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The Price Action Lab Report-Week of September 11, 2023 [Premium Articles]

Photo by Burak The Weekender

Market analysis for the week of September 11, 2023. Major market indexes, large caps, ETFs, commodities, and forex. Access to the full report requires a Premium Articles or All-in-One subscription.

Report contents

  1. Weekly Summary.
  2. SPY ETF Gap Analysis.
  3. S&P 500 Index Analysis.
  4. CRB Index Analysis.
  5. Bond Market Analysis.
  6. US Dollar Index and Forex Analysis.
  7. Asset Performance.
  8. Stocks and ETFs to Watch.

1. Weekly Summary (September 5 – September 8, 2023)

  • Stocks ended the week lower over inflation worries.
  • Bond yields were higher, and bond prices fell.
  • Commodities held steady due to a rise in crude oil.
  • The US dollar rally continued for the eighth week in a row.

US stocks fell in the holiday-shortened period as investors focused on rising crude oil prices and their potential impact on inflation going forward, which could force the Fed to remain hawkish. For the week, the S&P 500 index ($SPX) fell 1.3%. The NASDAQ-100 ($NDX) lost 1.4%. The Dow Jones Industrial Average ($DJI) shed 0.7%, while the S&P 500 low volatility index ($SP5LVI) dropped 0.5%. The S&P 500 high beta index ($SP5HBI) and small caps ($RUT) plunged 3.2% and 3.6%, respectively, due to risk-off. All-in-all, it was a losing week for the stock market, despite some bottoming action on Thursday and a small rebound on Friday.

The 10-year note yield gained nine basis points to 4.26%. The US Treasury Bond Total Return Index lost 0.2% for the week. Commodities ($CRB) were steady, primarily due to gains in crude oil. The US dollar index ($USDX) rose for the eighth week in a row to end the week up 0.8%. The spot price of crude oil (@WTI) gained 2.3%. Gold on the spot market (@GC) fell 0.5% on the back of a rallying US dollar. The US dollar index and spot crude oil are in overbought territory.

Year-to-date, tech stocks ($NDX) are up 39.7% and down 7.8% from all-time highs. The S&P 500 index ($SPX) has gained 16.1%. Gold (@GC) is up 6.4%, and crude oil (@WTI) is gaining 9.2% after a 6.4% gain the previous year. Commodities ($CRB) are up 2.4% for the year. Only low-volatility stocks are down year-to-date, with the S&P 500 low volatility index ($SP5LVI) losing 4.9%.

The stock gains this year, and especially of the tech stocks, should be considered in the context of the losses of the previous year. For example, last year the NASDAQ-100 fell 33%, and a gain of 39.7% after the bottom of October is part of a recovery process. This recovery process has different dynamics as compared to a market that goes up 10% one year, for example, and then rises an additional 20% or 30%. A recovery process normally has a higher chance of faltering because it reflects mean reversion rather than momentum.

Two weeks ago, I wrote:

Fed officials are aware of the exposure to higher-risk stocks and are trying their best to appease investors with promises of low inflation, low rates, and higher growth in the future. However, these are just promises and are based on wishful thinking. No one knows the future direction of prices because it depends on many factors, some of which are beyond the control of the central bank.

Our PSI5TF trend-following strategy with 23 futures contracts (long and short) is up 8.2% year-to-date (backtest). The DBMF iMGP DBi Managed Futures Strategy ETF is down 4% year-to-date.

2. Chart Of The Week

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Specific disclaimer: This report includes charts that may reference price target levels determined by technical and/or quantitative analysis. No charts will be updated if the market condition changes affect the charts’ levels and/or any analysis based on them. All charts in this report are for informational purposes only. See the disclaimer for more information.

Disclaimer:  No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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