A0 Financial

Date: 10/29/2023

(Not Financial Advice)

Table of contents:

1. $XLU decline

2. $APPL earnings

3. Bonds reinverting

$XLU decline

Since the start of September, the $XLU (utilities sector) has sharply declined. Since September 1st, it is down 7.20%. Historically, utilities mimic the S&P 500 sector. With utilities down, this is signaling a possible deflation. With interest rates so high, the Federal Reserve’s balance sheet shrinking, and equities falling, the near-term future of the market isn’t looking good. The Federal Reserve is deciding interest rates on November 1st. If the Fed pauses with inflation rising, it shows weakness, but if the Fed increases interest rates more, the economy's effects will be amplified. We think that the Fed is done, and an interest rate hike is unlikely, but it's not off of the table.

$APPL earnings

Apple earnings are this Thursday, which can further amplify the downturn in the market. If Apple's earnings are negative, this can be the last thing holding the S&P 500 index up. If Apple earnings are negative, 395 is next for the $SPY. If earnings are good, the $SPY can have a bounce at this level and meet the 200-day moving average again.

Bonds reinverting

Bonds are reinverting, which is a signal for a possible future crash. When bonds bottom, it takes an average of about 200 days for a crash to come. The yield curve is now moving reciprocal to the market, another red flag. If you read our report on portfolio allocation, you will know how to position yourself for tricky times like these. We don’t know precisely when these crashes will occur. All we can do is take the signals as they are and position ourselves accordingly.