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April 22, 2024

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The Fed lost confidence in its own outlook for the economy and inflation.  

The S&P 500 stock price index (symbol: $SPX, 4,967.23) fell 5.46% over the past 3 weeks. Technically, $SPX broke down below its 50-day SMA on 4/15/2024, which triggered more selling. Even before last week, the uptrend since October had been showing considerable damage: various trendlines were broken, short-term momentum oscillators broke down, and On-Balance Volume (OBV) stalled out after peaking on 3/1/2024. From October to March, sentiment on Wall Street swung from pessimism to optimism and Extreme Greed, which often is a sign of a top.

This month, more investors finally appear to be waking up to the risks to the outlook that we have been pointing out. A conservative investment strategy with emphasis on preservation of capital is rational and prudent when market risk is high. When higher probability Reward/Risk opportunities become available, that will be the time to move from conservative strategies toward growth strategies, not before.

Federal Reserve Chair Jerome Powell said he is less confident that inflation soon will fall to the Fed’s 2% target. "The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence." That implies that the Fed’s monetary policy will have stay tight for longer, and interest rates will have to stay high for longer.

Global Fund Managers are the most bullish on global equities since the top in January, 2022, according to the latest April survey by Bank of America. Fund managers expect a stronger economy, and some predict an economic boom. Higher inflation is seen as the biggest risk, followed by geopolitical risk. Inflation expectations have increased sharply to the highest point since April, 2022.

Summary of Current Issues Impacting the Financial Markets

  • Stock market indicators continue to confirm bearish price momentum for the short term.
  • Stocks have been overbought and overvalued for months after the price run-up since October.
  • Overall risk (including war risk, which is the worst kind) is high and rising.
  • The VIX volatility index surged to its highest level since October, reaching 21, up from 12 in December. Volatility typically increases when the price trend turns down. The last time VIX jumped like that was early in the Covid panic in February, 2020....  

See The Colby Global Markets Report (click herefor our complete analysis of global markets and specific investment rankings.

Every day, we use technical, fundamental, and quantitative analysis to judge the Reward/Risk probabilities of trend continuation or reversal. We strive to control risks and to make sure that all of our clients are safe and protected from large losses. If you want to earn reasonable returns while avoiding large losses, move your wealth to our professional fiduciary asset management. We always put our clients’ best interests first, and we are always here to help you in times of stress.

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Robert W. Colby Can Manage Your Account

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11-Year Outperformance by the
Top 10 Exchange Traded Funds
Weekly Rankings of Major Trend Relative Strength

My weekly Top 10 ETFs ranked by the Major Trend Relative Strength outperformed the S&P 500 by over an 11-year period of real-time weekly tests. Click here for a graph of simulated performance.
Please note that my ETF rankings are available by subscription--NOW WITH A NO-RISK FREE TRIAL.
See The Colby Global Markets Report (click here).

My latest book was named one of the top investment books by Stock Trader's Almanac 2005. This book also received an excellent review in the November 2003 issue of Futures.

My ETF Rankings are not investment advice. Rather, they are an objective ongoing research study.

Analysis of market forces may offer a sense of probabilities. But the many variables that can impact market prices are notoriously difficult to predict. And, market analysis is something less than an exact science. So, sound trading tactics are always recommended. See my
Money Management Rules.

According to CFTC Rule 4.41, hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

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Robert W. Colby, CMT,
is a consultant to institutional and private investors and traders, providing regular analytical reports, custom research services, and trading systems tailored to clients' objectives. Clients include the most successful traders and investors in the world. Robert is the author of The Encyclopedia of Technical Market Indicators, Second Edition, McGraw-Hill, 2003, which has become the standard reference for indicator and trading systems design. Previously, at several large Wall Street firms, Robert worked as a proprietary trader, technical analyst, and fundamental analyst. He also was adjunct professor at New York University and New York Institute of Finance, where he developed new courses on technical analysis and market timing.

Robert W. Colby is a Chartered Market Technician (CMT), an accreditation granted to members by the CMT Association (https://cmtassociation.org/) after demonstrating professional competence and ethics over a period of many years. Robert has been a member since 1980, and he strongly supports the CMT Association's high standards. He also supports the The Technical Analysis Educational Foundation (https://www.taeducation.org/about/), which works to have technical analysis included in the curriculum of major business schools. "The CMT Association is the national organization of investment analysts, stock market analysis professionals, and certified market technicians in the United States."

Robert W. Colby is America's foremost authority on testing market indicators."
--Bill Meridian, top-ranked investment analyst and international fund manager, www.billmeridian.com

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Ranking ETFs
"Robert Colby has evolved a system that, while hardly foolproof, is pretty clever," wrote Daniel Fisher, "Surfin' ETFs", Forbes, Investment Guide, Special Issue, June 4, 2007.
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INTERVIEW of Robert W. Colby in Technical Analysis of STOCKS & COMMODITIES magazine, December 2006 issue.
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"Gold's next move: History, logic, and intermarket relationships. See if testing gold's relationship to different markets over a 32-year period provides possible trade signals for the yellow metal."
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"Which gold indicators are best? Divining gold's next move."
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"Applying the Relative Strength strategy to ETFs."
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"PUTTING CANDLES TO THE TEST, How Profitable Are They Really?" by Robert W. Colby, CMT. Published in SFO, STOCKS, FUTURES AND OPTIONS MAGAZINE, Volume 5. No. 8. August 2006, pages 91-94. Please click here to buy this article. (Scroll to bottom of linked page.)

TradingMarkets.com interviewed
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Active Trader magazine September 2004 interviewed Robert W. Colby. 4 pages. "Robert W. Colby: Technical collector. A discussion with Robert W. Colby about technical trading and his revised Encyclopedia of Technical Market Indicators, Second Edition. By Active Trader Staff."

For information about
methods that would have performed substantially better than systematic trend-following in back-testing simulation dating back 32 years, email me by clicking on the following link:
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