.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
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