Weekly Update: Market Model Turns GREEN
Good evening, and welcome to this week’s edition of Stealth Trades!
Our market health model has officially flipped back to green – a signal that a healthy bull market is in full effect.
We built this model a little over a year ago. It analyzes both technical and fundamental data to signal when market conditions are healthy or poor.
It’s not perfect. Nothing is. But it keeps us in when times are good and out when conditions are less than ideal.
The market rallied today following Fed Chairman Jerome Powell’s comments at the annual economic conference in Jackson Hole, Wyoming.
“The time has come for policy to adjust,” Powell remarked. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data.”
In other words… It’s time to start cutting.
“We will do everything we can,” Powell said, “to support a strong labor market as we make further progress toward price stability.” By cutting rates, he said, “there is good reason to think that the economy will get back to 2% inflation while maintaining a strong labor market.”
This is what the market has been waiting for – solid confirmation from the head of the Federal Reserve that interest rates are heading down. Powell fell short of hinting at a 50-basis point cut at the next meeting (something I was hopeful for), but the news was bullish for stocks nonetheless.
It was a spectacular day for construction stocks. This is an area of the market I have been talking about for most of 2024. The rally that began in the beginning of the year lost steam after the 6 rate cuts we were promised failed to materialize.
Interest rates are hugely important for homebuilders. A few percentage points in either direction is often the difference between American families being able to afford a mortgage or not.
Here is a quick screenshot from my Construction watchlist on TradingView today:
There are several clean setups in this space – primarily in the big homebuilder and building materials names.
Builders FirstSource (BLDR) pictured below is breaking out from a clean shallowing base.
The nasty dip at the beginning of August was the Japanese Yen fiasco that temporarily rocked international markets. It was a Black Swan type event, so we can ignore it as it pertains to the trade setup.
Generac (GNRC), which manufactures and sells whole-home generator systems, also looks good.
The chart could be cleaner. And without the July 31 Japan shock, it probably would be. This is why it is important to know what is taking place in the markets when evaluating charts.
KB Home (KBH) is a west coast home builder whose stock is also benefiting from the assumption of lower rates going forward.
Notice the strong move through the pivot today.
Mohawk Industries (MHK), pictured below, is breaking out from a textbook flag pattern.
This is one of the most powerful chart patterns in the market, and I will be discussing it in more detail in tomorrow morning’s LIVE presentation. All the details are at the link below.
CLICK HERE TO REGISTER
Nothing is guaranteed. But right now, both the technical and fundamental picture point to one thing – higher stock prices over the rest of the year.
There will be lots of opportunities in several areas. But construction-related stocks are, in my opinion, the low-hanging fruit here.
Get ready for a new housing boom.
Best wishes for your trading,
