Weekly Models Update - Powell's Cold Slap in the Face to Markets🤚

Weekly Market Model Update for April 18th

Welcome to the weekly report! This report is targeted at investors that don’t have time to monitor the ebbs and flows of the market day to day and still want to beat the market and avoid bear markets🚀. Just 10 minutes a weekend is all it takes.

I focus on the MAJOR themes and the MAJOR trends of the markets in this report. All the models I present are back tested with results so you can see that they work🤔.

This post is long - so make sure you read it on the Substack App or Website so you get to see the bottom of it - Email can often cut the message short. Let’s get into the weekly models!

What Happened This Week

This week we saw pretty quiet price action and frankly we didn’t get much of a Circus out of the Trump admin compared to the last few weeks. Now that Bessant is in charge of things the Trade War stuff has been less chaotic, and markets are trying to find their footing.

Late on Friday of last week we did see some more ham-handed attempts to support markets by Trump saying he would exempt electronics imports from most of the Tariffs from China. This brought Mom and Pop in to buy AAPL - where they were summarily sold into by institutional investors near the critical 218 level. Later on, Sunday into Monday we saw that the Tariff exemption would be “temporary” - whatever that means. Stock ended up well under last Friday’s close as a result - trapping more bag holders - the hallmark of a Bear Market.

Trump Pumps AAPL via Tariff Exemptions - But It Didn’t Stick - Whoops!

This is a great example of the lost credibility we are seeing right now from the leadership up there. Markets are starting to take their pathetic statements as sell signals, not buy signals. I will say this - AAPL at sitting near some compelling long term value zones (red bands) on the weeklies. Very similar to the same place it bottomed during the 2022 Bear Market.

AAPL Weeklies Show Long Term Value Here

Later in the week we saw some well-known investigations into Chip Making and Pharma production by the administration (indicating tariffs would be coming), this caused a bad day for most drug makers as a result. Companies like MRK are sitting at EXTREME value right now - once in a generation opportunities galore in the Bio Techs and drug makers now.

Trump continues to make comments that he would support Automakers - this was anticipated in last week’s weekly note. Once AAPL got some candy from the administration you know Ford and GM wouldn’t be far behind. Corporate Welfare at its finest. F and GM actually finished the week higher, which was nice outperformance for them.

The big show came on Wednesday though - when Powell put a hurting on stocks with some comments that basically said inflation was coming and he wasn’t sure Fed would be able to cut rates as a result of Tariffs. You can imagine that pissed off Trump. Later in the week Trump started rattling his Sabre again and threated to terminate Powell. Trump actually thinks that because the EU is cutting rates, the US should too - more Monkey-See, Monkey-Do mental heuristics on display. I expect eventually Powell will get fired - this isn’t an administration interested in playing by any rules and if you are in the way, you eventually find your way to the door by hook or by crook. Whether or not markets go down is another question. If we end up with a crony in there as Fed President, we could just see hyperinflation, which would make stocks rip to the upside (the economy would crumble though as shortages of goods would run rampant). But inflation does one thing well - number go up when inflation happens.

Weekly Show and Tell

Each week I review a chart or model that I would normally keep behind the paywall, I hope you can make a couple bucks off of it! 🤑

This week we’ll show a pretty simple chart that illustrates the concept of mean reversion in markets. This is just a count of how many closes in a row the IWM has been under its 20 Day (roughly 1 month) moving average. It’s such a simple thing to measure and it does a great job forecasting a rally out a month later. We should hit levels next week on this metric where a rally out 1 month has a good 75-80% chance of happening. Even in a Bear Market - nothing goes down in a straight line.

IWM Setting Up for Nice Rally Out 5 Weeks as Forecasted by Consecutive Days Under the 20-Day SMA