The S&P 500 fell below its 200-day moving average (DMA) but bounced back above it on Friday, signaling support from institutional investors. The last two times the index tested this level were August 9, 2024, and November 3, 2023. It’s crucial that the S&P holds this key support level, or the market could face more significant challenges. Uncertainty is the market’s enemy, and escalating trade wars and tariffs could lead to slower growth and rising inflation—potentially resulting in stagflation. Tariffs will likely drive up costs across all goods and services, further fueling inflation expectations, which could ultimately hurt corporate earnings. Playing defense may be the best strategy to minimize losses in a bear market.

Many stock charts have broken down, and they will take time to repair. According to Investor’s Business Daily (IBD), we need a Follow Through Day (FTD) before considering new buys. An FTD occurs when the market rallies more than 1% on higher volume, four days after an up day, making Wednesday the earliest potential day to buy. However, I don’t see many stocks in favorable buying zones besides defensive stocks, which isn’t a bullish sign. I moved to all-cash (defensive) on February 21, 2025, and will wait for an FTD before re-entering the market.

On the global stage, Trump recently criticized Europe and Germany for not investing enough in defense and suggested the U.S. might pull out of NATO, leaving Europe to fend for itself. The European Central Bank (ECB) can’t monetize debt through asset purchases while inflation remains above target. Germany will likely need to tap into global credit markets, increasing competition for U.S. Treasuries, especially now that it may need to offer higher yields to attract investors. This dynamic caused a 3.5% drop in the dollar last week, as German yields surged due to increased government borrowing to finance military support for Ukraine. The higher yields on German bonds also led the Euro to rise 4.4% as investors sought higher returns in European currencies.

On Friday, the Atlanta Fed’s GDP growth estimate plummeted from 2.3% to a negative 1.5%, signaling the possibility of a recession that may have begun weeks before Trump took office. Consumer spending is declining, and the savings rate is increasing. In times like this, the risk isn’t worth the potential reward, so it’s better to step aside, wait for a solid market bottom, and watch for stocks to break out from sound bases.

Sin will have no dominion over you, since you are not under law but under grace. Romans 6:14

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Active Risk Management, CANSLIM Investing
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Last week, the NASDAQ dropped 3.5%, bouncing off its 200-day moving average (DMA), which serves as key institutional support. This marks the third test of significant support levels since March 2023, so we must maintain institutional demand at these levels. Each time the market tests these key support zones (like the 50 and 200dma), the likelihood of them being held decreases. Institutional investors (hedge funds, pensions, sovereign wealth funds) drive our trends, and the long-term trend is still positive. However, these support levels must hold, or we could be headed for a recession or bear market.

There’s been an uptick in down days on above-average volume, signaling heavy selling from big-money investors. Knowing when to “hold em or fold em” is essential for meeting long-term financial goals. When the market isn’t rewarding risk, I stick to my rules, step aside, and wait for stocks to break out of sound base pattern price pivots. Smart money looks ahead six to twelve months and positions itself accordingly. The market is adjusting expectations for future stock profits in light of the 25% tariffs on Canada and Mexico (and 10% on China) set to impact Tuesday, March 4, 2025. The market doesn’t like uncertainty, so stocks are being sold off in anticipation of how these tariffs might affect corporate profits. The return of open, tariff-free international trade could push the market higher out of this trading range, but that is unlikely.

Gold has only dipped about 3% from its all-time highs, with investors flocking to it as a hedge against inflation and economic uncertainty. The U.S. Treasury has been issuing more short-term T-bills to service our national debt rather than long-term bonds, which has helped reduce mortgage rates, potentially boosting the housing market. Falling rates might also be a reaction to fears of a tariff-induced recession. Oil prices have been sliding since mid-January, possibly due to recession worries, likely leading to reduced oil demand. Consumer confidence dropped last week as expectations for slower economic activity grew. NVIDIA posted solid earnings, but the stock still fell below its 50-dma. Many growth stocks face technical breakdowns and need time to recover, so I’m staying patient and waiting for better setups.

The market’s primary concern is uncertainty, and this Friday’s job report could clarify whether we stay in a trading range or heading into a bear market. Friday saw many oversold stocks showing “undercut and rally” patterns, a sign of potential accumulation. That would be a bullish signal if these recent lows hold. However, if these levels break down with increased volume, I will adopt a more bearish stance and look for stocks or ETFs to short.

The AAII (American Association of Individual Investors) survey shows a record-high 60.6% bearish sentiment, and the CNN Fear/Greed index indicates extreme fear. These are often viewed as contrarian signals, suggesting retail investors have already capitulated, which could mean the worst is over. Tariffs on Tuesday could push us into a recession/bear market, or the market could ignore it and move higher. May God’s grace and peace bless you!

As each has received a gift, use it to serve one another as good stewards of God’s grace. 1 Peter 4:10

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Dexter Lyons, Portfolio Manager
337-983-0676  Dexter@ChristianMoneyBlog.net
Active Risk Management, CANSLIM Investing
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Caution!

On Friday, the S&P 500 index fell by 1.71%, reaching its 50-day moving average support level on above-average trading volume, indicating potential distribution. The NASDAQ index experienced a 2.2% decline and failed to secure institutional support, dipping below its critical 50-day moving average. The Russell 2000 index, representing small-cap stocks, is trading beneath its 200-day moving average, while mid-cap stocks barely hold above this level. Factors contributing to this downturn may include options expiration, weak consumer demand forecasts from Walmart, and Microsoft’s cancellation of AI contracts, which included penalties. Many leading growth stocks suffered significant losses, resulting in numerous damaged charts requiring time to recover. A rebound is anticipated on Monday; however, further selling could push the S&P 500 down an additional 3.5% before it finds its next support level. High-volume declines are warning signs that often precede bear markets. Should the indexes consistently trade below their 50-day moving averages, I will explore short-selling opportunities.

Since January 10th, 10-year Treasury yields have declined, approaching the 4% support level, signaling economic weakness. The dollar began to weaken following the Federal Reserve’s decision to pause rate cuts on December 18th. Crude oil prices have dropped to around $65 due to increased supply, potentially coupled with weak demand. Consumer discretionary stocks (XLY) have fallen below their 50-day moving averages on significant volume, while consumer staples (XLP) have rallied, reflecting a shift in sentiment and a slowing economy. Homebuilders (XHB), often viewed as an economic indicator, peaked weeks ago. Although gold has remained stable near all-time highs, gold stocks faced substantial losses on Friday. Regional banks (KRE) have also fallen below their 50-day moving averages on high volume, indicating weak consumer loan demand under financial strain. While China appears stable, trust in a communist government is questionable. Reduced government spending constitutes one-third of GDP and could hinder economic growth. The favorable economic conditions are diminishing; prices remain high, inflation persists, and signs of economic slowdown may lead us toward stagflation, which is concerning.

Wednesday is judgment day for NVDA as it releases earnings for its Blackwell chip demand after the Deep Seek China news of a more efficient AI program. The indexes have been in a trading range since December 18^th, so NVDA’s earnings and guidance could be a game changer for AI and economic growth. I am short-term bearish but remain open-minded, seeking to make money and avoid life-changing losses. May God’s Grace & Peace Bless You!

Blessed is the one who perseveres under trial because, having stood the test, that person will receive the crown of life that the Lord has promised to those who love him. James 1:12

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Dexter Lyons, Portfolio Manager
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Active Risk Management, CANSLIM Investing
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The S&P 500 and NASDAQ are approaching historical peaks, and I anticipate they will break out and resume their uptrends after basing (going sideways) since December. The market has absorbed the negative news regarding interest rates, inflation, tariffs, and geopolitical conflicts, which now appears poised for further gains; thus, we are positioned to participate in the next phase of this bull market. Our portfolio comprises a well-diversified selection of approximately 27 stocks, with significant allocations in the gold, software, and medical sectors. I have been strategically limiting losses to around 5% of our cost basis while taking profits near 10%, yielding favorable outcomes. Artificial intelligence remains the prevailing theme, and numerous stocks are adjusting to the transformative efficiency results from Deep Seek, indicating that it may take some time for the market to realign with the new leaders. I plan to follow the big money by looking for stocks advancing on above-average volume.

Gold is currently experiencing institutional accumulation as it approaches $3,900 per ounce, supported by above-average trading volume. Recently, Trump issued an Executive Order (EO) instructing the Treasury to devise a plan within 90 days for establishing a sovereign wealth fund (SWF). This EO can potentially prompt the United States to reassess its reported gold reserves from $45 to $3,900, shoring up its balance sheet. It is possible that some of this gold has been loaned out (hypothecated) to other countries, and the creation of a SWF could necessitate the re-hypothecation of gold back to Fort Knox. This repatriation of gold to its rightful owner (the US) may account for some of the recent surge in gold prices to record levels.

The Chinese government now permits insurance companies and citizens to purchase gold for their accounts. Traditionally, gold has served as a reliable store of value and a safeguard against inflation. Gold and the stock market are likely headed higher! May God’s Grace & Peace Bless You!

Grace was given to each of us according to the measure of Christ’s gift. Ephesians 4:7

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Dexter Lyons, Portfolio Manager
337-983-0676  Dexter@ChristianMoneyBlog.net
Active Risk Management, CANSLIM Investing
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Digestion/Distribution in a Bull Market!

The current phase of digestion and distribution in a bull market is noteworthy. Growth stocks exhibiting accelerating earnings and sales are experiencing institutional accumulation; however, the overall market weight impedes their progress. Despite this, we remain in a bull market, with leading growth stocks poised to elevate the indexes in the upcoming week. The indexes have been consolidating recent gains, moving sideways (above the 50-day moving average) within a trading range close to all-time highs. The market is recovering from the shock of the Federal Reserve’s unexpected pause in rate cuts on December 18, during which we observed approximately six distribution days (defined as a price decline exceeding 1% on increased volume) on the NASDAQ and three on the S&P 500. The market experienced a sell-off on Friday due to potential tariff news anticipated over the weekend; however, futures show positive movement on Sunday night, suggesting a potentially favorable week ahead.

In December, consumer credit surged to over $40 billion, marking the largest increase on record, indicating that consumers continue to spend despite rising prices. The anticipated consumer debt was around $16 billion, which was a surprise, particularly given that individuals face interest rates of approximately 23% on their credit card debt. The Federal Reserve has contributed to inflation by increasing the money supply and extending credit. If the Fed were genuinely combating inflation, we would expect a contraction in credit; however, this is not the case. The Fed’s policies remain overly accommodative, raising concerns about the potential for stagflation, characterized by a slowing economy coupled with rising inflation. The absence of a contingency plan from the Fed to address stagflation could lead to a significant downturn in the stock market, raising serious concerns for the future.

Gold is a safeguard against inflation and is trading close to its historical peak of around $2,873 per ounce. Central banks are adding to their gold reserves in response to the decline in purchasing power of fiat currencies, which are issued without tangible backing. Notably, one ounce of gold still has the purchasing power to buy the same amount of bread as 2,000 years ago when Jesus walked the earth. Gold is acknowledged as a reliable store of value and may function as a medium of exchange in critical situations. Gold is experiencing a bull market and represents my largest investment allocation.

Japanese 10-year treasury yields are experiencing an upward trend, currently yielding 1.3%, which marks a 15-year peak. Concurrently, inflation in Japan is approximately 3.6%, and the debt-to-GDP ratio hovers around 250%. The increase in yields is attributed to rising inflation expectations in Japan, mirroring trends observed in the United States. This situation may compel Japan to liquidate US Treasuries to stabilize the yen. Hedge funds, utilizing significant leverage (up to 100:1), have borrowed yen at rates near 25 basis points, invested in higher-yielding Treasuries through the yen carry trade, and have benefited from substantial spreads for many years. However, should Japanese yields escalate too quickly, the yen carry trade could unwind abruptly. Such a rapid unwinding could disrupt global stock markets if there is a significant sell-off of US Treasuries. Trump is aware of the developments in Japan and is likely to take measures to avert a potential crash in the stock and bond markets during his administration.

Bottom line: We remain in a bull market, with the indexes likely to break free from this period of sideways trading and reach new all-time highs. This week, Powell will testify before Congress, and we will also receive the monthly Consumer Price Index (CPI) and Producer Price Index (PPI) data. A recent report indicates that DeepSeek has invested over $1 billion in its computer cluster. The frequently cited figure of $6 million is quite misleading, as it does not account for capital expenditures (CAPEX) and research and development (R&D), and it primarily reflects the cost of the final training run. Trump is currently “studying” the potential for a strategic Bitcoin reserve, which can be interpreted as an indication that it is unlikely to materialize. Disciplined risk management and appropriate position sizing are crucial for achieving long-term success. Grace & Peace!

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

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

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Deep Seek & Tariffs!

Last Monday, the NASDAQ 100 (NAZ) and S&P 500 (SPX) indexes dropped below their 50-day moving averages on above-average volume following the Deep Seek news. Deep Seek, a Chinese startup, introduced a new AI model that uses cheaper chips and less data, resulting in lower heat production and increased efficiency compared to current models. If their claims hold up, it could disrupt many AI companies. Despite the sharp drop, many of the stocks that were hit hardest on Monday have since rebounded, which is encouraging. Some of my sell-stops were triggered, so I repositioned into medical and software stocks, breaking out of solid bases. There are still a lot of stocks under institutional accumulation, which leads me to believe the bull market may not be over just yet. However, I’m cautious due to about seven distribution days (a 1% decline on above-average volume), which is a concern.

On Friday afternoon, Trump announced tariffs on Canada, Mexico, and China, causing the market to reverse course and close lower on significant volume. As I write this on Sunday night, futures indicate a rough opening on Monday.

The Fed hinted that it was nearing the end of its rate-cutting cycle on December 18. The indexes slipped below their 50-day moving averages shortly after, marking the first of seven distribution days. Since then, the NAZ has struggled but found support at its July 11 peak. I expect the NAZ to hold above its 50-day moving average, but further correction could be in the cards if it fails. The market seemed stable after the Fed held rates steady on Wednesday, but the Trump tariff news shifted the momentum.

I believe Trump is an effective negotiator working in America’s best interest, and ultimately, his policies will benefit the country. I don’t argue with the market—the price is always right. My health and peace of mind are far more important than any stock. If a stock doesn’t perform as expected, I’ll stick to my loss-cutting rules and live to trade another day. In the long run, we win!

Bottom Line: The bulls are still in control, but that could change. I’ll continue following the trends created by big money while sticking to my rules to ensure I can keep investing. Risk management and position sizing are key to long-term success. Grace & Peace!

May the God of hope fill you with all joy and peace in believing, so that by the power of the Holy Spirit you may abound in hope. Romans 15:13

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