Market Update: 25th March
Ceasefire Rally or Bull Trap?
Hope you are all well. A quick update from me.
News
Last night we had news of a potential “ceasefire.” ICYMI, the headline was: “Israel’s Channel 12 reports that US negotiators are working on a one-month ceasefire with Iran, during which talks will be held over 15 items.”
This morning the SPX is up 70 bps or so, but my read is if the market trusted this news, it would be up a lot more. Not to mention, we are seeing reports of thousands of troops arriving by the weekend. Seems like an escalation
Economic Data: U.S. Import and Export Price Indexes (February) There was an upside surprise, with numbers coming in hotter than expected this AM.
Import Prices: Rose 1.3% in February (vs. 0.5% expected). This is the largest monthly jump since March 2022.
Export Prices: Rose 1.5% in February (vs. 0.5% expected).
While the terms of trade improve (export prices rising faster than import prices), global supply chains are tightening again, and imported inflation will be a headwind for the Fed. This feeds into the higher-for-longer narrative
SPX Chart:
SPX continues to hold the important 6500 level, but once again, it was rejected at the underside of the 200-day SMA, which is currently at 6630. I suspect it will be range-bound until there is clarity about the war.
My working position remains:
I do not recommend raising exposure until we reclaim, hold, and close above the 200 SMA.
I do not recommend taking large directional positions right now
Sell into descending moving averages to raise cash as per portfolio needs.
When Trading:
Shorten time horizon and focus on high RS stocks.
Use opening gaps up and green open to trim/sell;
Use red closes at the end of the week (last 5-15 mins) or gap down Mondays to buy.
When Investing:
Use the strategies I have shared in my accumulating during a correction Post.
Thank you for reading and see you for the next one!