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 9–September 13, 2024)
- Stocks rebounded strongly after inflation data raised the probability of a rate cut in September to nearly 100%.
- Large-cap stocks (SPY) surged 4% (see below for an analysis of the technical significance of this move).
- Long-duration bonds (TLT) were up 0.9%, but stronger-than-expected core CPI limited gains.
- Commodities (DBC) rebounded by 1.8%. After testing support levels, crude oil’s spot price was up 1.5%.
- The US dollar index (UUP) ended the week flat but near crucial support.
- Gold (GLD) rallied 3.5% to new all-time highs.
- Since January 3, 2022, bonds (TLT) have been down 26.3%, while gold and large-caps (SPY) have gained 39.6% and 22.8%, respectively.
- For the week, the equally weighted magnificent seven stocks index surged 7.3%, driven mainly by NVDA, which rallied 15.8%. TSLA and AMZN jumped 9.3% and 8.8%, respectively.
- The technology sector (XLK) gained the most this week, by 8.1%, while the only sector that fell was energy (XLE), down by 0.5%.
The rebound
The S&P 500 index gained 4% this week after the previous week’s 4.2% drop. The rebound started on Monday with a gain of 1.2%.
There have been 23 instances when the S&P 500 index fell more than 4% during a week, and the following week gained more than 4%. The majority of these rebounds have occurred near the bottoms of bear markets or large corrections. Few have occurred along uptrends. The exceptions have been solely near the dot-com top and along the bear market that ensued.
Therefore, according to past history and the relatively small sample, there is a small probability of a major top when these rebounds occur near all-time highs. Given an uptrend (price above the 40-week moving average), the sample size drops to 6, with 4 events that have occurred along an uptrend and 2 near the top of the dot-com. Besides the low sample issue, the question is whether this time is different, and the low breadth rally due to a few tech stocks does not resemble the irrational exuberance of the dot-com. However, if we knew the answer to this question in advance, which is unlikely, we wouldn’t require any price action patterns. The patterns are occasionally useful in determining what questions we should ask about the markets, especially if we are trying to avoid confirmation bias.
2. Update on market positioning
We use two cross-sectional momentum long-only strategies that generate signals for capital markets and factor ETFs. Year-to-date, both strategies outperform the S&P 500 total return by a wide margin. The equally weighted performance year-to-date is 21%.
Last update: Friday, September 13, 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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