Strategy Update (2024-03-13)

The market has shown volatility due to economic data influencing rate expectations. Price swings have been notable in recent trading sessions.

Alpha Signals strategy remains unchanged on a green signal
Alpha Signals strategy remains unchanged on a green signal

The market has experienced notable volatility and price swings in recent trading days. Factors influencing price moves include economic data on inflation/employment that impact interest rate cuts expectations, and earnings reports from some important tech stocks.

Yesterday's inflation numbers came in matching expectations, but the underlying core inflation data was still stubbornly high, running around 4% annually. That's not great news for those hoping the Fed will start cutting rates as soon as June like the markets are pricing in. The risk is that rate cuts could get pushed back or be fewer than expected if this high inflation sticks around.

Even though the major indices like the S&P 500 and Nasdaq closed over 1% higher, the buying wasn't really broad-based. More stocks were actually declining than advancing on the Nasdaq.

From a technical analysis perspective, the recent price action may be showing patterns like testing support/resistance levels (with TQQQ swinging within the range $58 and $63), while market sentiment is a mix of cautious optimism about the strength of big tech companies but uncertainty around inflation and rates.

In essence, there's a mixed market reaction to the inflation data, translating in cautious and the importance of remaining flexible and nimble, and ready to adapt depending on the broader market sentiment. Nevertheless while the short-term outlook may be uncertain, the long-term prospects for technology and innovation remain strong.

Whether this volatile period represents a temporary digestion of recent market advance or the beginning of a more extended downturn remains to be seen. For now, tech investors would be wise to buckle up as choppy trading could persist.