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The News Buzz

• 6 stocks Warren Buffet is selling: AAPL, HP, SIRI, PARA, CVX, LPX.

• Google Cloud deleted and then recovered $135 billion from the pension fund; data for hundreds of thousands of pensions was recovered in two weeks.

• Google Cloud Layoffs: Employees working across several Cloud teams were informed that their jobs were being eliminated.  Major Changes in Consulting and Engineering Teams. 

• Jamie Dimon expressed doubts about the effects of the past five years of significant fiscal and monetary stimulus. He believes these measures could lead to stagflation, a period marked by high unemployment and inflation combined with low demand. Dimon highlighted that JPMorgan is preparing for various economic outcomes, including both hard and soft landings. While the general consensus expects the Federal Reserve to achieve a soft landing, Dimon remains cautious about the potential for a harder landing with stagflation. 

• De-dollarization: Is the US dollar losing its dominance? "The risk of de-dollarization, which is a periodically recurrent theme throughout post-war history, has returned into focus due to geopolitical and geostrategic shifts." Alexander Wise, Strategic Research, J.P. Morgan.

• Semiconductor shares were among the market's weakest areas Friday, led by a drop of more than 10% in Marvell Technologies (MRVL). The chipmaker's stock tumbled after the company reported weaker-than-expected first-quarter results.

Typical LT Investment Strategies

Success in investing depends on your goals, risk tolerance, investment horizon, and an appropriate investment strategy and selection of financial instruments. Research and insight provided by the Free and Premium BraVoCycles Newsletters are applicable to virtually all investment strategies. Below are some strategies often used by investors:

1. Buy and Hold: This strategy involves buying investments you believe in and holding them long-term, riding out market fluctuations. 

   • Can be an emotional rollercoaster. It works great in bull markets but can be devastating in prolonged bear markets.

2. Index Investing: You invest in funds that mirror a market index like the S&P 500. This provides broad diversification and historically strong returns with lower fees than actively managed funds.

   • Warren Buffet often recommends investing in the S&P500 index fund, although he himself invests in individual stocks.

3. Dollar-Cost Averaging: This involves investing a fixed amount at regular intervals, regardless of the share price. This helps you buy more shares when prices are low and fewer when they're high, averaging your cost per share over time.

   • Most investors, at least in part, automatically follow this method via participation in various retirement pension plans. 

4. Diversification: Spreading your investments across asset classes like stocks, bonds, and real estate helps mitigate risk. Diversification is key to investing in various sectors and companies even within asset classes.

   • Many investment companies apply some form of diversification.

5. Asset Allocation: This strategy involves dividing your investment portfolio among asset classes based on risk tolerance and time horizon. Younger investors with a longer time horizon can typically tolerate more risk and invest more in stocks, while those nearing retirement may shift towards bonds for income and stability.

   • Warren Buffet’s mentor, Benjamin Graham, favored a balanced asset allocation between stocks and bonds. 

   • This rudimentary market timing strategy employs periodic rebalancing. For example, when the percentage of assets in stocks is above its predetermined value and that of bonds below, trim stock holdings and allocate raised funds to bond holdings to obtain desired percentages.

BraVoCycles multi-dimensional technical analysis can enhance these general investment strategies by providing improved estimates of optimal time and price to enter or exit the market or a specific financial instrument.

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SPX Cycle Composite

• I think I posted the chart below in the Premium Newsletter several days ago. Now, I want all free subscribers to see it, too.

• The pink curve represents the cycle composite projection of the three cycles that dominate the weekly chart: 2.27Y, 2.7Y, and 3.44Y (the famous 3.5Y cycle).

• It sends a similar cycle picture as several international markets we looked at recently.

• Always allow for some tolerance when interpreting cycle projections, as some cycles vary over time.

• Shorter- and longer-term cycles that are not included in the composite will somewhat change the shape of the cycle composite but will not significantly affect medium-term expectations.

QQQ Breadth Divergence

• Less than 60% of stocks in the NDX are above their 50-day moving averages, a dramatic change from earlier in the year, see the chart below (courtesy of SentimenTrader).

• Over the past 30 years, there have been a handful of times when the NDX hit a 52-week high, and the percentage of its member stocks holding above their 50-day averages was at least 30% below the peak reading over the past six months. Over the next two to three months, the NDX lost some steam.

Market Summary

As of close on 31 May 2024.

What Has Been

• On Friday, SPX and NDX hit down targets we posted in the premium newsletter.

• Then the indexes strongly reversed, as predicted and as the Friday’s newsletter title suggested.

• That was all based on my cycle, EW, and technical analysis. It was destined to happen. But what are the media saying?

• MarketWatch: It didn’t take long for stock-market gains to start fading on Friday before mostly bouncing back during the final trading day of May, given the multitude of issues weighing on investors. Investors were trying to balance everything from the typical month-end squaring of stock positions to Salesforce Inc.’s CRM lower-than-expected current-quarter revenue guidance on Wednesday, Friday’s as-expected April PCE inflation print, and even the guilty verdict against former U.S. President Donald Trump announced late Thursday. 

• charlesSCHWAB: 

• According to Cooper Howard, director of fixed income strategy at the Schwab Center for Financial Research, the PCE report probably did little to alter Fed leaders' cautious stance toward any rate cuts. Market indicators continued to price one or two rate cuts later this year. 

• The S&P 500 index added 42.03 points (0.8%) to 5,277.51, down 0.5% for the week; the Dow Jones Industrial Average® ($DJI) gained 574.84 points (1.5%) to 38,686.32, down 1.0% for the week; the Nasdaq Composite® ($COMP) declined 2.06 points (0.01%) to 16,735.02, down 1.1% for the week. 

• The 10-year Treasury note yield (TNX) fell more than 6 basis points to 4.491%.

• The CBOE Volatility Index® (VIX) declined 1.55 to 12.9.

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Read our Disclaimer

• After a strong bounce on Friday afternoon, and SPX, NDX and DJI potentially completed EW structures down, I expected indexes to continue. . .

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