Market Status as of March 10

One of the biggest advantages that an individual investor has is the ability to do nothing if that is the best course of action.

Contrast this to a fund manager who has a mandate that requires money to be invested even when it should be pretty obvious that it is not in the best interest of shareholders.

Given the current market meltdown, the Silicon Valley Bank debacle, and the upcoming CPI report on Tuesday, this is a market that should have investors practicing defense and doing very little.

This Week's Action:

The Value Line Arithmetic Index closed below its 30-week moving average. This is bearish.

The percentage of stocks on the NYSE that are bullish is currently 43.87%. Any reading less than 50% is bearish.

The Market is Bearish

Our slower point and figure chart of the NYSE Bullish Percent shows that the indicator is continuing its descent and remains in a column of O's.

For now, the NYSE Bullish Percent Indicator, the internal market, is telling us that it’s time to be on the defensive over the short term because Supply is in control of the market.

Sector Analysis

The sector data is confirming my overall market analysis.

Presently, only 1 US sector displays that shorter-term demand is in control (UTGI-Utility Gas). And given the left-hand skew of the chart below, we can see that the selling pressure is intensifying.

Last week, there were 3 major sectors with SCTR scores above 80. This week we are down to 1.

The Industrial sector remains strong, with 8 Industry Groups displaying SCTR scores above 80.

Conclusion

Market conditions are bearish, and most investors should stand aside and wait for more favorable conditions. Sometimes the best offense is a good defense.  

Some parting thoughts.

This week was the annual testimony of the Federal Reserve before the Senate Banking Committee, followed by the House Financial Services Committee.

The takeaway for investors who had been hoping for a "pivot" was "not likely".

"If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes."

And if that statement wasn't enough, this was.

"The latest economic data have come in stronger than expected, suggesting that the ultimate interest rate level is likely to be higher than anticipated."

This sent 2-year Treasury interest rates to 5% and stocks lower.

Some fear that the Fed will raise rates until something breaks. They have collectively embarked on the most aggressive interest-rate tightening cycle since the 1970s when Paul Volcker jacked up rates to 20%.

That’s triggered signals like an inverted yield curve which is putting huge pressure on banks' margins.

The banks are breaking.

And so is the market.

On Friday, the market closed below the last logical important support level.

It looks lower, with a wall of resistance now at 4000.  

The Dividend Growth Portfolio will likely being holding on to its large cash balance for the foreseeable future.

Have a great week.