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Weekly Market Report-January 22, 2024 [Premium Articles]

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The weekly market reports include a stock market forecast and an analysis of capital markets.  Access to the full report requires a Premium Articles or All-in-One subscription.

Included in this weekly market report:

  • Equity markets are about to hit a crucial threshold.
  • The yield curve “bear steepener” and what it means.
  • The new bagholders are already here.
  • Update on two pair trades for 2024.

Weekly Summary (January 16–January 19, 2024)

  • U.S. stocks were up after a rise in consumer sentiment.
  • Bond yields rose the most since late October of last year.
  • Crude oil gained, but commodities came under pressure.
  • The US dollar was up on the back of rising bond yields.

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The long-stocks, short-bonds trade was again at the center of attention in the holiday-shortened week after stronger-than-expected consumer sentiment data. Tech stocks rallied on news of rising demand for chips due to the artificial intelligence rush. The VanEck Semiconductor ETF (SMH) surged 8.2% to new, all-time highs on the news. This provided fuel for the stock market to move higher. At the same time, bond yields rallied due to rising uncertainty about the timing of rate cuts this year. Some analysts have started questioning whether rate cuts will be a good idea due to the strength of the economy.

The stock market can rise higher without rate cuts on good stories and higher nominal earnings, but the bond market needs lower inflation and rate cuts for higher prices. At this point, the growth environment favors stocks, specifically the tech sector, while the bond market is in a deep correction. It sounds like an election year. We elaborate further in this report below.

In the holiday-shortened week, large caps (SPY) gained 1.2% to new all-time highs. Bond yields rallied, and prices of long-duration bonds fell (TLT, -2.5%). The weakness in small caps persisted, with the IWM ETF falling 0.4% for the week. High beta large caps (SPHB) were up 1.2%, while low volatility large caps fell 0.2% due to risk-on. The Dow-30 (DIA) gained 0.8%.

Crude oil (USO) gained 1.2%, and gold (GLD) fell 0.9% on the back of a rising US dollar (UUP, +0.9%) See our latest article about the wide divergence in performance between the UUP ETF and the US dollar index.

Stock Market Forecast

A proprietary model generates the forecast. The model’s accuracy has been close to 100%. The model generates well-defined long entry and exit signals for SPY ETF. The model does not attempt to forecast exact tops and bottoms. The objective is to minimize losses due to large corrections and maximize gains in uptrends.

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Specific disclaimer: This report includes charts that may reference price levels determined by technical and/or quantitative analysis. No charts will be updated if market conditions change the price levels 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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