With the Fed on hold, Santa has brought back his sleigh. Think about value | Top Advisor Corner

The Santa Claus rally has left the station and is racing down the tracks as the Feds are put on hold.

Before taking a week off from this column for the Thanksgiving holiday, I wrote the following. technical picture This has developed in the bond market, and the resulting doom and gloom for stocks will begin as early as September 2023. And although there are no guarantees, the ongoing rally in both stocks and bonds is likely to continue. It begins in earnest with a traditional Thanksgiving gathering.”

This is why we gather. At least three FOMC members, including Chairman Powell, made the following clear:

• There is no room on the card right now.
• The Fed is preparing for further tightening if necessary. but
• Unless inflation indicators worsen, the interest rate hike cycle is likely to end.

Unless something bad happens to derail the bullish sentiment, all of this will result in stocks rising higher in the short term. Consider that the CPI, PPI, and FOMC meetings are all coming up. Moreover, there is evidence that overbought sectors of the market, such as technology, are starting to suffer. This means that there has been a significant delay in the sector rotation of sorts.

So far so good; But what’s next?

Bond yields and mortgage strength continue to decline

The first part of the answer to the above question lies in the bond market. In the bond market, interest rates continue to fall and appear to be falling at a rapid pace. The US 10-year Treasury yield (TNX) is currently well below its 50-day moving average of 4.5%. Moreover, the approval rating has fallen below 4.3% to 4.4% and appears to be heading toward 4%.

Even more impressive is the decline in mortgage rates (MORTGAGE), which looks set to test the 7% area and could move as low as 6.8%, the series’ 50-day moving average.

As expected, among the main beneficiaries of lower interest rates have been homebuilders, which is reflected in the recent price action of the SPDR S&P Homebuilders ETF (

Additionally, the long-term supply and demand fundamentals of the housing market remain favorable for homebuilders and related sectors. This includes real estate investment trusts (REITs).This company specializes in housing rental and related businesses.

We can see the bullish impact of lower interest rates on the Nuveen Short Term REIT ETF (NURE), which is currently testing its 200-day moving average. This ETF specializes in rental properties. If REZ rises above $30, prices are likely to rise further.

Possibility of industry rotation

The REIT sector is certainly a place where value investors can find great ways to invest their money. But it’s not the only sector that’s been overlooked in the market lately, and could benefit from sector rotation.

Over the past few weeks I have been focusing on value investing in this space.This is a topic I recently expanded on. my latest Your Daily 5 videoyou can catch here. This is because while growth stocks are overbought and are due for a brief pause, there are still many investors and money managers who missed the October bottom and need to catch up before the end of the year.

You can see this dynamic by comparing the movement of the S&P 500 Citigroup Pure Growth Index (SPXPG) to the trend of the S&P 500 Citigroup Pure Growth Index (SPXPV).

The growth index has been trading ahead of the value index over the past few weeks but is currently struggling near the chart point of 15800. Meanwhile, the value index expanded its moves with greater momentum. The difference in the strength of the movement can be understood through the pure Price Momentum Indicator (PMO) for both, with SPXPV’s PMO being much stronger.

All of this suggests that unless something bad happens, the next phase of the market will likely be driven by value stocks.

To learn more about homebuilder stocks, click here.

The unloved energy sector

After the oil market’s incredible summer rally, conditions have cooled dramatically. At the heart of the decline in the crude oil and fossil fuel sectors was an oversupply of products. On the one hand, increasing well efficiency in the U.S. shale sector has increased supply. On the other hand, as usual, OPEC+ did not fully stick to its widely publicized policy of cutting production.

But the recent slump in clean energy stocks has placed a different emphasis on the traditional energy sector, which is why it’s worth looking at the actions of the Energy Select Sector SPDR Fund (XLE), a collection of large oil and gas companies.

Most notably, even though crude oil prices (WTIC) are well off recent highs, the decline in XLE has been much milder. In fact, XLE is still trading above its 200-day moving average, so technically it is in a bullish trend. Additionally, the ETF is starting to show signs of breaking away (towards the upside) from the large VBP bar near $85. Above, the 50-day moving average and the VBP bar cluster have found further resistance up to $89.

Still, with components like BP Plc (BP) trading at 7 times earnings and yielding 4.81%, we wonder how long it will be before value investors come knocking on the door of this sector.

In addition to recommending a number of big winners in the homebuilding and technology sectors recently, I’ve also recommended energy stocks that are clearly likely to move higher regardless of oil prices. Join the smart money at Joe Duarte in the Money Options.com gives you free access to this ETF and a variety of bullish stocks. 2 week trial subscription.

Market breadth is now optimistic

The NYSE advance decline line (NYAD) is back in bullish territory and above the 50-day and 200-day moving averages. So, while there is improvement, there are still no clear long-term signals about the market trend. The downside is that the RSI indicator is approaching an overbought situation. However, while NYAD’s gains may slow at this stage of the rally, a complete reversal is unlikely in the near term.

The Nasdaq 100 Index (NDX) is looking a little tired and in need of a break. The index struggled to rise above 16,000. Both ADI and OBV are leveling off as profit taking increases.

The S&P 500 (SPX) is hovering above 4500 and is likely to rise above 4600. This is not surprising, as many value stocks are currently pushing the SPX higher.

VIX is back below 20.

The CBOE Volatility Index (VIX) continued to decline, closing below 15 last week. This is optimistic.

When the VIX rises, it means traders are buying large amounts of put options. When market makers’ put option trading volume increases, they sell stock index futures to avoid risk. A decline in VIX is optimistic because it leads to fewer put option purchases, which ultimately leads to call purchases. This forces market makers to hedge by buying stock index futures, increasing the probability that stock prices will rise.

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Joe Duarte

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Joe Duarte is a former money manager, active trader, and widely regarded independent stock market analyst since 1987. He has written eight investment books, including bestsellers. Trading options for beginnersRated Benzinga.com’s TOP Options Books of 2018 Now the third edition is out. A book about everything you should know about investing in your 20s and 30s And six other trading books.

A book about everything you should know about investing in your 20s and 30s Can be used on amazon and Barnes & Noble. It was also recommended. Washington Post Currency Color of the Month.

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