The weekly market reports include a stock market forecast and a capital market analysis. To access the full report, you must subscribe to Premium Articles, Weekly Premium Articles, or an All-in-One subscription.
Included in this weekly market report:
- The financialized bitcoin.
- For how long, stocks over bonds?
- Reflexivity exhaustion.
- A divergence in commodities.
- A crowded trade got more crowded.
Weekly Summary (April 15–April 19, 2024)
- Geopolitical tensions and an undecided Fed drove a stock market sell-off.
- Bond yields rose due to expectations of higher-for-longer rates.
- Precious metals gained, but crude oil fell after a rise in inventories.
- The US dollar was up amid rising geopolitical turmoil.
For a second week in a row, despite gains in precious metals due to losses in energy and grains, the DBC ETF fell (-1.2%). Gold (GLD) gained 1.9% to end the week 0.1% below the recent all-time closing highs. For the week, the U.S. dollar index (UUP) gained 0.2%. Gold (GLD) has outperformed the SPY ETF since 2022 by a wide margin, with a return of 29.3% versus 7.9%, respectively. Gold and the US dollar are highly overbought (strong momentum).
Large-cap stocks (SPY) fell 3.1% due to escalating geopolitical tensions and an undecided Fed about interest rate cuts. Tech stocks (QQQ) plunged 5.4%, the most since a 5.8% loss for the week ending November 4, 2022. Note that the following week, ending November 11, 2022, the QQQ ETF surged 8.8% due to a dovish Fed. A repeat of this pattern next week will be an interesting, albeit low-probability, event.
Small caps (IWM) lost 2.8% and are down 17.6% from their all-time highs. High beta large caps (SPHB) plunged 3.6% due to risk-off. The low-volatility large caps (SPLV) gained 1% due to a switch to lower-risk assets. The Dow Jones Industrial Average (DIA) ended the week unchanged due to large gains in United Health (UNH, +14.1%) and American Express (AXP, +5.9%).
For the week, the magnificent 7 equal-weight index plummeted 7.7%. TSLA and NVDA plunged 14% and 13.6%, respectively.
The TLT ETF fell 1.3% for the week. Since January 3, 2022, the TLT ETF has been down 35.7%, while large-caps (SPY) have gained 7.9%.
The technology sector (XLK) fell the most, by 6.3%, while utilities (XLU) gained 1.9%. Year-to-date, the energy sector (XLE) is up the most, by 14.2%.
The real estate sector (XLRE) is down the most year-to-date, by 9.8%.
Last week, the stock market sold broadly, but gains in a few large-cap stocks prevented an accelerated decline. This week, a sell-off in magnificent 7 stocks caused the broad market sell-off to accelerate, and the probability of a bear market increased, although it is still relatively low given the strength of the economy.
Stock market forecast
The forecasting model generates well-defined entry and exit signals for the SPY ETF. The model does not forecast exact tops and bottoms, but the objective is to minimize losses due to large corrections and maximize gains in uptrends. For the last 32 years, the accuracy has been close to 100%. We describe the current signal, duration, and strength below.
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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.
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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