Shifting Tides: Can Markets Stay Strong?
Economic strength and sector rotation are reshaping market dynamics.
Market Trends Last Week
Election Rally and Bond Yields:
Stocks surged post-election while bond yields spiked toward yearly highs.
Markets started strong, pushing the S&P 500 to a record 6,010 by Tuesday, but rolled over mid-week.
Rates & Economic Signals:
The 10-year yield climbed from 4.30% to 4.50%, driven by a mix of better-than-expected economic data and inflation fears tied to fiscal policy changes.
The Fed is closely monitoring data and signaled it may slow rate cuts if the economy remains strong.
Fed Chair: "We can approach decisions carefully; no urgency to lower rates."
Market Reaction:
Markets dipped after those remarks, hitting lows by Thursday’s close.
Sector Rotation:
Investors shifted out of Information Technology into cyclicals like Financials, Industrials, and Energy.
Key question: Can markets stay resilient with Technology’s 31% S&P 500 weight under pressure?
Bottom Line:
Economic strength and sector rotation are reshaping market dynamics. The coming weeks will test whether the broader market can hold up amid shifting investor preferences and rising rates.
This week-The Short Term
The SPX is back below the key 6,000 level and it fell below its 20-day moving average at 5,860 (-2.5% from Monday's high).
What to Watch
20-day moving average: A break could lead to testing the 50-day MA at 5,770—a more critical level.
Momentum signals: RSI dropped from 70 to ~51 and this is not a cause for concern, but a fall below 40 is what traders need to keep an eye on.
Near-Term Risks
Failure to hold these levels may trigger more selling into the weekend as investors de-risk.
Next week's action hinges on how bulls defend current levels.
Economic Calendar Highlights (Full Calendar)
Early Week: Housing data (NAHB Index, Housing Starts, Building Permits).
Late Week:
Jobless Claims
S&P Global PMI
U. of Mich Consumer Confidence
Earnings to Watch
Retail & Tech: Walmart, Lowe's, Target, TJX, PANW, SNOW.
Wednesday Spotlight: Nvidia's earnings. With its role in AI tech, expect this to be a major market mover.
Bottom Line: Bulls need to hold critical levels to stabilize markets, while Nvidia's report could set the tone for tech and AI stocks next week.
The Fab 5
Gold is bouncing off of it’s 20 week EMA. This is a tradable low.
Buy silver and gold here now that we are at the bottom of the implied move (range).
The dollar is hitting the top of the range. Look for the dollar to stall out here.
Bitcoin-Long-Remember we are looking for a sharp move higher over 100k if the dollar falls. See last weeks report.
TLT-I am still short long bonds and I am still long the front end of the curve (3 month bonds).
USO-Staying away from it for now but we are long energy stocks.
This week, I still think the market can move higher. I still believe the market will move higher in to year end.
The signals are clear.
Against All Odds Research
Stay Connected:
YouTube: Against All Odds Research Channel (@againstalloddsresearch)
Twitter: Jason P (@jasonp138)
Substack: AAO Research
Support the Bees: Help save the native bees! Learn more and get involved here.