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It’s certainly been a tough week for the S&P 500 (SPY) bulls. In the last 10 days he has had three big reports, all showing better-than-expected inflation. And while the bulls appeared to be able to shake off his first two rounds, the evidence is accumulating in favor of another rate hike, and a victory for the bulls could be much more difficult than it is now. Here’s what I mean.
(Enjoy this updated version of my weekly commentary, originally published on February 24th.th2023 POWR Stocks Under $10 Newsletter).
Market commentary
Over the weekend, both the CPI and PPI reported higher prices month-on-month and larger annual price gains than economists had expected.
Still, the bulls hold it pretty well, and the S&P 500 (spy) finished the week just a few points below the all-important 4,100 line.
Despite the bears’ big win last week, this latest round of ‘tug-of-war’ seemed to be nobody’s game…
And the minutes of the Fed were released. And the third inflation indicator (and the Fed’s favourite), the Personal Consumption Expenditures (PCE) Index, was also higher than anyone expected. A growing number of Fed officials are also publicly expressing concerns that inflation remains too high.
Look, I’ll be the first to say that the Bulls put on a surprisingly strong show in the first few weeks of the year.
But I’m not saying it can’t be done either. These bulls always seemed a little paranoid. There aren’t many “bullish” events… people were ready to move to a more “risk-on” environment.
Also, all three signs I’ve spotlighted recently, namely the 4,100 level (bottom dashed line), the January CPI report (hot), and the CME FedWatch tool (expecting a 50 bps rise in March The number of people almost tripled from 9.2% to 27%).
They say the market is “climbing the wall of worry.” But how much is too expensive?
I’m not 100% sure. Honestly, anyone who tells you about themselves is selling you a lot, well, something.
Either way, the bulls will have to put on quite a show, with further rate hikes and a great deal of evidence pointing to higher terminal rates.
So I want to take some time to prepare my portfolio for the next legdown. I’m not ready to sell anything today, but this morning I spent some time creating most of the trading triggers I have.
They help contain losses and protect the gains you’ve been working so hard on over the past few months.
Conclusion
The best thing we can do now is prepare. Stocks below $10 are a very strong group.
But they’re also susceptible to price fluctuations when they sell. So they keep things tightly locked down as they navigate what happens next.
what next?
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all the best!
Margrave Meredith
StockNews Chief Growth Strategist
POWR Stocks Under $10 Newsletter Editor
SPY shares closed at $396.38 on Friday, down $4.28 (-1.07%). Year-to-date, SPY is up 3.65% on him, while the benchmark S&P 500 index gained 10% over the same period.
About the Author: Meredith Margrave
Meredith Margrave has been a prominent financial expert and market commentator for the past 20 years. she is currently Growth of POWR and POWR Stocks Under $10 Newsletter. Learn more about Meredith’s background, with links to her latest articles.
post Hot Inflation Means Tough Road for Bulls… first appeared StockNews.com