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Digesting Gains? The S&P 500 and NASDAQ 100 indexes have rallied about 5% in just 7 days and are approaching all-time highs. A short digestion period (~3%) of these recent over-bought gains is needed before the uptrend resumes. The market is optimistic about Trump’s policies—lower taxes, less regulation, and smaller government—which bode well for growth. When a company shows strong earnings and sales growth, I look for a pivot point to buy the stock, typically when it breaks out of a base on above-average volume. These base breakouts have been working in this bull market, and I expect them to continue. Historically, growth stocks have outpaced both inflation and taxes.

Treasury Bonds and the Dollar The 20-year Treasury Bonds appear to have hit a short-term bottom, rallying more than 2% since 1/14/25, causing yields to drop. Rising rates have been a headwind for the market. Meanwhile, the U.S. dollar is weakening, breaking its uptrend. A declining dollar should benefit international stocks as they convert overseas profits into dollars. A weaker dollar is also favorable for gold, trading near all-time highs and showing a low-volatility uptrend. Silver, in contrast, is not being heavily accumulated by central banks, so I focus more on gold. Gold stocks are not yet at all-time highs, and they have plenty of room to catch up, so gold remains the better choice. Oil prices are declining as the “drill, baby, drill” agenda takes effect. I expect oil to drop from $75 to around $65 and consolidate for a while. Consumer staple stocks are in a downtrend, which reduces the likelihood of an imminent recession.

Fed Meeting and Market Outlook The Fed’s meeting on Wednesday could significantly impact the market. The last time the Fed met on 12/18/25, the market dropped about 3% on high volume, as the Fed mentioned they may be nearing the end of the rate reduction cycle. Markets typically react positively to rate cuts and negatively to rate hikes. We could hear dovish comments about rate cuts if the Fed views recent cooling inflation (PPI and CPI) as a positive sign. However, if they adopt a hawkish stance and raise rates, we could see a 10% correction. Chairman Jay Powell will likely avoid taking actions that harm Trump’s agenda.

Global Economic Factors Japan raised rates last week to combat inflation, which could hurt our Treasury Bonds since Japan is our second-largest creditor after the Fed. If higher rates in Japan slow down their economy too quickly, it could force Japan to sell U.S. bonds, driving yields higher and potentially harming our stock market and economy. However, I trust Trump will prioritize America’s interests and negotiate a favorable deal with Japan.

Bottom Line: The bull market is alive and well, with AI leading the charge and Trump focusing on putting America first. I am bullish but with a slight hedge (ETF shorting NASDAQ 100). Earnings are exceeding expectations, which is lifting many sectors. If I’m wrong, I will quickly adjust my positions to minimize risk, as risk management and position sizing are crucial for long-term success.

“It is by Grace you have been saved, through faith, and this is not from yourselves; it is the gift of God, not by works, so that no one can boast.” Ephesians 2:8-9  

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Dexter Lyons, Portfolio Manager
337-983-0676  Dexter@ChristianMoneyBlog.net
Active Risk Management, CANSLIM Investing
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The Trump Effect: Risk On!
The NASDAQ 100 (tech stocks) has absorbed the election rally, factoring in the Fed’s decision to pause rate cuts on 12/18/24. After three waves of selling, the index hit a low on 1/13/25 before surging past its 50-day moving average (DMA) on solid, above-average volume last Friday. The rally was sparked by cooler CPI data Wednesday, driving the index toward its downtrend resistance line. I expect the NASDAQ 100 to break through this resistance and rise about 3% higher; at this point, a new catalyst will be necessary to sustain the bull market trend.

With Trump assuming office on Monday, I expect him to follow through on promises to cut taxes and reduce regulations, which should positively impact corporate earnings and sales. The price and volume charts will reflect stocks benefiting from Trump’s agenda. AI-related stocks will maintain strong momentum, and companies with growing earnings and sales will likely capture investor attention.

Meanwhile, 20-year Treasury bonds have fallen to the 4/25/24 support line, pushing yields lower and allowing the S&P 500 to climb roughly 3% since 1/14/25. The junk bond index trades above its 50-DMA, signaling increased risk appetite and confirming a “risk-on” environment. Natural gas has surged nearly 50% since the election, driven by growing energy needs from AI data centers. The retail home furnishings industry has risen over 70%, indicating future economic growth. Bitcoin is approaching its all-time high, benefiting from expectations of Trump’s support. The energy sector has gained about 14% over the past 18 trading days, buoyed by a “drill baby drill” agenda. Regional banks are nearing their 50-DMA resistance, supported by a favorable yield curve, which helps banks profit from spread differences. Gold is regaining focus, trading above its 50-DMA as a hedge against inflation. Utilities are also above their 50-DMA, driven by higher energy demand from expanding AI data centers. The dollar is stable, with the market appearing content. Healthcare stocks remain weak due to the potential negative impacts of “Make America Healthy Again” regulations. China’s economy continues to weaken under communist rule, and consumer staples are trending lower while discretionary stocks are rising, signaling strong consumer spending and an optimistic outlook for corporate profits.

Bottom Line: Stocks with growing earnings and sales are under institutional accumulation, driving indexes higher. The market has adopted a “risk-on” attitude, expecting the Trump administration to boost overall performance. I remain highly bullish, anticipating indexes to break through to new highs and maintain their upward momentum. If I’m wrong, I will adjust quickly to avoid substantial losses, as risk management and position sizing are crucial to long-term financial success.

For where your treasure is, there your heart will be also. Matthew 6:21

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Dexter Lyons, Portfolio Manager
337-983-0676  Dexter@ChristianMoneyBlog.net
Active (BRI) Risk Management, CANSLIM Investing
ChristianMoneyBlog.net

Digesting/Correcting! 

All major indexes, including junk bonds, are trading below their 50-day moving averages (DMA), signaling an increased risk environment. Friday’s employment report exceeded expectations, causing stock indexes to gap lower and yields to spike as inflation concerns resurfaced. The U.S. dollar reached an all-time high as foreign investors converted their currencies to purchase our higher-yielding Treasuries.

20-year Treasury bonds are nearing the 4/25/24 low, which may act as support. This week, we’ll see key inflation data with the Producer Price Index (PPI) on Tuesday and the Consumer Price Index (CPI) on Wednesday, making this a pivotal week. I expect that bonds will hold support and stocks will experience a rally. However, if I’m wrong, I plan to hedge or sell positions to stay aligned with the market trend.

Leading stocks with accelerating earnings and sales are performing well, and I expect them to continue their positive momentum—unless higher inflation pushes us into a recession. Inflation is often driven by excessive money printing. For context, Obama spent $8.6 trillion over eight years, and Biden spent $8.5 trillion in just four years, which explains the market’s concern about the pace of price increases. While inflation has fallen from 9% to 3%, wage growth has not kept up with rising prices. We may be on the brink of a recession, but no one wants to lose their job or face slow growth and high food prices (stagflation).

The market had anticipated the Fed would lower rates on 9/18/24, and since then, the Fed Funds Target Rate has dropped over 18%, while 20-year Treasury bond yields have risen more than 25%. Typically, the stock market rises when the Fed lowers rates, and longer-term rates decline. This time, however, the market seems to be signaling that the Fed was politically motivated (lowering rates before an election to influence votes) and made a mistake by cutting rates, which added to inflationary pressures.

Gold is trading above its 50-DMA, acting as both an inflation hedge and a potential haven as stocks face headwinds. International stocks are underperforming due to the stronger dollar, as overseas earnings lose value when converted back into U.S. dollars. The AI sector remains strong, with major players investing heavily to capitalize on the AI boom. The revolution in AI is still in its early stages, presenting ample opportunities. I am focused on companies benefiting from AI, particularly those with accelerating earnings and sales, as that’s where the greatest profit potential lies.

Bottom Line: Stocks are digesting and correcting, but if bond prices hold their support levels (less than 1% lower), we could see a tailwind for stocks by the end of the week. Mortgage rates are above 7%, credit card rates are near 25%, and the Commodity Price Index (CRB) is at a 14-year high, up 28% in the past seven months. My best guess is that bond yields will decline, and stock prices will rise this week. If I’m wrong, I’ll act quickly to avoid significant losses for myself and my shareholders. Grace and Peace to Everyone!

Grace and peace be multiplied unto you through the knowledge of God and of Jesus our Lord. 2 Peter 1:2

If you know anyone who would like to receive these Updates or invest in my Mutual Fund, please Email or call me.

Dexter Lyons, Portfolio Manager
337-983-0676  Dexter@ChristianMoneyBlog.net
Active (BRI) Risk Management, CANSLIM Investing
ChristianMoneyBlog.net

Stock Picker’s Market

The tech-heavy NASDAQ 100 Index rebounded sharply off its 50-day moving average support level with strong volume, driven by Microsoft’s announcement to invest $80 billion in AI-powered data centers in 2025. This news also helped propel the S&P 500 toward its 50-day moving average, albeit with lighter trading volume due to the holiday season. The market seems to have absorbed recent news, and I believe the digestion phase may be over. However, market breadth (advancers vs. decliners) has been weak, impacted by year-end tax selling and investors hedging stocks with significant gains. I expect volumes to pick up dramatically this week as traders return to the markets after their holiday breaks. Investors looking to outpace inflation and taxes should focus on stocks with strong earnings and sales growth. I prefer stocks with accelerating earnings and sales and those that have seen analysts raise their forecasts.

Nvidia’s CEO, Jensen Huang, will deliver the keynote at the Consumer Electronics Show (CES) on Monday night, and there are high expectations for him to share exciting news on AI and future tech trends. His speech could act as a market catalyst, potentially pushing indices to all-time highs in the coming weeks.

The U.S. dollar remains strong as long-term Treasury yields rise following the Fed’s rate cuts in September. Foreign investors seeking higher, safer yields are flocking to the U.S. as it offers a better risk-adjusted trade than other global rates. However, the 20-year Treasury bond may have found support, signaling a potential yield decline, which could boost stock prices.

Gold is currently just 6% shy of its all-time high and is viewed by many as a hedge against inflation. While the inflation rate has dropped from 9% to 3%, prices remain elevated. Gold has preserved its intrinsic value for millennia, and I believe it will continue to serve as a haven. In my view, Bitcoin will not replace gold or the dollar. If the government adopted Bitcoin as its official currency, it could lead to more significant issues, as it would be beyond its control.

Bottom Line: With lower taxes and less bank regulation under the Trump administration, I expect to see a boost in innovation, and free-market capitalism will attract global investment to the U.S. The market acts as a truth-teller, revealing that price trends never lie for long. America continues to lead with its brilliant minds, and the next four years could be the most prosperous we’ve seen in decades. I believe 2025 will be a stock picker’s market, and with growth stocks back in favor, a fully invested position presents a favorable risk-to-reward scenario. Wishing everyone a Happy, Healthy, and Prosperous New Year! Grace and Peace to all!

In the world, you will have tribulation. But take heart; I have overcome the world. John 16:33

If you know anyone who would like to receive these Updates or invest in my Mutual Fund, please Email or call me.

Dexter Lyons, Portfolio Manager
337-983-0676  Dexter@ChristianMoneyBlog.net
Active (BRI) Risk Management, CANSLIM Investing

Healthy Digestion

The blue-chip S&P 500 bounced off the 50-day moving average (DMA) last week, indicating strong support. The tech-heavy NASDAQ remained above its 21-DMA, which is a constructive sign, providing additional support for market cap-weighted indexes. Both major indexes are trading above the low from the December 18 Fed-driven dip, signaling overall market health. However, the equally weighted indexes (showing weaker breadth) are trading below their 50-DMA. We prefer more stocks to participate in the rally (stronger breadth), but we must work with what we have.

Since the election, the market has been in rally mode, with stocks positioning themselves in anticipation of the new Trump era starting on January 20, 2025. The leaders have already been identified, and many are consolidating gains (resting sideways) building new bases while shaking out weaker holders. Charities receiving appreciated stocks (with significant tax deductions) might sell leading stocks on the same day, leading to forced selling. I expect more tax-related selling in early January to lock in gains and defer taxes. So far, the charts haven’t shown compelling reasons to reduce exposure significantly. However, with only two more trading days left in 2024, I will allow the charts to determine how much exposure we should maintain.

Bottom Line: The major indexes are undergoing a period of healthy digestion, with the leaders performing well. It may be time to pull out the weeds (sell underperformers) and let the flowers grow (hold the leaders). The market could be positioned for a “buy the rumor” (November 5) and “sell the news” (January 20) scenario. If the market drops following the Trump Inauguration on January 20, we’ll follow the charts and take the necessary actions to invest for another day. Wishing you all a Happy, Healthy, and Prosperous New Year! Grace and Peace to Everyone!

The grace of God has appeared, bringing salvation to all people. Titus 2:11