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[dTraderB]

CFNAI Index Suggests Economy Is Slowing
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CFNAI Index Suggests Economy Is Slowing
Mar. 02, 2025 6:53 AM ETACTV, AFMC, AFSM, ARKK, AVUV, BAPR, IVOO, IVOV, IVV, IVW, IWC, IWM, IWN, IWO, IWP, IWR, IWS, IYY, QQQ, SPLV, SPMD, SPMO, SPMV, SPSM, SPUS, SPUU, SPVM, SPVU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SPYD, SPYG, SPYV, SPYX, SQEW, SQLV, SSO, SSPY, SVAL, SYLD, TMDV, TPHD, TPLC, TPSC, UAUG, UJAN, UMAR, UMAY, UOCT, UPRO, USMC, USMF, USVM, MAGS6 Comments

Lance Roberts
Investing Group Leader

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(21min)
Summary
Over the previous week, the market fell sharply following news of a potential viral outbreak in China and more concerns about tariffs from the Trump Administration.
The EOCI and the Leading Economic Index remained in typically recessionary territory for an extended period, yet the National Bureau of Economic Research never called a recession.
The CFNAI and EOCI incorporate the impact of monetary policy on the economy in both lagging and leading indicators.
While the outbreak news was quickly dismissed, stocks struggled this week, with bonds, real estate, healthcare, financials, and staples outperforming.
a snail crossing a road

Stefan Rotter

February Weakness And The Outlook For March
Last week, we discussed that continued bullish exuberance and high levels of complacency can quickly turn into volatility. Over the previous week, the market fell sharply following news of a potential viral outbreak in China and more concerns about tariffs from the Trump Administration. While those were the headlines that gained the markets attention, the reality was that the market was overbought and on a sell signal, setting the market up for pullback. The correction was not unexpected, as discussed three weeks ago:

The bullish bias is evident, as witnessed by the recent surge in retail money flows into leveraged ETFs and speculative options trading. However, as is always the case, whenever investors are crowded on one side of the boat, it is often a decent contrarian signal to be a bit more cautious. Furthermore, while there is currently no evidence of a catalyst for a correction, it is worth noting that we are entering into the seasonally weak part of February.

Late February can be tricky for the bulls

In other words, while the media scrambled to align reasons with the sell-off, the correction was very much in line with seasonal tendencies. Crucially, that sell-off has pushed investor sentiment to levels typically equating to much deeper corrections. From a contrarian view, that extreme negative sentiment, now combined with oversold conditions, provides a good base for a rally in March.

Sentiment is approaching two standard deviations below its average level. Such levels are more coincident with market bottoms than the beginning of a corrective cycle. I have labeled some events along the way. The lesson is that headlines drive sentiment, and when sentiment becomes too negative, as may be the case today, such allows for rallies to form.

Net bullish sentiment Z-score

Here Comes March
Furthermore, March has a seasonal bias to the upside as we enter the end of the quarter and the last stretch of the seasonally strong period of the year. January, March, and April have the most substantial early year returns, with March and April having the highest win rates.

Seasonal returns
Does this mean the next major bull market rally is set to begin? No. But it does suggest that there are such high levels of negative sentiment that selling today will likely be a mistake. Loss avoidance is one of the psychological factors that leads investors to long-term underperformance. With market sentiment very negative and becoming decently oversold, be patient and wait for a tradeable rally to rebalance portfolio positions as needed. For traders, a decent tradable opportunity is likely in the near term.

However, while there is a potential for a decent tradeable rally over the next month or so, we still expect increased volatility this year. We want to reiterate using rallies to rebalance risk and manage allocations as needed.

The latest readings from the CFNAI index are one reason we remain cautious about our outlook.

The CFNAI Index Suggests The Economy Is Weakening
Recent economic reports have shown a more serious activity slowdown, which we have discussed many times in recent months. One indicator we watch closely is the Chicago Fed National Activity Index (CFNAI) which is arguably one of the most important and overlooked economic indicators. Each month, economists, the media, and investors pour over various mainstream economic indicators, from GDP to employment and inflation, to determine what markets will likely do next."

https://seekingalpha...nomy-is-slowing

[redfoliage2]

I see more likely just a ST bounce. IT trend now is bearish .....................

Edited by redfoliage2, 03 March 2025 - 09:08 AM.

[dTraderB]

Never thought I will be daytrading IBIT.
Unintentional. Good swings...

[12SPX]

I mostly agree with you as I keep saying over and over that volatility is going to continue as Friday's big push at the end of the day wasn't surprising to see as everyone wants to make their books pretty for month end.  I did actually get filled for a short at 6000 overnight and out for 20 points but its totally unofficial as I didn't post and right now don't really care lol!!  I'm into selling daily options right now as they are just so easy to collect amazing premiums quick with little movement and don't have to stare at my computer all day.  If we do rally a little after this plunge though I may start selling again mind you.... 

[redfoliage2]

After this profit taking upon the cash open ES is likely to go up from here.  VST we are likely to see the bounce to resume and to see ES 6000 in the afternoon today.  This is a typical ST bullish setup ............................

Edited by redfoliage2, 03 March 2025 - 10:29 AM.

[redfoliage2]

After this profit taking upon the cash open ES is likely to go up from here.  VST we are likely to see the bounce to resume and to see ES 6000 in the afternoon today.  This is a typical ST bullish setup ............................

It's a textbook bullish setup, and I see a confirmation of last Friday's bottom.  That said dips here are likely to be bought ...............................

Edited by redfoliage2, 03 March 2025 - 10:51 AM.

[12SPX]

Exciting, those 6000 calls are very pricey as the bulls are out in force trying to push it up....  Not only am I selling the daily 6000 calls for an average $7.20, already profitable I would leave some behind to sell there lol!!  Btw with the sell off I also sold the 5900 puts for $7.70 with profit stops on already.... 5 hours to go,,,,tick tick tick

[redfoliage2]

 

After this profit taking upon the cash open ES is likely to go up from here.  VST we are likely to see the bounce to resume and to see ES 6000 in the afternoon today.  This is a typical ST bullish setup ............................

It's a textbook bullish setup, and I see a confirmation of last Friday's bottom.  That said dips here are likely to be bought ...............................

 

ES 6000 is the target for today, and weekly target ES 6060 - 6100 ........................

Edited by redfoliage2, 03 March 2025 - 10:55 AM.

[blustar]

I see SPX 6150-60 cash by March 5 on the Mercury Pluto sextile, but watch out below after that!!! We have the Sun Saturn conjunction on the 12th, my guess around SPX 5725-30.

[dTraderB]

Want to add LONGS AGGRESSIVELY but this market still looks too heavy. Added IBIT & NVDA CALLS. WILL ADD QQQ, SPY, DIA CALLS below ES 5950

ES 5950 IS IMPORTANT SUPPORT/RESISTANCE but this market is beyond TA or FA today and recent days.