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Strategies & Market Trends : Point and Figure Charting

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To: J.B.C. who wrote (34385)9/25/2022 9:47:06 AM
From: J.B.C.   of 34405
 
September has lived up to its reputation as one of the worst months for the market this year. Starting with a higher-than-expected CPI print and then more hawkish statements from the Fed yesterday, equity and fixed income markets have taken a hit across the board. This led to the Money Market Percentile Rank reaching 77.46%, an increase of almost 35% in a single day. Much has been noted about the overall weakness of the fixed income market which has helped buoy the Money Market Percentile Rank to rest at higher-than-normal levels, but the recent move saw the group leap above numerous equity-related groups. The average group score for US Money Market is still below 3.0 and is now 2.68 which is still lower than it was for much of this year. The group has yet to cross above the 3.0 score mark since 2020 which it did for less than a week. The only prolonged period the US Money Market group was able to spend time above the 3.0 score threshold was from 2007-2009. Even though the US Money Market’s score is lower than it was earlier this year, the Money Market Percentile Rank is at the highest level this year due to broadening weakness across asset classes. The number of groups with an average score above 3.0 is only 18, two of which are the Inverse-Market and Inverse-Fixed Income groups. Even in mid-June when the S&P 500 put in a 52-week low, there were 21 groups with an average score above 3.0.

When observing MMPR (Money Market Percentile Rank) historical data, this is the first time since 2007-2008 where the MMPR went above 50% then came back down below 25%, and then moved back above 50% This is concerning, and it speaks to the vicious swings to the downside and upside we’ve had so far this year. A silver lining is the US Equity Core Percentile Rank, which is still sitting at 90%. This was not the case in 2007-2008 when the Core Percentile Rank was below 50%. However, it must be stated that our history is somewhat limited as it only goes back to the mid-2000s. The weakness in the fixed income market and the prospect of a prolonged period of higher interest rates is not something markets have had to deal with for decades. This does impact asset class rankings due to fixed income not operating as a backstop to a weak equity market. Given this dynamic, relative strength in equities when compared to fixed income may hold up longer than usual since both are moving, albeit at different rates, in the same direction. With this dynamic, it is still encouraging to see the Core hold up as well as it has on a relative basis so far this year. Both the Money Market Percentile Rank and the US Equity Core Percentile Rank are worth keeping close eyes on and possibly setting alerts on to closely follow movement as it occurs.
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