The S&P500 ($SPX) lost 0.1% last week. The index sits ~4% above the 50-day moving average, and 12.5% above the 200-day moving average (historically elevated).
SPX Technical Analysis for the Week of Mar 10 2024
All three signals show an uptrend in place. The ADX continues to wane with the positive directional indicator elevated (yellow light). While outright distribution days have been in short supply since the beginning of the year, there have a been a couple of stalling days in the past 5 weeks, which were absent from last week's chart.
S&P Sector Performance for the Week of Mar 10 2024
While the S&P500 was basically flat for the week, the energy sector ($XLE) and utilities ($XLU) outperformed, taking their turn as beneficiaries of the decline in the yield curve.
COMMENTARY
While ISM Services PMI was in line with estimates, U.S. factory orders caused a brief stir in the equity market on Tuesday. New orders for manufactured goods in February fell 3.6% from January readings, which is the largest month/month drop since April 2020.
Wednesday's JOLTS data was "unremarkable", and Powell admitted to Congress what everyone in the banking industry expected: that pesky plan to raise capital requirements for large banks (i.e. Basil 3 standards) will be overhauled after industry complaints cost and economic impact.
Friday's February nonfarm payrolls report showed 275k added jobs were added; more than the 198k forecast. Unemployment rose to 3.9%, while expectations were for it to remain at 3.7%. More importantly, though less reported, was the negative revision to January's NFP data; jobs added was revised down from 353,000 to 229,000 (-35%)!
Speaking of things that didn't get much notice, the Japanese Central Bank appears to be prepping the market for the end of its negative rate program, in place since 2016. Doing so would reduce the profitability of the Japanese Yen Carry Trade, a form of arbitrage used by institutions in forex/currency and debt markets. Employed across the globe since the mid-1990s, it came back into favor for the U.S. with the Fed's recent hiking cycle.
Friday's trading session also provided a great example of current market capitalization dynamics. The performance of the indexes looked "not good" for most of the day. But if you look beneath the surface, you'll see that performance wasn't widespread.
Source: T1 Alpha // https://tier1alpha.com/
The S&P500 ended the day with a 0.57% loss. But the number of advancing and declining stocks was 50/50. What caused the negative performance shift?
Source: T1 Alpha // https://tier1alpha.com/
As shown in the table above, 22% of the S&P500's loss came from 1 stock, $NVDA. $AVGO and $MSFT didn't help either. Per Goldman Sachs:
The 10 largest stocks now account for 33% of S&P 500 market cap, well above the 27% share reached at the peak of the tech bubble in 2000, and 25% of earnings.
The good news? High concentration doesn't end rallies.
This week, we get CPI on Tuesday, PPI on Wednesday, and another massive options expiration (quarterly) on Friday.
Best to Your Week!
P.S. If you find this research helpful, please tell a friend.
If you don't, tell an enemy.
Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics
How to Make Money in Stocks: A Winning System in Good Times and Bad.
It's one of my favorites.
Charts provided courtesy of stockcharts.com.
For historical Elliott Wave commentary and analysis, go to ELLIOTT WAVE lives on by Tony Caldaro. Current counts can be found at: Pretzel Logic, and 12345ABCDEWXYZ
Once a year, I review the market outlook signals as if they were a mechanical trading system, while pointing out issues and making adjustments. The goal is to give you to give you an example of how to analyze and continuously improve your own systems.
IMPORTANT DISCLOSURE INFORMATION
This material is for general communication and is provided for informational and/or educational purposes only. None of the content should be viewed as a suggestion that you take or refrain from taking any action nor as a recommendation for any specific investment product, strategy, or other such purpose. Certain information contained herein has been obtained from third-party sources believed to be reliable, but we cannot guarantee its accuracy or completeness.
To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisors of his/her choosing. Invest Safely, LLC is not a law firm, certified public accounting firm, or registered investment advisor and no portion of its content should be construed as legal, accounting, or investment advice.
The material is not to be construed as an offer or a recommendation to buy or sell a security nor is it to be construed as investment advice. Additionally, the material accessible through this website does not constitute a representation that the investments described herein are suitable or appropriate for any person.
Hypothetical Presentations:
Any referenced performance is “as calculated” using the referenced funds and has not been independently verified. This presentation does not discuss, directly or indirectly, the amount of the profits or losses, realized or unrealized, by any reader or contributor, from any specific funds or securities.
The author and/or any reader may have experienced materially different performance based upon various factors during the corresponding time periods. To the extent that any portion of the content reflects hypothetical results that were achieved by means of the retroactive application of a back-tested model, such results have inherent limitations, including:
Model results do not reflect the results of actual trading using assets, but were achieved by means of the retroactive application of the referenced models, certain aspects of which may have been designed with the benefit of hindsight
Back-tested performance may not reflect the impact that any material market or economic factors might have had on the use of a trading model if the model had been used during the period to actually manage assets
Actual investment results during the corresponding time periods may have been materially different from those portrayed in the model
Past performance may not be indicative of future results. Therefore, no one should assume that future performance will be profitable, or equal to any corresponding historical index.
The S&P 500 Composite Total Return Index (the "S&P") is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. Standard & Poor's chooses the member companies for the S&P based on market size, liquidity, and industry group representation. Included are the common stocks of industrial, financial, utility, and transportation companies. The S&P is not an index into which an investor can directly invest. The historical S&P performance results (and those of all other indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual in determining whether the performance of a specific portfolio or model meets, or continues to meet investment objective(s). The model and indices performance results do not reflect the impact of taxes.
Investing involves risk (even the “safe” kind)! Past performance does not guarantee or indicate future results. Different types of investments involve varying degrees of underlying risk. Therefore, do not assume that future performance of any specific investment or investment strategy be suitable for your portfolio or individual situation, will be profitable, equal any historical performance level(s), or prove successful (including the investments and/or investment strategies describe on this site).