The Safe Investing Blog

Stock Market Outlook entering the Week of October 6th = Uptrend

• ADX Directional Indicators: Uptrend
• On Balance Volume Indicator: Uptrend
• Institutional Activity (Price & Volume): Uptrend

ANALYSIS
The stock market outlook maintains an uptrend, as market participants gear up for the start of earnings season.

The S&P500 ($SPX) rose 0.2% last week.  The index sits ~4% above the 50-day moving average and ~10% above the 200-day moving average.

SPX Price & Volume Chart for Oct 06 2024

All three indicators ( Average Directional Index, On-Balance Volume, and Institutional Activity ) remained bullish after last week’s action.

S&P Sector Performance for Week 40 of 2024

Within the S&P500, the Energy sector ( $XLE ) blew away everything else last week, rallying almost 7%.  The volatility in commodity prices has really whipped the sector around lately.  Staples ( $XLP ) were the laggard, and have begun to lose key technical levels, along with stocks in healthcare and real estate.

Sector Style Performance for Week 40 of 2024

Style-wise, returns were all over the place.  Momentum ( $MTUM ) ended up leading to the upside, while Small Cap Value ( $IWN ) led to the downside.  Despite the variation, High Beta and Momentum stocks have shown the most technical strength in recent weeks.

Asset Class Performance for Week 40 2024

As mentioned above, the volatility in commodity prices has bled through to equities; this week oil ( $USO ) outperformance gave the energy sector a much needed boost.  Bitcoin took the week off and underperformed, after leading to the upside for most of September.

COMMENTARY
September labor data came in hot, with JOLTs and NFP beating expectations for the labor market.  On the one hand, this is good news for the soft-landing camp, as the Fed raised rates and tamed inflation without disrupting the labor market.  One the other hand, talking heads will have a harder time justifying the need for aggressive rate cuts in the near-term.

The ISM survey showed manufacturing remains slightly “contractionary”, albeit unchanged from last month.  Services showed a small expansion.

The Longshoremen got back to work after a brief strike, so East Coast ports are operational again and all the people who stocked up on toilet paper can consider donating it to hurricane relief efforts.

We get September CPI and PPI data on Thursday and Friday, respectively.  Friday also brings with it the start of earnings season, with big banks reporting quarterly results. All in all, risk-on tickers show the most technical strength ( e.g. within $XLK, $XLC, $SPHB, $MTUM, $IBIT ), while lower volatility and safety trades have weakened ( e.g. $XLP, $XLRE, $SPLV, $SPHD, $IEF ).

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, Stockcharts.com, TradingEconomics.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of September 29th = Uptrend

• ADX Directional Indicators: Uptrend
• On Balance Volume Indicator: Uptrend
• Institutional Activity (Price & Volume): Uptrend

ANALYSIS
The stock market outlook shows an uptrend in place as we close out the third quarter.

The S&P500 ($SPX) rallied 0.6% last week.  The index sits ~4% above the 50-day moving average and ~10% above the 200-day moving average.

SPX Price & Volume Chart for Sept 29 2024

All three indicators (Average Directional Index, On-Balance Volume, and Institutional Activity) remained bullish last week.

S&P Sector Performance for Week 39 of 2024

Materials ($XLB) outperformed the broader market last week, reflecting the strength in commodities (excluding oil and gas) and perhaps frontrunning money spent supporting regional rebuilding efforts after hurricane Helene.  Energy ($XLE) was the laggard, thanks in large part to the weakness in oil and gas.

Sector Style Performance for Week 39 of 2024

Style-wise, High Beta ($SPHB) was the best sector for the third week in a row, while small cap value ($IWN) was the worst performer.  Risk-on indeed.

Asset Class Performance for Week 39 2024

Also benefiting from the risk-on trade was Bitcoin, which led asset class returns for the third week in a row.  Oil underperformed.

COMMENTARY
The final Q2 GDP reading showed an increase of 3% quarter / quarter; almost double the first quarter increase of +1.6% q/q, and outpacing the Q2 2023 figure of +2.4%.   With Q3 already in the books, any “hard landing” data won’t hit the official measures until sometime in the 4th quarter.

Headline PCE from August showed inflation dropping a bit more than expected, while core was inline (thought slightly higher vs. July).

But no one cares about inflation anymore.  September labor data is due out this week, which is the new “king” of all things rate cut related, along with the latest ISM survey data for manufacturing and services.

So far, increased geopolitical “activity” in the Middle East hasn’t significantly impacted major markets or economies.  Regional conflicts have a way of creating unintended consequences outside the region, and there are several fronts that are currently “hot”.

Closer to home, workers at East and Gulf Coast ports at set to strike on Tuesday, essentially freezing ports from New England all the way to Texas.   Negotiations between the International Longshoremen’s Association and the U.S. Maritime Alliance haven’t progressed in months, with neither side meeting in person since the summer. The strike will strand container goods, from produce to electronics, as no one will be loading or unloading the ships. Even a short stoppage could impact corporate earnings in the coming months, not to mention prices paid by consumers.

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, Stockcharts.com, TradingEconomics.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of September 22nd = Uptrend

• ADX Directional Indicators: Uptrend
• On Balance Volume Indicator: Uptrend
• Institutional Activity (Price & Volume): Uptrend

ANALYSIS
The stock market outlook uptrend held strong through the volatility of the FOMC rate cut decision and a massive quarterly options expiration.

The S&P500 ($SPX) rallied 1.4% last week.  The index sits ~3% above the 50-day moving average and ~10% above the 200-day moving average.

SPX Price & Volume Chart for Sept 22 2024

The Average Directional Index (ADX) and On-Balance Volume (OBV) remained bullish last week.  Institutional activity switching to an uptrend on Thursdays move, but also added 2 distribution days to the count: outright on Tuesday and a stalling day (stealth selling) on Wednesday.

S&P Sector Performance for Week 38 of 2024

Energy ($XLE) outperformed the broader market last week, buoyed by rising oil prices.   Real Estate ($XLRE) and Consumer Staples ($XLP) were the laggards.

Sector Style Performance for Week 38 of 2024

Style-wise, High Beta ($SPHB) was the best sector for the second week in a row, while Low Beta ($SPLV) was the worst performer.

Asset Class Performance for Week 38 2024

Since high volatility was the best investing style, it should be no surprise that Bitcoin led asset class returns for the second week in a row.  Bonds underperformed, which is a bit surprising given the FOMC rate cut decision.

COMMENTARY
The FOMC started the rate cutting cycle last week, choosing to drop it’s policy rate by 0.5% on Wednesday, citing the need to accommodate a new economic environment.  While a 25 basis point cut was as close to a certainty as one can get in investing, the 50 basis point cut caught some by surprise (including myself).  However, Treasury rates across the yield curve actually rose after the FOMC announcement, indicating the market got a bit too aggressive by pricing in too many future rate cuts.

Upcoming macro events include the final Q2 GDP adjustment and speech from Federal Reserve Chairman Powell on Thursday, as well as August PCE data 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, Stockcharts.com, TradingEconomics.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of September 15th = Uptrend

• ADX Directional Indicators: Uptrend
• On Balance Volume Indicator: Uptrend
• Institutional Activity (Price & Volume): Mixed

ANALYSIS
The stock market outlook flipped back to an uptrend late last week, after sustained buying pressure almost every afternoon kept volatility levels elevated and flipped 2 of the 3 indicators.

The S&P500 ($SPX) rallied 4% last week.  The index sits ~2% above the 50-day moving average and ~9% above the 200-day moving average.

SPX Price & Volume Chart for Sept 15 2024

The Average Directional Index (ADX) flipped back to bullish on Friday, but the overall trend is weak due to the back and forth price action since mid-August.  On-Balance Volume (OBV) moved back to bullish on Wednesday, after testing its moving average cross-over point.

Institutional activity was bullish, but not enough to flip the signal to an uptrend.  The follow-through day came one day to early (Day 3 of the rally attempt), but the market has all week to try again.

S&P Sector Performance for Week 37 of 2024

Technology ($XLK) led to the upside by a wide margin, while Energy ($XLE) lagged, as mega cap technology stocks continue to have an outsized influence on market performance.  The strength in discretionary ($XLY) stocks is a bit surprising, but likely reflects expectations of rate cuts and subsequent consumer spending.

Sector Style Performance for Week 37 of 2024

High Beta was the best sector style, and serves as a reminder that upside volatility is still volatility (i.e. the $VIX is elevated).  The prior week’s winners (Low Beta and High Dividend) were this week’s “losers”, registering a 1.5% gain.

Asset Class Performance for Week 37 2024

Every asset class outperformed last week, with Bitcoin gaining more than 10% for the week!  Bonds only managed a gain of 0.5%, as the coming rate cuts have already been fully priced into the market.  Keep an eye on commodities; a recovery in something like oil would indicate a shift from the current deflationary environment to a stagflation regime.

COMMENTARY
The consumer price index (CPI) fell for the fifth month in a row, down to 2.5% y/y in July.  Core CPI was flat.

Headline producer prices (PPI) fell July, while Core PPI rose (*Core & Headline  figures revised down 0.1%).

It’s FOMC week, and the slowing headline inflation data guarantees a rate cut this Wednesday, along with some volatility before and after the Powell press conference. Now the only question is how many basis points and how often.

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, Stockcharts.com, TradingEconomics.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of September 8th = Downtrend

• ADX Directional Indicators: Downtrend
• On Balance Volume Indicator: Mixed
• Institutional Activity (Price & Volume): Downtrend

ANALYSIS
The stock market outlook entered a downtrend last week, after encountering heavy selling pressure throughout the week.

The S&P500 ($SPX) fell 4.2% last week (oof!).  The index sits ~2% below the 50-day moving average and ~5% above the 200-day moving average.

SPX Price & Volume Chart for Sept 08 2024

The Average Directional Index (ADX) flipped to a bearish signal thanks to the selling on Tuesday.  On-Balance Volume (OBV) shifted to a mixed signal on Friday, testing its moving average cross-over point.

Institutional activity also switched to to bearish, adding 2 more distribution days and failing to find support at the 50-day moving average (on higher than average trading volume no less).

All in all, the weakness isn’t surprising given last week’s outlook:

The ADX shows a weak trend in place, (and) the young rally already has 3 distribution days…neither of those two data points are highly supportive of a rally or a market making new all time highs.

S&P Sector Performance for Week 36 of 2024

A few pockets of strength emerged in last week’s sell off, including Consumer Staples, Real Estate, and Utilities ($XLP, $XLRE, $XLU).  Technology ($XLK) and Energy ($XLE) led to the downside.  The relative performance of the sectors above, month over month, suggests a deflationary environment within U.S. stocks.

Sector Style Performance for Week 36 of 2024

High Dividend stocks led to the upside, if you can call breakeven “outperformance”.  All other sector styles fell, though some managed to beat the overall index. High Beta and Small Cap Growth names dropped the most.  On a month over month basis, the relative strength of sector style shows a deflationary regime in place, with Low Beta and Dividend Yield outperforming and underperformance from High Beta and Growth.

Asset Class Performance for Week 36 2024

Bonds were the only asset class to register gains last week, while oil edged out bitcoin for the worst performer.  On a month over month basis, the relative strength of asset classes shows a deflationary regime in place.

COMMENTARY
ISM Manufacturing PMI rose slightly versus July, but was down year over year, showing a contraction in manufacturing activity for 21 of the past 22 months.

ISM Manufacturing PMI – August 2024

A similar story for ISM Services PMI, with the monthly comparison up slightly and the yearly lower.  An overall reading above 50 shows an expansion in services, albeit a small one.

ISM Services PMI – August 2024

Jobs data came in a bit weaker than expected, which adds pressure on the Federal Reserve to cut rates at their next meeting.  The number of job openings (JOLTS) in July fell verses June and 2023 levels, hitting the lowest level since January 2021.  Non-Farm payrolls shows an increased in employment verses last month, but a decreases versus last year.

Non Farm Payrolls – August 2024

This week, U.S. BLS releases the latest CPI and PPI.

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, Stockcharts.com, TradingEconomics.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of September 1st = Uptrend

• ADX Directional Indicators: Uptrend
• On Balance Volume Indicator: Uptrend
• Institutional Activity (Price & Volume): Uptrend

ANALYSIS
The stock market outlook shows an uptrend in place, with prices just below another all time high.

The S&P500 ($SPX) rose 0.2% last week.  The index sits ~3% above the 50-day moving average and ~10% above the 200-day moving average.

SPX Price & Volume Chart for Sept 01 2024

All three signals show an uptrend in place.  Index volume picked up at the end of the week, as a result of end of the month trading ahead of a long weekend.  The ADX shows a weak trend in place, the young rally already has 3 distribution days to it’s credit.  Neither of those two data points are highly supporting of a rally or a market making new all time highs.

S&P Sector Performance for Week 35 of 2024

The financial sector ($XLF) led the way by a relatively large margin, while technology stocks ($XLK) lagged thanks to Nvidia earnings (more below).

Sector Style Performance for Week 35 of 2024

Low beta and Large Cap Value had the highest returns last week, while High Beta underperformed.

Asset Class Performance for Week 35 2024

A strong performance by the U.S. dollar put pressure on all the other asset classes.  Bitcoin let to the downside.

COMMENTARY
Nvidia reported another strong quarter for revenue and earnings. However, it was the smallest beat in recent memory, and shows that growth is starting to slow albiet from ridiculously high levels. The market typically views the first signs of a slowdown harshly, so the post-earnings sell-off wasn’t too surprising.

The headline number for durable goods was much higher than expected.  Most of the outperformance came from transportation equipment.  The second estimate of 2nd quarter GDP also came in higher than expected at 3%; greater than the Q1 reading of 1.4%, and last year’s Q2 level of 2.1%.

PCE showed no change in year over year inflation in July.

U.S. equity markets are closed tomorrow for the Labor Day holiday.  Upcoming data releases include ISM Manufacturing & Services PMI, JOLTs job openings, and August Non-farm Payrolls.

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, Stockcharts.com, TradingEconomics.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.

Stock Market Outlook entering the Week of August 25th = Uptrend

• ADX Directional Indicators: Uptrend
• On Balance Volume Indicator: Uptrend
• Institutional Activity (Price & Volume): Uptrend

ANALYSIS
The stock market outlook shows an uptrend in place, with equities looking to close out August at all time highs.

The S&P500 ($SPX) rose 1.4% last week.  The index sits ~3% above the 50-day moving average and ~11% above the 200-day moving average.

SPX Price & Volume Chart for the Week of August 25 2024

All three signals show bullish action.  Index volume remains below average, which is expected during sessions at the end of August.  Traders and their volume should return to their desks after Labor Day.

S&P Sector Performance for Week 34 of 2024

Real Estate ($XLRE) led the way last week, although most sectors advanced for the week.  Energy sector ($XLE) was the lone holdout and worst performer, largely due to oil’s underperformance and correlation to the U.S. dollar (more below).

Sector Style Performance for Week 34 of 2024

All sector styles had positive returns last week: Small Caps (growth & value) led the way, while large and mega cap growth underperformed the general market.

Asset Class Performance for Week 34 2024

Asset classes benefited from continued weakness in the U.S. dollar.  Bitcoin let assets higher, while Oil underperformed.  Over the past 3 weeks, moves in oil and the dollar are highly correlated, while dollar correlations with the other assets classes are negative.

COMMENTARY
A rather large, negative revision to non-farm payrolls hit the wires midweek, suggesting the labor market hasn’t been as robust as experts believed.  Given employment is now the focus of the FOMC (rather than inflation), it’s no surprise that Federal Reserve Chairman Powell said the time has come to cut interest rates during his Friday speech.

Markets rejoiced.  Media outlets were quick to highlight the coming change, saying that inflation is no longer an issue (wrong), and consumers will find relief in the form of lower payments on debt (new mortgages, credit card balances, etc.).  Probably a bridge too far, and a dangerous one at that, but you know what they say: “Never let the truth ruin a good story”.

Next week, all eyes are on Nvidia; they release quarterly earnings Wednesday after market close.  The data will serve as a catalyst for market moves, given $NVDA’s importance to the artificial intelligence narrative and semi-conductor supply chain, as well as the stocks relative high index weighting.  They’ve blown past targets the past few quarters.  Lets hope market participants are equally impressed this time around, or it could be a rough start to September.

The market also gets July Durable Goods data on Monday, the 2nd Q2 GDP estimate on Thursday, and July PCE 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, Stockcharts.com, TradingEconomics.com, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

Invest Safely, LLC is an independent investment research and online financial media company.  Use of Invest Safely, LLC and any other products available through invest-safely.com is subject to our Terms of Service and Privacy Policy.

Not a recommendation to buy or sell any security.