After what was a strong run-up, the HCM-BuyLine® has turned back to negative, and we have been reducing exposure to equites into any rally we have had. We are approximately at maximum cash, which is a very solid 40% or maybe a bit more. Remember, the HCM-BuyLine® has 73/27% average of being right or wrong. The market is deeply oversold, but any rally should be held suspect and patience should be adhered to. The market will bottom but only time will tell when it does. With the massive cash build-up we have, the turn of the market could be very rewarding. If we break the February 22 low the market will probably sell off to the 3980 level on the S&P 500, which would be the next level of support.

S&P 500 performance over the first four months of the year indicates a high chance that the market could rally in the last half of 2022. History suggests a weak start to the year could continue over the intermediate term, supporting a tactical underweight to stocks, but it does not prevent a second-half rally. Looking back, there have been 13 times where the first four months of the year were negative like it is today, and only 4 times did the S&P 500 not recover and end the year positive. Of those 4 times, the market recovered the following year. So, there is a 66% chance we will recover from the drop and end the year higher. This is important and if you’re an optimist, which I am, when the market does turn back up there will be some great buys with all the cash we have built up.

There is an amazing list of growth and technology stocks that have dropped down to the point where you could say they are value stocks at this time. We have our list ready, and it continues to grow. The markets will work themselves out given time.

Job openings increased 1.8% in March to a new record high of 11.5 million. There were notable gains in retail trade and durable goods manufacturing. Job openings increased in medium-size firms (50-249 workers) and large firms (250+ workers) but fell in small businesses (fewer than 50 workers). Hires ticked down 1.4% to 6.7 million, but the near-term upward trend was intact, as both the three-month and six-month averages continued to move up. Layoffs edged up 3.8% to 1.4 million, although still close to a record low level. Voluntary quits increased 3.5% to 4.5 million, a new record high and a sign of rising worker confidence about future job prospects.

The number of unemployed per job opening fell to a new record low of 0.515, indicating continued tightening in labor market conditions. The number of job openings has exceeded the number of job seekers for 11 straight months now, contributing to faster compensation growth. As this could potentially feed into a wage-price spiral, it supports the market’s and our expectation for a fast Fed tightening cycle this year.