V2 Model July 8 2023 Update

CPI Next Wednesday. Hot or Cold?

July 08, 2023

Recap

The SP500 was down over 1% for the week. 10-year interest rates jumped higher (+6.05%) and the short term VIX moved up over 9%. So a bit of risk-off look this week. Also noteworthy - the rapid sell of late in the day Friday.

V2 was flat this week.

Performance (Weekly/YTD)

V2 +.14% / -15.96%

SPY -1.07% / +15.55%

Changes

None.

V2 Portfolio Holdings (Allocation).

CASH (100%)

Notes/Chart

V2 turned slightly negative late Friday, but remains in our neutral zone for now.

Here is one SP500 daily chart we follow. You can see at the blue arrow where we closed on Friday. We are below the pink 5 DMA and above the blue dotted 20 DMA. We close right on the red 10 DMA. So we have pulled back into a neutral zone. I also marked some short term support with a blue line - roughly 4330. If markets decline in a meaningful way from here we will look to go short again.

Here is one ratio we track. The SP500 vs Short Term Treasuries (Cash) Rate of Change with the SP500 below it. Risk-on vs Risk-off. You can see when ROC falls and moves below the center line The SP500 struggles. 3 of the last 4 times this past year when this happened stocks moved slower. In one case it went sideways. You can see where we are on the close Friday. On the line.

Plan

There are a number of Fed speakers on Monday - will they continue to push the “higher for longer” narrative? CPI and Core CPI will be released on Wednesday. That will impact the next extended trend and we will hope to get on the right side of it.

As always, we will keep an open mind, be nimble, and follow the math.

Distance=Victory

Chris

Market information from Bloomberg, ETRADE, Morningstar, and StockCharts.com.