A Colorful Week: Yellow Vests and Red Flags

March 24, 2019

Weekly Market Outlook

By Keith Schneider

Risk Gauges flipped 100% negative (see risk gauges below) as Global Equities closed on their lows for the week.

Member of our Alpha Rotation service have seen the progression of the market’s deterioration in the risk gauges shown below (read right to left).

MarketGauge BigView Premium Risk Gauge:

However, growth stocks that populate the NASDAQ 100 were able to eek out a small gain and still look good technically.

Geo-political stress that emanates from economic uncertainty lurks everywhere.  This situation is highlighted by social unrest in France led by normally fashionable Parisians who relaxed their standards by donning yellow vests while protesting Macron’s economic policies.

Germany’s Purchasing Managers’ report missed by a huge margin on Friday, causing bond markets to rally, which resulted in the yield curve inverting even more.

This week, the Fed also reiterated a dovish stance on rates over concerns about growth. Thus, the strongest economies are signaling a red flag that a recession is coming to a theater near you.

However, when the recession will arrive is questionable, and the yield curve is not a great market timing tool.

This week’s highlights are:

  • All our Risk Gauges turned 100% negative by Friday’s close
  • The Yield Curve inversion deepened
  • Sentiment (VXXB) indicators jumped from their lower Bollinger Bands to just under their 200 DMA which if breached, will mean much greater weakness ahead
  • Gold closed positive on the week
  • 5 out of 6 Modern Family members retreated to bear phases with the Russell 2000 (IWM) dropping -3.62%
  • Semiconductors continue to lead helped by blowout earnings by Micron and news about a partnership between AMD and Google
  • On a positive note, speculative growth stocks continue to lead and remain strong

Ok, so if you focus on the winners which are stocks that reside in the NASDAQ 100 there are still major opportunities.

Currently, chip stocks are on fire, and our NASDAQ 100 All Stars models closed +3.5% for the week. (for more info on this quant-based model click here)

Have a great week!

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