Red Charts, Green Light: What the HCM-BuyLine® Says

POSTED BY: VANCE HOWARD

The market has weakened and so has the HCM-BuyLine®, but it is still positive and as we always say, when the HCM-BuyLine® is positive all pullbacks should be considered buyable. The S&P 500 has dropped by about 4% over the last week and a half, and the NASDAQ 100 is off by about 8%, which is a pretty big drop in a short period of time. The markets are oversold and should start to stabilize. VIX, the volatility index, is also oversold, which generally has a high percentage of calling an oversold market. But with that said, there has been some damage done to the uptrend and we will watch with caution.

Bitcoin is down about 40% in ten trading days. I’m not sure if Bitcoin is an investment or a trading vehicle but there is a lot of price action in Bitcoin. Bitcoin has some nasty drops just about every year, so this drop is not uncommon.

Like I wrote a few weeks back, hopefully you tightened your stops on gold, as it had gone way up way too fast to be sustainable. The big drop in gold is one of the reasons for the selloff in stocks.

Initial claims for unemployment insurance fell 9,000 last week to a lower-than-expected 198,000. This was the eighth decline in the past ten weeks, pushing initial claims near the lows of this cycle. The trend is consistent with subdued layoffs and still-robust labor demand, which is supporting a continued economic expansion.

Continuing claims in the previous week declined 17,000 to 1.884 million, while the insured jobless rate was unchanged at 1.2%. Both indicators are low by historical norms and suggest that long-term unemployment is not an issue for the economy.

The ISM Manufacturing PMI jumped 4.7 points in January, the most since June 2020, to an above-consensus 52.6. This was the highest level since August 2022 and in expansion territory for the first time in a year. In data since 1971, the monthly change was a 2.1 standard deviation event, making it a relatively rare occurrence. Previous large increases have typically happened early in economic recoveries, suggesting that a stronger manufacturing sector could lead to faster economic growth this time, too.