Market News

S&P 500 Volatility Soars as Hamas Attacks Escalate

/ October 9, 2023

Early on Monday, U.S. stock futures faced a decline due to an escalation in violence in the Middle East, impacting investor sentiment. Here’s a breakdown of how stock-index futures were performing: On the previous Friday, the Dow Jones Industrial Average (DJIA) recorded a gain of 288 points, or 0.87%, reaching 33,408. Similarly, the S&P 500 (SPX) saw an increase of 50 points, equivalent to a 1.18% rise, to 4,309. The Nasdaq Composite (COMP) gained 212 points, or 1.6%, reaching 13,431. What’s Behind the Market Movement: The global markets started the week with a risk-off sentiment as a result of Hamas’s attack on Israel, which raised concerns about the potential for a broader conflict. Richard Hunter, head of markets at Interactive Investor, noted, “Such geopolitical tension typically has a negative impact on sentiment, with investors likely to be unsettled by the prospect of increased uncertainty.” The price of Brent crude (BRN00, 3.41%), the global energy benchmark, surged nearly 4% due to concerns about potential disruptions in oil supplies from the Middle East. Jim Reid, a strategist at Deutsche Bank, pointed out, “Geopolitical risk tends not to have a lasting impact on markets, but there are many secondary effects that could emerge in the weeks, months, and even years ahead as a result of developments over the weekend.” While geopolitical concerns held the market’s attention, the upcoming week was expected to shift the focus back to monetary and corporate matters. This included the release of U.S. producer and consumer price data for September, which would provide further insights into potential actions by the Federal Reserve. Additionally, the third-quarter corporate earnings season was set to begin, featuring major banks such as JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) reporting their results. Analysts had become less optimistic about corporate profitability in recent weeks, with S&P 500 earnings expected to decline by 0.3% for the year ending in Q3 2023. While there were no U.S. economic updates scheduled for release on Monday, there were statements expected from Federal Reserve officials, including Dallas Fed President Lorie Logan and Fed Governor Philip Jefferson. Tom Lee, head of research at Fundstrat, suggested that the ongoing Middle East conflict could potentially impact the U.S. economy through reduced consumer confidence or disruptions in the global economy, potentially influencing the Federal Reserve’s policy decisions.

Market News

Don’t Miss Out! The Stock Market’s Big ‘Buy’ Signal is Approaching!

/ October 7, 2023

Higher Interest Rates Won’t Keep Stock Prices Down for Much Longer” The recent drop in the U.S. stock market can’t be solely blamed on the rise in interest rates, and investors are beginning to realize this fact. The widely held belief that stocks decline when interest rates go up is rarely questioned. But unquestioned beliefs can often lead us astray. As Humphrey Neill, the pioneer of contrarian analysis, regularly reminded his clients: “When everyone thinks the same, everyone is likely to be wrong.” To reexamine this notion, let’s first remember that interest rates and inflation have historically shown a strong correlation, as evident from the accompanying chart. This year is no exception: The 10-year Treasury yield (BX:TMUBMUSD10Y), often singled out as the reason for the recent slowdown in the bull market, has surged from 3.79% to 4.81% since the beginning of 2023 through October 3. Over the same period, the 10-year breakeven inflation rate, which represents bond investors’ consensus on expected inflation over the next decade, has only inched up slightly from 2.26% to 2.33%. The correlation between interest rates and inflation is essential because corporate earnings in nominal terms tend to grow faster during periods of higher inflation. This doesn’t mean that investors should welcome inflation, but it does indicate that future earnings in the years ahead will be discounted at a higher rate. However, due to various behavioral biases, investors often place more weight on the negative impact of the increased discount rate than on the higher nominal earnings growth associated with higher inflation. Economists refer to this investor bias as the “inflation illusion.” A significant study illustrating how this error affects the stock market was conducted by Jay Ritter of the University of Florida and Richard Warr of North Carolina State University. They found that investors systematically undervalue stocks when inflation is high. Conversely, when inflation and interest rates begin to decline, investors tend to make the same error but in the opposite direction. This lays the foundation for a substantial buy signal in the market.

Market News

S&P 500 Futures Maintain Positivity Ahead of Jobs Release

/ October 6, 2023

U.S. stock index futures saw a modest rise on Friday morning prior to the release of the September jobs report. What’s happening On Thursday, there were small decreases in the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite. The Dow Jones went down by 10 points (equivalent to 0.03%) and reached a value of 33,120. Similarly, the S&P 500 decreased by 6 points (or 0.13%) and settled at 4,258. The Nasdaq Composite also saw a decline of 16 points (or 0.12%) and fell to 13,220. What’s driving markets The upcoming release of the September U.S. employment data is scheduled for 8:30 a.m. Eastern Time. According to economists, there is expected to be a rise of 170,000 job opportunities, resulting in an unemployment rate of 3.7%. This report holds importance as it is the last one to be released before the Federal Reserve announces its decision on interest rates on November 1st. According to Henry Allen, a strategist at Deutsche Bank, today’s reading is extremely important in deciding if there is still a chance of a rate increase. The probability of a rate hike has been changing between above and below 50%, with the current probability at 38% this morning. This week, the stock market experienced major ups and downs due to labor market information. At first, there was a significant drop in the market after a report showed an unexpected rise in job openings. However, it recovered when a subsequent report indicated a decrease in private sector payrolls from ADP. Later on, the market settled down once more after another disappointing report on weekly jobless benefit claims. The Wall Street Journal has reported that Exxon Mobil may purchase Pioneer Natural Resources for a staggering $60 billion. This news, along with the employment report, has the potential to influence the performance of energy stocks on Friday. Single stock movers

Market News

U.S. Stock Market Watch: The Effect of Trend-Following Fund Adjustments

/ October 5, 2023

Adding to the array of challenges facing the U.S. stock market, a new concern emerges: systematic trend-following funds are reducing their market exposure, potentially exacerbating downward pressure on the markets in the upcoming weeks. Goldman analysts estimate that commodity trading advisors (CTAs), a subset of trend-following hedge funds typically engaged in futures markets, shed approximately $40 billion worth of exposure to U.S. stocks last week. This rapid pace of CTA selling, according to Goldman’s data, sets a record. Fortunately, the Goldman team anticipates that the selling pressure from systematic funds will diminish in the coming days. However, not everyone shares this optimistic outlook. A team at UBS, in a recent note obtained by MarketWatch, forecasts an additional $20 billion to $30 billion in CTA selling over the next two weeks. According to their analysis, this would result in systematic funds holding a net short position on stocks for the first time since November of the previous year. The S&P 500 faced a 3.6% decline in the quarter ending in September, marking its first quarterly downturn in a year. Since then, stocks have continued to slide, with the index decreasing by another 0.5% since the beginning of October. In total, the S&P 500 has experienced a nearly 7.5% drop since its peak on July 31. By comparison, the index closed at 4,263.75 on Wednesday following a 0.8% increase, marking its most significant daily gain in three weeks, according to FactSet data. On the flip side, the Nasdaq Composite saw a 1.4% rise on Wednesday, closing at 13,236.01, while the Dow Jones Industrial Average climbed 127.17 points, or 0.4%, reaching 33,129.55. Easing Treasury yields were seen as a potential factor in this uptick, offering stocks a temporary respite. Increasing yields on Treasury bonds, particularly for longer-dated maturities, have exerted pressure on stocks, with the yields on the 10-year and 30-year Treasury bonds reaching their highest levels in 16 years earlier this week. Rising bond yields can lead to higher borrowing costs for corporations, potentially impacting economic growth, while also diminishing the appeal of U.S. equity valuations compared to bonds. For instance, these rising yields have recently driven the U.S. equity risk premium to its lowest level in over two decades, hovering just under 0.90 earlier this week, as per Dow Jones Market Data. This indicates that the compensation investors can expect for holding stocks rather than bonds is currently less attractive, at least in theory. Investors have also pointed to the lofty valuations of mega-cap technology stocks and concerns about the Federal Reserve’s plan for higher interest rates as contributing factors to the ongoing market selloff.

DayTradeToWin Review

Mastering Day Trading with the Atlas Line and Trade Scalper

/ October 5, 2023

Are you prepared to embark on a thrilling journey into the realm of day trading? Whether you’re an experienced trader or just starting, the Atlas Line and Trade Scalper are potent weapons in your trading toolkit. The Atlas Line is a versatile trading tool that furnishes precise signals grounded in price action and market trends. One of its standout features is its adaptability across different time zones, granting accessibility to traders globally. Whether you’re in the Pacific, Central, Mountain, or even engaged in overnight trading during the London session, the Atlas Line can be customized to suit your trading schedule. When employing the Atlas Line for trade scalping, comprehending its signals is paramount. If the Atlas Line issues a short signal, it’s time to concentrate solely on short trades, actively seeking opportunities to sell in the market. However, it’s important to note that trading goes beyond blindly following signals. Crucial consideration should be given to market volatility, which is often represented by the Average True Range (ATR). A higher ATR suggests increased market volatility, warranting caution. Even if signals appear favorable, exercising care in executing trades is imperative under such circumstances. The Atlas Line presents both strength and pullback trades, aiding in the assessment of trend strength and the suitability of short selling. Strength trades juxtapose the current trend with previous strength trades, while pullback trades do the same for pullbacks. This analysis ensures alignment with the prevailing trend direction. Trade Scalper: Proficiency in Short-Term Price Action The Trade Scalper is a valuable tool for day traders, specialized in capturing rapid short-term price movements. When combined with the Atlas Line, it serves as an effective filter, allowing you to pinpoint trade opportunities that align with your preferred trading direction. To maximize the synergy between the Trade Scalper and Atlas Line, focus primarily on short trades when the Atlas Line signals short. This strategic alignment enables fine-tuning of your trading approach, elevating your chances of success. Maintaining an awareness of ATR is key to establishing practical profit and stop-loss targets. Tailor your trading strategy to the current market conditions, ensuring that risk remains within acceptable parameters. The Crucial Role of Risk Management While we’ve extolled the virtues of these trading tools, emphasizing robust risk management is imperative. Relying solely on rigid price-based stops is discouraged. Instead, incorporate a blend of exit strategies: Remember, successful day trading demands adeptly capturing profitable trades and astutely managing losses. Employ these exit strategies to shield your capital and maintain a balanced trading approach. Ready to Take the Plunge? Day trading offers excitement and potential rewards when equipped with the right tools and strategies. While the Atlas Line and Trade Scalper offer valuable insights and opportunities, adapting them to your risk tolerance and market conditions is paramount. If you’re a novice day trader or seeking to hone your skills, consider enrolling in a mentorship class or exploring resources centered on price action, such as daytradetowin.com. With dedication, practice, and ongoing learning, you can master the art of day trading and confidently navigate the intricate world of financial markets.

Market News

S&P 500’s Support in the Face of Bond Market Pressures

/ October 4, 2023

Key Insights for Today’s U.S. Trading Session While you were away, the yield on the 30-year Treasury briefly exceeded 5% earlier today, indicating ongoing turbulence in the bond market. Influential figures in the world of finance are sounding the alarm: Amidst the stock market’s erratic performance, technical analysts are closely monitoring a critical level for the S&P 500, the focal point of our discussion today. Michael Kramer, the founder of Mott Capital Management, emphasizes the importance of the 4,200 level. He points out that it not only corresponds to the 200-day moving average (DMA) but also signifies the S&P 500’s loss of a 20% gain from its October 2022 lows. The S&P 500 closed at 4,229.45 on Tuesday, reflecting a 1.37% decline. Kramer highlights the potential for investor unease if the 200-day moving average is breached, signifying the end of the bull market. The 200-DMA is a critical indicator for many technical analysts in assessing long-term trends. Despite Tuesday’s sell-off, the S&P 500 remains 21% above its October intraday low. A 20% decline from its July 31 high would be necessary to exit the bull market. Kramer underscores the significance of the 4,200 level, both from a technical and psychological perspective. He suggests that a breach could lead to further deterioration, especially if weak job data on Friday triggers a collapse in rates. Heisenberg (@Mr_Derivatives), a commentator on the stock market, has also been discussing a pivotal moment for the S&P 500. He anticipates a visit to the 4,200 level in the near future, possibly overshooting to 4,185 to 4,190, followed by a reasonably strong rally. On a different note, Keith Lerner, the Co-Chief Investment Officer and Chief Market Strategist at Truist Advisory Services, sees an opportunity as the stock market approaches its most oversold condition since autumn 2022, particularly as it nears the 4,200 support level. He expects a temporary dip below this level, given the high number of observers. The good news is that “the percentage of stocks within the S&P 500 trading above their 50-day moving average is now below the 20% threshold considered oversold and sits at 15% currently,” according to Lerner. This suggests indiscriminate selling and historically tends to precede market rebounds, especially in stronger markets. However, the outcome will hinge on yield stabilization and the upcoming earnings season. For investors below their benchmark equity targets, there may be an opportunity to “increase equity exposure and bring weightings closer to a neutral position,” Lerner suggests.

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