Futures are moderately lower, testing the 50-day moving average as ripples from the longest ever government shutdown reach more critical areas of the economy.
Note that ES has now completed a small H&S Pattern that targets 6535.
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To quote the great Yogi Berra, “it’s tough to make predictions, especially about the future.”
But, there are a number of important themes that should drive markets in 2024. The elephants in the forecasting room are the so-called Magnificent Seven (AAPL, GOOGL, MSFT, AMZN, META, TSLA and NVDA) which soared 105% in 2023 versus the S&P 500’s 24%.
These seven stocks make up roughly 30% of the S&P 500, so even that index’s returns are suspect. Without the Mag 7, SPX gained only 9.94%. So, don’t chastise your investment manager if they returned only 10% last year by exercising prudent diversification.
Will the rest of the market catch up to the Mag 7 or will the Mag 7 “catch down” to the rest of the market? Investors tempted to join the party and pile into the Mag 7 should remember that, in 2022, these same stocks plunged 40% compared to the rest of the market’s 12% losses.
From a fundamental standpoint, their price to earnings multiples are historically quite high, meaning that any disappointments will be dealt with harshly. We saw this last week with AAPL. While SPX fell as much as 2.2% from its highs, AAPL was off a whopping 9.7%.
We’ll spend the next several days examining the equity charts for clues as to what to expect in the year ahead. We’ll also zero in on the currencies, commodities and interest rates which greatly influence equity values.
As always, our goal is to get most them right most of the time, as we did in 2023 [see: The Year in Review – 2023.] Chart patterns and technical analysis are great tools for doing so. We’ll start with a very obvious chart pattern for SPX which should make all the difference between a stellar year or a slump. It ties in with another chart pattern dating back to the Great Depression.
The most important chart pattern for SPX is the large Inverted H&S Pattern which completed on Dec 11.
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Futures are sagging once again as they test our latest downside target to be tagged.
One has to wonder how much ground will need to be given up in order for consumer confidence to drop back below 100.
Note that the Dow is testing its 200-day moving average – always an important threshold when it comes to investor confidence.
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Futures are up moderately in advance of this afternoon’s FOMC meeting.
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It’s been lonely maintaining that rates would continue to rise over the past 10 months. As we noted in Decision Time:
“TNX…looks likely to test 47.55 after it digests recent gains.”
After the 10Y topped its Oct 21 highs, folks started coming around. Now it’s looking fairly obvious.
The only question is whether Powell will fess up to the coming rise in CPI and, therefore interest rates, in his speech at Jackson Hole (1005 ET.)
As we discussed a few days ago [see: Interesting Goings On in Currencies] the cross currents in rates and currencies are problematic for the market. We saw ample evidence yesterday when futures gave up a strong opening – breaking out of a well-formed channel only to close deep in the red.
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In our last major analysis of COMP [see: Oct 13, 2022 Update] we noted that COMP hadd reversed within 1% of our upside target in 2021 and had subsequently dropped to within 0.3% of our 10,122 target.
Since then, it’s been a battle. COMP finally rebounded to our 13,873 target at the yellow .618 Fibonacci retracement…only to reverse at the .707 Fib at 14,418. Since then, it has been on a wild ride, giving up 2.7% yesterday after failing to break back above its 50-day moving average.
Its rebound at its Aug 2022 highs was so convincing, we had our doubts as to our 12,828 downside target. It’s now looking like a distinct possibility again.
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Futures are up modestly in advance of the Jackson Hole symposium. 
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Futures are up moderately, primarily on the DXY stall and the usual overnight VIX smackdown. But, most attention will be focused on Thursday’s CPI print.
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Equities have ramped almost 12% since the last Fed meeting – ignoring the prospect of higher interest rates for a longer period of time. Given the oil market’s recent breakout and the obvious base effect on inflation, we see a good chance of Powell presenting a more hawkish stance than the overbought market is prepared for…
…raising the prospect of spike in the 10Y to 4.76% by mid-August. One of the few developments that could prevent it: a collapse in oil/gas prices.
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