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VoSI Focus List Review for the Week Ended February 24, 2023

Major market indexes all closed lower at week's end, continuing what has been a two- to three-week sell-off from the early February highs. the NASDAQ Composite closed Friday below its 200-day moving average while the S&P 500 closed below its 50-day moving average but found intraday support at its lower 200-day moving average. Volume was slightly lower on the NASDAQ and just barely higher on the NYSE.
Strong Personal Consumption Expenditures price data on Friday, the Fed's favorite measure of inflation, came in  hotter than expected at 0.6% month-over-month vs. expectations of 0.4%. This along with the hot Producer Price Index number earlier in the week indicate that inflation may be reaccelerating after a period of consolidation. Further, consumer spending which accounts for more than two-thirds of U.S. economic activity shot up 1.8% last month, the largest increase in nearly two years due in part to a surge in wage gains. Robust job growth and the lowest unemployment rate in more than 53 years paints a rosy picture, but this is the calm before the recessionary storm if history is any guide. The Fed clearly has more work to do in slowing down aggregate demand. Nevertheless, as discussed in a prior report, recession is likely to come in the second half of this year. 

Note that other than a brief respite back in mid-year 2022, the PCE Price Index has remained in a steady uptrend since May 2020. Fed Chair Powell's profuse use of the word disinflationary during his press conference following the last Fed policy announcement two weeks ago does not seem to be supported by the data, and indeed, Wednesday's release of the latest Fed meeting minutes confirmed that nowhere was the word disinflationary to be found.
Interest rates and the U.S. Dollar moved higher in response on Friday, as the 10-Year Treasury Yield ($TNX) again approaches the 4.00% level, ending the week at 3.949%. The U.S. Dollar ($USD) closed higher on Friday as it extends its gains off the early February lows. Note that the peak in the market occurred as precisely the same time as the low in the Dollar.
As we have noted repeatedly, we do not believe that we are in a new bull market. The trend of inflation is reaccelerating and some are now speculating that the Fed will have to take the Fed Funds Rate above 6%, well beyond the current terminal rate of 5.25-5.50% that the crowd currently expects, and leave it there. In our view, as long as rates and the Dollar continue to rise, stocks will be on the defensive.

The Market Direction Model (MDM) remains on a SELL signal.

This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2024 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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