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Markets shifted dramatically this week as they faced extreme pressure and attempted rallies were unable to stick. Downside leadership is rapidly increasing, and market turmoil is likely to continue.
MACROECONOMIC UPDATE
- The Final Consumer Sentiment report for November showed further weakness in consumer attitudes as the Overall Index declined from 53.6 to 51.0. Consumer Future Expectations ticked up slightly from 50.3 to 51.0 while the Current Conditions Index dropped from 58.6 to 51.1. This report continues to confirm that consumers, and the economy, are vulnerable.
- The National Association of Home Builders (NAHB) Housing Market Index increased slightly from 37 to 38. It still remains below the threshold of 50 which indicates that builders feel pessimistic about the current and near-term outlook for housing.
- The Jobs Report for September was released this week, over a month after its scheduled release date of October 3rd. It showed an increase in jobs added of 119,000. Most importantly, however, it saw the unemployment rate increase to 4.4% – the highest level in 4 years and the third consecutive increase [see more in the Personal Perspective in today’s issue].
- Existing Home Sales increased 1.2% from last month as inventory decreased 0.7%. The housing market remains fairly stagnant as buyers continue to face affordability headwinds.
TECHNICAL UPDATE
- The InvesTech Artificial Intelligence Index continued its plunge this week and now sits -19% off its peak from earlier this month. With AI hype driving so much of the stock market, where this indicator goes the rest of the market will likely follow.
- As we predicted in last week’s Hotline Update, our Negative Leadership Composite (NLC) triggered bearish Distribution this week, joining the ranks of other major indicators warning of danger ahead. This critical development signifies that the stock market could be heading toward bear market territory. [See Market Insight].
InvesTech Model Fund Portfolio
There are no changes in our InvesTech Model Fund Portfolio this week. It remains defensively positioned with a net invested equity allocation of 50% (55% long positions, 5% in an inverse index ETF, 5% in an intermediate Treasury ETF, and 35% cash held in short-term Treasurys or a money market fund).
Latest Issue of InvesTech Research available later today!
In this latest issue we dive into the Fed’s battle, consumer headwinds, and the technical alarm bells currently ringing. Our Strategy section reveals why our InvesTech Model Fund Portfolio has proven to be so resilient since the stock market’s peak last month.