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The Price Action Lab Report-Week of September 25, 2023 [Premium Articles]

Photo by Burak The Weekender

Market analysis for the week of September 25, 2023. Major market indexes, large caps, ETFs, commodities, and forex. This report includes 18 charts and tables. Access to the full report requires a Premium Articles or All-in-One subscription.

Report contents

  1. Weekly Summary.
  2. A Winning Streak.
  3. S&P 500 Index Analysis.
  4. CRB Index Analysis.
  5. Bond Market Analysis.
  6. US Dollar Index and Forex Analysis.
  7. Thematic ETF Performance.
  8. Markets to Watch.

1. Weekly Summary (September 18–September 22, 2023)

  • Stocks fell hard after a hawkish Fed.
  • Bond yields rose to 16-year highs.
  • Commodities retreated after the recent rally.
  • The US dollar gained for the tenth week in a row.

As a result of a hawkish Fed, US stocks fell hard. For the week, the S&P 500 index ($SPX) fell 2.9%. The NASDAQ-100 ($NDX) lost 3.3%. The Dow Jones Industrial Average ($DJI) dropped 1.9%. The S&P 500 low volatility index ($SP5LVI) fell 1.3%. The S&P 500 high beta index ($SP5HBI) and small caps ($RUT) plunged 4.7% and 3.8% in oversold territory, respectively.

The 10-year note yield gained 12 basis points to 4.44% after reaching a 16-year high at 4.49%. The US Treasury Bond Total Return Index lost 0.4% for the week. Commodities ($CRB) retreated 1.2% after the recent rally. The US dollar index ($USDX) rose for the tenth week in a row to end the week up 0.2%. The spot price of crude oil (@WTI) fell 0.9%. Gold on the spot market (@GC) was unchanged on the back of a strong US dollar.

Year-to-date, tech stocks ($NDX) are up 34.4% and down 11.3% from all-time highs. The S&P 500 index ($SPX) has gained 12.5%. Gold (@GC) is up 6.3%, and crude oil (@WTI) is gaining 12.3%. Commodities ($CRB) are up 3% for the year. Low-volatility stocks are down year-to-date, with the S&P 500 low volatility index ($SP5LVI) losing 5.5%.

Tech stocks ($NDX) have the strongest 252-day momentum reading at 26.3%, with gold (@GC) following at 15.3%. Low-volatility large caps ($SP5LVI) have negative momentum at -1.7%, and the US dollar index’s momentum is at -4.9% despite the strong rally.

Last week, I wrote:

There are signs that asset momentum may be entering a mean-reversion mode.

A mean reversion could cause a significant drawdown and a rise in volatility. The S&P 500 index has already fallen about 6% from the highs of July. The primary driver of mean reversion is profit-taking due to macroeconomic uncertainty. During the last quarter of the year, fund managers may want to take profits and secure a higher level of closed equity at the end of the year. This behavior could cause reflexivity and the amplification of losses for equity indexes.

Our PSI5TF trend-following strategy with 23 futures contracts (long and short) is up 9.6% year-to-date (backtest). The DBMF iMGP DBi Managed Futures Strategy ETF is down 2.5% 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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