Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

What Can We Expect From Stagflation?

Published 04/28/2023, 03:12 AM
Updated 07/09/2023, 06:31 AM

The PCE rises (although far from the 8% peak). The GDP falls.

is the contraction of the economy over?

Meanwhile, stagflation persists along with the trading ranges in indices and many sectors.

INDU Monthly Chart

Plus, the theory we have been expounding on (a 2-year business cycle within a longer 6–8-year business cycle) gets more relevant every week.

How long can this trading range continue?

Looking at the Dow Jones Industrial Average, the range has been from $31,4239.82 to $34,342.32 in 2023.

Historically, we have seen the Dow remain rangebound for years (1968-1982). In current times though, things move much faster.

The 23-month moving average is a shorter-term cycle within a longer-term cycle.

The DJIA is sitting right on the monthly MA-teasing investors during a tough time predicting the next major moves.

With April about over, it will be fascinating to see if the DJIA closes above or below the blue line or 33,600.

It could be that the economy has contracted enough for now and will grow marginally.

It could also be that inflation peaked at 8% but could still have more upside.

There are many factors to consider, such as geopolitics. For now, we are accepting that stagflation remains the theme.

If so, we look at sectors outperforming the 2-year cycle, showing expansion.

Interestingly, some growth stocks (META APPL MSFT), defense sectors (Raytheon (NYSE:RTN) RTX), consumer staples (PG, Walmart (NYSE:WMT)), global streaming stocks (FWONA) and as few commodities (GLD (NYSE:GLD), SLV, Sugar) fit that bill.

Model Portfolio Monthly

Our NASDAQ All-Stars model has picked up on these growth stocks.

Now that Meta Platforms (NASDAQ:META) has wowed (and handily cleared the 23-month moving average), perhaps we will see the others join in as they get ready to report.

Here are the other positions relative to the 23-month MA.

MELI-ALGN-NVDA-BKNG Monthly Charts

ETF Summary

  • S&P 500 (SPY) 23-month MA 420
  • Russell 2000 (IWM) 170 support - 180 resistance
  • Dow (DIA) Over the 23-month MA
  • Nasdaq (QQQ) 329, the 23-month MA
  • Regional banks (KRE) 43 now pivotal resistance
  • Semiconductors (SMH) 246, the 23-month MA
  • Transportation (IYT) 202-240 biggest range to watch
  • Biotechnology (IBB) 121-135 range to watch from monthly charts
  • Retail (XRT) 56-75 trading range to break one way or another

Latest comments

I liked the Michele Schneider observation
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.