The weekly market reports include a market position update, a stock market forecast, and an analysis of capital markets. To access the full report, you must subscribe to Premium Articles, Weekly Premium Articles, or an All-in-One subscription.
Included in this report:
- Weekly summary.
- Update on market positioning.
- Stock market forecast.
- Capital markets update.
1. Weekly Summary (September 16–September 20, 2024)
- Stocks moved higher after a generous 50 basis points cut by the Fed.
- Large-cap stocks (SPY) gained 1.4% to new all-time highs (see below for an analysis of the technical significance of this move).
- Long-duration bonds (TLT) fell 1.5%, due to worries that rate cuts could reignite inflation.
- Commodities (DBC) rallied 2.6% after strong gains in energy, precious metals, and livestock futures.
- The US dollar index (UUP) ended the week slightly down.
- Gold (GLD) gained 1.5% to new all-time highs as the geopolitical risk premium increased.
- Since January 3, 2022, bonds (TLT) have been down 27.4%, while gold and large-caps (SPY) have gained 41.7% and 24.6%, respectively.
- For the week, the equally weighted magnificent seven stocks index gained 2.6%, driven mainly by META, which rallied 7.1%. NVDA lost 2.6% for the week.
- The energy sector (XLE) gained the most this week, by 3.7%, as escalation fears in the Middle East rose. The real estate sector (XLRE) fell 1.2%.
New Highs
The S&P 500 index gained 1.4% this week after the previous week’s 4% surge. On Thursday, September 19, 2024, the index made its 39th new closing high for the year.
The above chart shows the number of new closing highs for all years since 1945. According to the chart, 1995 had the best performance with 77 new closing highs, followed by 1954 with 73, and 2021 with 70. Following the two most successful years in terms of new closing highs, 1995 and 1954, the market continued to rise, but after the third top year, 2021, a bear market began.
The number of new closing highs and many other descriptive statistics are useless for making any forecasts. Financial analysts usually focus on descriptive statistics because their audience can understand them, while they avoid quantitative forecasts in fear of alienating their followers. We will get a little more quantitative here by noting that the current count of 39 closing highs for this year is just below three mean absolute deviations. In other words, the current performance is far from spectacular, as in 1995 and 1954, when the number of new closing highs was in excess of six mean absolute deviations. However, this does not imply any significant conclusions about the market’s future direction. See Section 3 below for more details about the performance of the stock market.
2. Update on market positioning
We use two cross-sectional momentum long-only strategies that generate signals for capital markets and factor ETFs. The equally weighted performance year-to-date is 23.9%.
Last update: Friday, September 20, 2024, after the market close.
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Specific disclaimer: This report includes charts that may reference price levels. If market conditions change the price levels or any analysis based on them, we may not update the charts. All charts in this report are for informational purposes only. See the disclaimer for more information.
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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