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US Futures Take a Breather as Oil Rally Pauses

/ September 28, 2023

Thursday saw Wall Street stocks struggling to gain ground, as they grappled with the prevailing market pessimism despite a pause in the oil rally. Investors were eagerly awaiting an update on the state of the US economic growth. Futures linked to the S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) faced challenges in making significant gains, hovering near the flatline. Meanwhile, futures tied to the tech-heavy Nasdaq 100 (^NDX) remained relatively unchanged. The Federal Reserve’s announcement that interest rates would remain elevated for an extended period had unsettled the markets. Nevertheless, stocks appeared to be stabilizing after enduring several days of sharp declines. In the realm of bonds, the rapid rise of the 10-year Treasury yield (^TNX) was showing signs of slowing down, although it still lingered around 4.63%, a level not seen in over 15 years. Both the stock and bond markets felt pressure due to the surge in oil prices, which had reached fresh 2023 highs on Wednesday and had surged by over 35% since the end of June. This surge was expected to drive up fuel costs, presenting a challenge to the Fed’s attempts to curb inflation, and subsequently affecting the likelihood of a rate reduction. On Thursday, oil prices retraced their steps, with West Texas Intermediate futures (CL=F) sliding to $93.50 per barrel after earlier reaching $95. Brent crude futures (BZ=F) were down by 0.5% at $96.09, having come close to $97. The central question remained whether the Fed could successfully orchestrate a “soft landing” for the economy, a subject of significant debate. Investors kept a close watch on updates regarding second-quarter GDP and jobless claims, scheduled for release later on Thursday. Additionally, the week’s data highlight was the forthcoming report on PCE inflation, the preferred gauge of the Fed, set to be released on Friday. However, some believed that it wouldn’t be persistent price increases but rather insatiable consumer spending and an overheated economy that would prompt central bankers to take action. In terms of individual stocks, Micron (MU) witnessed a nearly 5% decline during premarket trading following the chipmaker’s announcement of a wider-than-expected first-quarter loss. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Market News

The Road to Recovery: 3 Indicators to Gauge Stock-Market Pain’s Departure

/ September 27, 2023

Many investors are eagerly seeking signs of the stock market downtrend nearing its end, despite the S&P 500 only witnessing a 5.5% decrease since reaching its highest point in late July. Considering this, Victor Cossel from Seaport Research Partners has presented a few technical charts that could offer some understanding about when a possible reversal may happen. Nonetheless, the crucial idea is that, at present, there is an anticipation of encountering further challenges unless the ongoing rise in Treasury yields and the U.S. dollar ceases. At first, it is important for the proportion of Nasdaq 100 companies that are currently trading below their 200-day average to match the number of S&P 500 and Russell 2000 members that are also trading below their 200 DMAs. Analysts utilize moving averages to evaluate the speed and trajectory of a specific financial asset. Through analyzing these trends in the constituents of an index, analysts can ascertain the degree to which the performance of said index is dependent on a chosen few stocks. This trend has been especially prevalent in the U.S. stock markets over the year, largely attributable to the emergence of the renowned “Magnificent Seven.” The term “Magnificent Seven” is used to describe a group of prominent technology stocks that have seen substantial growth as a result of the increasing popularity of artificial intelligence. This group encompasses companies like Nvidia Corp., Microsoft Corp., Apple Inc., Meta Platforms Inc., Tesla Inc., Amazon.com Inc., and Alphabet Inc.’s Class A and Class C shares. According to the latest information from Cossell, which was current until the close of trading on Monday, 61% of Nasdaq 100 NDX members were above their 200-day moving averages. In comparison, the percentages were 45% for the S&P 500 SPX and 35% for the Russell 2000 IWM. However, these percentages may have altered slightly due to a notable drop in U.S. stock prices on Tuesday. If there is more pressure to sell, traders will closely monitor whether the S&P 500 can continue to stay at 4,200 points, a level that has served as a solid base for the large-cap index for a long time. If the stock market goes down to a level lower than 4,200, it may suggest negative outcomes for the future. Traders would perceive this decrease as a sign that the downwards trend is becoming more powerful. However, the excessive excitement and speculation in the market, which potentially impacted the Federal Reserve’s decision to signal consistent increases in interest rates, are slowly decreasing. One example of this can be seen when the information-technology section of the S&P 500 experienced a correction on Tuesday. It closed at 2,869.6, a decrease of 1.8% in value. This drop caused the index to decline by 10.5% from its highest point in the past year, which was 3,207.29. When a stock or index falls by 10% or more from its recent peak, it is categorized as being in correction territory. The interest rate plans revealed by the central bank after its September policy meeting have been widely cited as the main reason behind the recent changes in Treasury yields and the value of the dollar. The stock market may encounter difficulties if bond yields adjusted for inflation, known as real rates, continue to rise. This was illustrated by Cossel in a chart depicting the S&P 500’s valuation based on the future price-to-earnings ratio, which reveals a significant disparity compared to the current trading of 10-year real rates. In this particular situation, Cossel used the actual rate of interest, known as the 10-year nominal Treasury yield BX:TMUBMUSD10Y. However, this rate has been adjusted by considering the difference between the 10-year Treasury yield and the expected inflation rate, also known as the 10-year breakeven spread. Cossel indicated in the message that if rates do not go down, there is a chance that the S&P 500 could face some vulnerability while remaining at its present levels. The U.S. stock market faced notable declines on Tuesday, as the Dow Jones Industrial Average saw its biggest drop in a single day since March. Additionally, Treasury yields rose and the ICE U.S. Dollar Index reached its highest point in 10 months, indicating a stronger value for the U.S. dollar. Specifically, the ICE U.S. Dollar Index increased by 0.2% to 106.18, as mentioned. The Dow Jones Industrial Average fell by 338 points, indicating a 1.1% decrease to its present value of 33,618.88. In a similar vein, the S&P 500 index dropped by 63.91 points, or 1.5%, reaching 4,273.53. Likewise, the Nasdaq Composite index experienced a decrease of 207.71 points, reflecting a 1.6% decline, resulting in a new level of 13,063.61. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Market News

Market Meltdown? A Closer Look at September’s Stock Market

/ September 26, 2023

Wall Street Witnesses Earnings Forecast Downturn as S&P 500 Declines by 4% in September As apprehension grows among stock market investors due to the surge in Treasury yields and its impact on equities, the downward revisions in S&P 500 earnings forecasts are further fueling concerns. Nicholas Colas, co-founder of DataTrek Research, observed that after several weeks of Wall Street analysts either increasing or maintaining their 2023 and 2024 S&P 500 earnings estimates, there was a reversal in this trend last week. This shift may have played a less recognized role in the recent market selloff. In the past week, Wall Street reduced its third-quarter earnings estimate for the S&P 500 to $55.74 per share, representing a 0.6% decrease from the prior week. This effectively erased all the positive revisions made over the past seven weeks. For the fourth quarter, analysts lowered their forecast by 0.4% to $57.85 per share, essentially returning Wall Street’s estimate to where it stood at the beginning of June, as noted by Colas. The changes in earnings forecasts signify a shift from the earlier optimism stemming from the upward trajectory in estimates, according to DataTrek. Colas pointed out that many trading algorithms give significant weight to revisions in earnings forecasts. “While minor adjustments to earnings estimates typically go unnoticed, trends in this data can sometimes carry substantial implications,” he explained. “We anticipate further downward revisions in the upcoming week as analysts finalize their Q3 estimates.” On Monday, the S&P 500 managed to eke out a modest gain but still recorded a 3.8% loss for September, marking the third consecutive weekly decline. Most sectors within the S&P 500 incurred losses this month, with only the energy and utilities sectors showing positive performance. Utilities saw a 1% gain, while energy stocks rose by 2.5%, partly due to increased oil prices in September. The recent decline in the S&P 500 is attributed, in part, to the surge in bond yields, which have exerted pressure on equity valuations following the Federal Reserve’s late-September policy meeting. The yield on the 10-year Treasury note reached its highest level since 2007 after the Fed indicated its intention to raise interest rates and maintain them at elevated levels for longer than initially anticipated. Higher bond yields result in increased borrowing costs, which can weigh on companies and their earnings. With regard to corporate earnings expectations for the upcoming year, DataTrek highlighted a trend of downward revisions. Wall Street analysts reduced their 2024 earnings estimate for the S&P 500 by 0.3% last week, bringing it to $247.90 per share, marking the first reduction in nine weeks. For the first half of the next year, analysts revised their earnings estimate for the S&P 500 to $57.93 per share for the first quarter and $60.90 per share for the second quarter, according to DataTrek. Despite the climb in Treasury bond yields, U.S. stocks managed to close higher on Monday, with the Dow Jones Industrial Average edging up 0.1%, the S&P 500 rising by 0.4%, and the Nasdaq Composite advancing by 0.5%, according to FactSet data. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Market News

S&P 500 Futures Show No Signs of Recovery, Extend Three-Month Low

/ September 25, 2023

Monday morning witnessed a shift in U.S. stock futures‘ fortunes as they relinquished their early gains. Here’s a concise breakdown of the events: To recap Friday’s performance, the Dow Jones Industrial Average (DJIA) recorded a loss of 107 points, equating to a 0.31% decline, landing at 33,964. The S&P 500 (SPX) also experienced a decline of 10 points, equivalent to a 0.23% drop, reaching 4,320, while the Nasdaq Composite (COMP) registered a 12-point fall, or 0.09%, closing at 13,212. Last week painted a bleak picture for the S&P 500, as it recorded a 2.9% decrease, marking its worst week since the period ending March 10 and hitting its lowest level since June 9. Monday’s market lacked significant catalysts; however, the tentative resolution of a writers’ strike provided a boost to media companies like Paramount Global (PARA, -4.96%) and Netflix (NFLX, -1.13%) during premarket trading. Additionally, President Joe Biden announced plans to show support for the United Auto Workers strike against the Big Three automakers during his visit to Michigan. Nonetheless, the primary narrative in recent times has been the rapid ascent of long-term interest rates. Technical strategists at Bank of America noted that while they lack conclusive evidence that the upward movement in the 10-year yield is complete, it is beginning to appear stretched. The yield on the 10-year Treasury (BX:TMUBMUSD10Y) increased by 5 basis points to 4.49%. China’s housing crisis returned to the spotlight, with Evergrande (3333, -21.82%) shares plummeting as the company abandoned a $35 billion debt restructuring plan. Additionally, shares of China Aoyuan Group experienced a sharp decline on Monday, marking their first day of trading in over a year. In Hong Kong trade, the Hang Seng (HK:HSI) skidded 1.8%. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Market News

Dollar’s Recent ‘Golden Cross’ Spells Trouble for Stock Traders

/ September 23, 2023

The U.S. Dollar Extends Its Winning Streak for the 10th Week in a Row, the Longest Since 2014 In a significant development, the U.S. dollar has achieved its first “golden cross” since July 2021, raising the possibility of further upward momentum and potential challenges for the stock market. As we approach the end of the week, the 50-day moving average of the ICE U.S. Dollar Index (DXY), a key measure of the dollar’s strength against a basket of major currencies, with a strong emphasis on the euro, stands at 103.15. Notably, this surpasses the 200-day moving average, which registers at 103.11. The index itself concluded the week at 105.56, reaching its highest level since March 10, 2023, a day that witnessed the collapse of Silicon Valley Bank, triggering a brief surge in safe-haven assets like the dollar. Over the course of the week, it edged up by 0.2%, marking its 10th consecutive weekly gain, a streak not seen since the 12-week run ending in October 2014. The “golden cross” formation materialized when the 50-day moving average closed above the 200-day moving average, a widely recognized signal among technical analysts that often implies an emerging trend in a particular direction. Conversely, a “death cross” occurs when the 50-day moving average crosses below the 200-day moving average. In the case of the U.S. dollar, a “death cross” occurred on January 10. Subsequently, the dollar trended downward for the following six months, ultimately hitting its lowest point in 2023 on July 14. Since then, it has been on a sustained uptrend, a trajectory that some currency experts believe has the potential to continue, especially after the Federal Reserve revised its interest rate forecasts to remain above 5% through 2024. Based on analysis by Dow Jones Market Data, following a golden cross, the dollar typically continues to rise during the subsequent three months, posting an average gain of 1.9% and trading higher approximately 79.2% of the time. Performance becomes more mixed over a one-year horizon, with the dollar trading higher 58.3% of the time and averaging a gain of 1.5%. Drawing from a previous golden cross on July 29, 2021, the dollar index surged by approximately 25%, advancing from around 91 to nearly 115 in late September 2022, when it reached its highest level in two decades, according to FactSet data. However, some analysts have issued caution about the dollar’s ascent, particularly in conjunction with rising Treasury yields, which could pose additional challenges for the stock market. On Thursday, the S&P 500 experienced a drop of more than 1.6%, marking its most substantial single-day decline since March 22, as reported by Dow Jones Market Data. Jeffrey deGraaf, a technical strategist at Renaissance Macro Research, remarked in a note to clients, “A new cycle high in yields and a golden cross in the dollar are strong headwinds for the market.” John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Market News

S&P 500 Futures Show Strength Following Fed’s New Rate Stance

/ September 22, 2023

U.S. stock index futures showed mainly positive movements on Friday, which was a change from their previous trend following the Federal Reserve’s recent announcement about a higher interest-rate forecast for the next year, made on Wednesday. What’s happening In English, the paragraph can be paraphrased as follows: Last Thursday, the Dow Jones Industrial Average decreased by 370 points, representing a decline of 1.08% and reaching a value of 34070. Likewise, the S&P 500 went down by 72 points, equivalent to a 1.64% decline, and settled at 4330. The Nasdaq Composite also experienced a drop of 245 points, resulting in a 1.82% decrease, and ended with a final value of 13224. The S&P 500 has experienced a decline of 2.8% in the past three days. What’s driving markets Stocks seemed to find stability on Friday after two consecutive days of decline sparked by the Federal Reserve’s announcement. The Fed chose to keep its policy interest rates unchanged, however, it raised its projected rates for 2024 by 0.5%. On Thursday, new data revealed a surprising decline in the number of individuals seeking unemployment benefits, which suggests a strong employment market. As a result, the 2-year Treasury yield attained its highest point since 2006, while the 10-year yield reached its highest level since 2007. Saxo Bank analysts mentioned that the impact of the recent statement by the U.S. Federal Reserve, indicating a prolonged period of high interest rates, is still ongoing. As a result, Wall Street witnessed its biggest drop in half a year, with the yield on the 10-year government bonds hitting 4.5% for the first time since 2007. Moreover, the chances of future interest rate cuts have decreased to only 75 basis points. Reports suggest that both the S&P 500 and the Nasdaq 100 closed at levels of technical support, potentially resulting in a minor rebound despite the prevailing bearish trend. After a busy week of central bank decisions, the Bank of Japan decided to keep its loose monetary policy stance the same. This caused the dollar to become stronger compared to the yen, with the USDJPY exchange rate increasing by 0.41%. The initial purchasing managers index reports for the manufacturing and service sectors will be included in the economic calendar of the United States on Friday. S&P Global will be providing these reports. Furthermore, Fed Gov. Lisa Cook will give a speech at a conference centered around artificial intelligence. Companies in focus John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

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