ESP Tuesday: Stock Rally Continues as Middle East Conflict Enters New Phase. NYAD Makes Emphatic New High as Market Ignores Powell’s Hawkish Mantra. Plus, a New Stealth and very Contrarian ESP Pick.

Don’t Fight the Tape. Trade what you see. Trust the charts not the noise.

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The stock market is starting to decouple from Fed Chairman Powell’s hawkish comments as three Fed officials are suggesting that rate cuts are on the table.

Strategy Update – Don’t Fight the Tape

Amidst the confusion of whether there is a ceasefire in the Middle East or not, stocks continue to rally as three Fed officials are hinting at lower rate cuts, Waller, Bowman, and more subtly Goolsby. Yet, Fed Chair Powell is sticking to his inflation is still a problem mantra, as he testified in front of Congress. Yet, the market seems to be ignoring him, setting up a momentum driven rally, which means it’s time to trade the trend.

Thus, as I noted this weekend, the market seems to be discounting Powell’s hawkishness and starting to price in a rise in liquidity via rate cuts.

I remain wary of the global situation, but I continue to position our portfolios (Momentum Monday and ESP Tuesday) according to the market. Yesterday we added a new tech stock to our Momentum Monday portfolio, which has gotten an excellent start. Today, I’m adding a new very contrarian pick to our ESP portfolio.

Stick with the plan:

• Don’t fight the liquidity trend, which is positive – the Fed and the U.S. Treasury are sneaking money into the system and the market is expecting more.

• Stick with strength – some tech stocks are moving decidedly higher. I’m adding a new one today.

• Let the market stop you out of positions – so far, our portfolio has remained resilient

• If a position does not get stopped out, it’s a sign of strength and it should remain in the portfolio – we have 11 such positions in the portfolio right now

• Hedge when necessary – we have an insurance trade setup in place.

Market Update – NYAD Makes Emphatic New High

The New York Stock Exchange Advance Decline line (NYAD) made an emphatic new high this morning. This is encouraging. But we’ve seen this before of late. So we want to see NYAD close at that new high and build upon it. Keep an eye on the 50 level on RSI, the support lines, and the 20 and 50-day moving averages. If NYAD holds above this support cluster, we are likely going to move higher. Also, keep an eye on the dip buyers. If they materialize as the news shifts, the bullish trend will have a chance.

The S&P 500 (SPX) is back above 6000 and looking to bet above 6100. We’ll see what happens as the day progresses. Key support remains at the 5850-5950 and important resistance at -6100 area. A breach of the upper or lower end of this range will likely be very meaningful.

The U.S. Ten Year Note yield (TNX) is still trading between 4.3 and 4.6% and is within striking distance of breaking below its 200 day moving average. Interestingly, the bond market barely flinched as Mr. Powell continued his hawkish stance before Congress.

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