Last week was an important week as the market cap weighted S&P and NASDAQ both broke below their 200 DMAs. It was something I’d been expecting given the underlying internal weakness in the market for quite some time now (“The Market Is About To Break”, October 3). What it means is that the bear market rally is over, the bull market has been canceled and stocks are going lower.
The big events next week are The Fed Decision on Wed 11/1 at 2pm EST and Apple (AAPL) earnings on Thursday afternoon. While the Fed is almost certain to make no change to The Fed Funds Rate, investors will focus on Powell’s comments and tone. He maintained his hawkish “higher for longer” narrative when he spoke at The Economic Club of New York two weeks ago. Now it’s time for him to recognize that the market is breaking down and make an adjustment if he wants to have any chance at nailing a soft landing.
On Thursday afternoon, AAPL will reports its fiscal year 2023 4th quarter. I’ve long argued that AAPL has essentially no growth anymore and should be repriced as a value stock (“Apple Zero And The Maturation Of Big Tech”, August 5). If this quarter is a catalyst for that repricing, that may well be the final nail in the coffin for the rally we’ve seen over the last year.
Lastly, Barron’s cover for this weekend says it’s “time to buy bonds”. While the magazine cover indicator is usually a contrarian indicator that a narrative is played out and priced in, in this case I believe Barron’s is spot on and ahead of the curve. The breakdown in the market and a recession next year will be the catalysts for a bottom and sustained rally in beaten down long term bonds. The Long Term Treasury ETF (TLT) will be a monster in 2024 (I was a year early).