stock market Archives – Page 77 of 125

Big Investors Absent as Bullish Sentiment Builds for This Asset Class

John Paul / April 2, 2024

As a new quarter begins, there’s a slight dip in stock momentum compared to premarket activity. After reaching its 22nd record high, the S&P 500 closed the first quarter, suggesting a potential pause ahead. Investors are analyzing comments from Fed Chair Jerome Powell, who recently stated that he didn’t see any surprises in the central bank’s preferred inflation measure and didn’t feel the need to lower rates urgently. More insights from Powell are expected later this week, along with key data such as job figures. Are major investors missing out on a possibly profitable asset class right now? That’s what’s being suggested by a Sunday blog post from the Mosaic Asset Company, which highlights a “bullish case for commodities.” Interestingly, gold prices hit new highs on Monday. The context is that “rate cuts are expected while the economy avoids recession.” While this scenario is favorable for stocks, various commodities have also received positive attention, according to Mosaic. Their data shows how different commodities have performed in non-recessionary periods when the 2-year yield is declining, with notable gains for copper, industrial metals, oil, and gold: Moreover, Mosaic suggests that the commodity trade is further supported by the lack of interest from professional investors. “Commodities have significantly lagged behind, with overall price declines reflected in the S&P GSCI commodity index since mid-2022, giving fund managers little reason to chase performance.” Referring to Bank of America’s recent survey of fund managers, Mosaic points out that institutional portfolios are currently the least exposed to commodities relative to bonds since the financial crisis of 2008. They indicate that such herd behavior can quickly reverse if commodities begin to rebound. “Institutional investors, while evaluating their portfolio allocation, might become a driving force behind commodity demand if momentum picks up. This is particularly true considering that commodities are currently at historically discounted levels compared to equities,” states Mosaic. They highlight that the commodities-to-stock price ratio is nearing historic lows, a situation that has previously triggered a “significant mean-reversion in favor of commodities.” Their subsequent graph illustrates this ratio dating back to 1970 — a rising trend indicating commodities outperforming stocks, and a declining trend signaling the opposite: “Although the current ratio has lingered at low levels for much of the past decade, the environment is turning favorable for commodities to excel from these depressed levels,” they remark. Considering all these factors, there appears to be an enticing risk/reward prospect. 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

Evolution of the S&P 500: Beyond the Magnificent 7 to Record Highs

John Paul / April 1, 2024

Throughout the first quarter, more stocks participated in the market rally, offsetting some of the weakness observed in Big Tech. Analysts anticipate this trend to persist. Individual stocks contributed to the strength of the S&P 500 index, dispelling concerns about narrow market gains. Recent data shows that the number of S&P 500 stocks hitting 52-week highs reached its highest level in three years, indicating a broadening market. Additionally, an increasing number of index members are showing long-term uptrends, with over 83% trading above their 200-day moving average, marking the highest level since August 2021. While the dominance of Big Tech has waned since 2023, major tech stocks still made significant contributions to the index’s rise this year, albeit less than before. The “Magnificent Seven,” comprising major tech companies, contributed 37% of the S&P 500’s first-quarter gains, down from two-thirds in 2023. However, excluding Apple, Tesla, and Alphabet, the remaining four members—Nvidia, Microsoft, Meta Platforms, and Amazon—contributed a substantial 47%. Despite challenges faced by Apple and Tesla, other sectors such as industrials, financials, and energy have picked up the slack. These sectors, alongside information technology and communications services, outperformed the S&P 500 in the first quarter, reflecting a diversified market rally. As the Federal Reserve considers interest rate cuts, portfolio managers anticipate mid- and small-cap stocks to regain momentum, particularly with cyclical sectors like financials and industrials reaching record highs. Looking ahead, analysts are closely monitoring the release of the March nonfarm payrolls report for further insights into the market’s direction. In March, both the Dow Jones Industrial Average and the S&P 500 achieved record highs, reflecting the overall bullish sentiment prevailing in financial markets. 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 and Vix Rally: Is Investor Confidence Fading in 2024?

John Paul / March 30, 2024

The recent surge in the Vix likely reflects its tendency to revert to its mean, rather than indicating an impending market downturn, as suggested by a portfolio manager. In a departure from the norm, both the S&P 500 and the Cboe Volatility Index, commonly known as the Vix, have experienced gains this quarter in the stock market. But does this signal an end to the unusually calm market conditions of late? Probably not, according to insights from Barbara Reinhard, the chief investment officer of Voya Investment Management’s multi-asset strategies and solutions platform. Reinhard suggests that the recent uptick in the Vix from its four-year low in December is likely due to the natural tendency of implied volatility to return to its average. Contrary to the notion that nervous investors are preparing for a market crash, Reinhard argues that feedback from fellow financial professionals doesn’t support this idea. She notes that the Vix, often called Wall Street’s “fear gauge,” remains historically low. While the Vix has increased by 4.3% since the beginning of the quarter, reaching 12.98, it’s worth noting that its long-term average is around 20, according to FactSet data. Reinhard emphasizes the cyclical nature of the Vix, stating in an interview with MarketWatch, “If the Vix is low like it is now, it is more likely to rise over the medium term. But then again, it can remain low for years, as it did between 2012 and 2015.” Meanwhile, the S&P 500 seems poised to achieve a 10% gain this quarter, reaching record highs on Thursday for the 22nd time this year. Despite this, the concurrent rise of the Vix amid relatively stable market conditions adds to the peculiarity of the current situation. Although instances of both indexes rising simultaneously have occurred in recent years, previous occurrences often saw a brief retreat in the S&P 500 along the way. The most recent instance was in the third quarter of 2021, when the S&P 500 saw a marginal rise of 0.2%, juxtaposed with a significant 46% surge in the Vix. This surge largely occurred in September as the S&P 500 recorded its most substantial monthly decline since March 2020, driven by concerns surrounding the spread of the COVID-19 delta variant. Before that, the Vix rose alongside the index during the second and third quarters of 2019, prompted by the Trump administration’s trade tensions with China, which triggered brief selloffs in the S&P 500. The current streak of more than 100 trading days without a 2% pullback in the S&P 500, the longest in about six years according to Bespoke Investment Group, further underscores the current market’s resilience. However, it’s essential to note that while the Vix and S&P 500 typically exhibit a strong negative correlation, this relationship isn’t immutable. The Vix serves as an indicator of implied volatility, reflecting traders’ expectations regarding market volatility in the upcoming month rather than the present volatility levels. Its value is derived from activity in S&P 500 options. 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

Inflation Signals in Silence: Good Friday’s PCE Data & Closed Markets

John Paul / March 29, 2024

The imminent release of the February personal-consumption expenditures index carries substantial weight for investors, potentially molding expectations regarding future rate adjustments by the Federal Reserve. However, this pivotal data unveiling coincides with the Good Friday holiday, rendering financial markets closed for the day. While U.S. stock exchanges will be inactive on Friday and the Treasury market will close early on Thursday, economic data will still be disclosed as scheduled, given that Good Friday is observed as a market holiday rather than a federal one. Anticipation surrounds the expected data, with economists projecting a continuation of elevated price pressures. Forecasts suggest a 0.4% rise in the headline PCE for February, surpassing January’s 0.3%, while the annual rate is expected to climb to 2.5% from the previous month’s 2.4%. The core measure, excluding volatile food and energy components and preferred by the Fed as an inflation gauge, is anticipated to increase by 0.3% in February, slightly lower than the previous month, with year-over-year core inflation forecasted to hold at 2.8%. Recent upticks in the consumer-price index have instilled apprehension into Wall Street, prompting some investors to recalibrate their expectations for the timing of the Fed’s initial interest-rate cut. Consequently, the forthcoming PCE report is deemed particularly significant, serving to discern whether the preceding inflationary figures signify temporary deviations or herald a prolonged trend of heightened inflation. Although financial markets will be closed, traders will assess the implications of the inflation report upon the reopening of futures markets over the weekend. Their analysis will center on whether the report alters the Fed’s strategy of potentially implementing three rate cuts in 2024. Federal Reserve officials, having kept interest rates steady for the fifth consecutive meeting, maintain their projection of reducing rates by 75 basis points by the end of 2024, as indicated by the latest “dot plot.” Futures traders are currently estimating a 61% likelihood of a 25-basis-point rate cut occurring in June, according to the CME FedWatch Tool. While Monday is anticipated to provide clearer insights into market reactions, some foresee a subdued response due to investors’ tendency to prioritize recent market-moving events over historical data. Analysts caution that a higher-than-expected PCE reading could challenge the narrative articulated by Fed Chair Powell, potentially influencing the timing of future rate adjustments. The conclusion of a month or quarter often prompts portfolio rebalancing by managers, which, despite being anticipated, may still induce price fluctuations in the markets. 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

Good Friday Trading: What to Expect from the Stock Market

John Paul / March 28, 2024

The Treasury market will close early on Thursday, March 28, in anticipation of the Good Friday holiday when the U.S. stock market will also be closed. Trading in the $27 trillion Treasury market will conclude at 2 p.m. Eastern on Thursday. Despite a brief slowdown earlier in the week, stocks are aiming to wrap up a strong first-quarter rally on a positive note. According to Dow Jones Market Data, the S&P 500 index is set to post a first-quarter gain of around 9.4%, marking its strongest performance in the first three months of a year since 2019. Similarly, the Nasdaq Composite Index is expected to record an 8.6% increase for the quarter, while the Dow Jones Industrial Average is up by 4.8% for the same period, as per FactSet. All three major U.S. stock indexes have rebounded to reach record levels in the first quarter, bouncing back from challenges faced two years ago when the Federal Reserve began raising rates to counter persistent inflation. Despite the Fed’s policy rate being at its highest level in nearly a quarter-century and 10-year Treasury yields hovering around 4.2%, the economy has shown resilience. However, investors are eagerly awaiting signs of a potential shift to rate cuts later this year, with attention particularly on a possible June rate adjustment. While the major stock exchanges will be closed on Friday, investors can expect fresh inflation data with the release of the February PCE gauge, the Fed’s preferred inflation index, which is anticipated to show a monthly increase while maintaining a yearly rate of 2.8%. Investor attention on Friday will also be drawn to Fed Chairman Jerome Powell’s scheduled speech at 11:30 a.m. Eastern. 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

Beyond the Surface: Delving into Historical Data to Understand Future Stock-Market Corrections

John Paul / March 27, 2024

A group of investment strategists at Piper Sandler has outlined the usual triggers behind stock-market corrections, pinpointing three main factors: rising unemployment, increasing bond yields, or unforeseen global shocks. Despite the S&P 500’s recent surge of nearly 30% over five months, even optimistic market analysts are considering the possibility of a “healthy” correction. However, corrections don’t just happen out of the blue; they typically require a catalyst. To anticipate potential triggers for the next significant downturn, Piper Sandler’s Michael Kantrowitz and his team examined the 27 corrections of 10% or more for the S&P 500 since 1964. Their analysis reveals that each of these corrections was mainly driven by one of three factors: escalating unemployment, climbing bond yields, or unexpected global events. Sometimes, it’s a combination of these factors, as seen in the two equity-market corrections in 1980. So, what’s most likely to spark the next 10% correction? According to Kantrowitz and team, the primary threat to stable markets is rising bond yields. The most recent correction, ending on October 27 with the S&P 500 down 10.3%, was also triggered by climbing yields. In the past two years, stocks’ sensitivity to rising yields has soared to levels near those seen at the peak of the dot-com bubble. This suggests that stocks could react negatively to further increases in long-term bond yields, despite their relative immunity to such rises since the beginning of 2024. Kantrowitz notes that a modest increase in unemployment could actually benefit the market by acting as a counterforce against rising yields. Typically, bond yields decrease during economic slowdowns as demand for defensive assets like bonds rises. Last year, stocks experienced a three-month sell-off as Treasury yields surged. The lowest point of the downturn came shortly after the 10-year Treasury yield hit over 5%, a level not seen in 16 years. Although Treasury yields are once again edging higher in the first quarter, expectations of robust economic growth supporting corporate earnings have so far shielded stocks. The 10-year Treasury note’s yield has risen by 39 basis points since the year began, reaching 4.252%, while the S&P 500 has climbed by 9.4% and 26.7% since the start of the quarter and since October 27, respectively. Similarly, the Nasdaq Composite is up 9.6% since the beginning of the first quarter, closing at 16,452.69 as of Tuesday, while the Dow Jones Industrial Average has gained 4.5%, or 1,670.79 points, to reach 39,388.56. 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