November 9, 2023
Good morning,
Last Monday we reflected on the stock and bond market’s emphatic reversals of their respective downtrends. For stocks, the S&P 500 Index (SPX) was up +5.85%, its biggest weekly gain in a year. The Russell 2000 (small caps) soared +7.6%, its best week since February 2021. We suggested that the strength of the follow through in the days and weeks to come would likely clue us in as to whether last week’s strong snap-back rally was the beginning of the next leg up of the bull market (new highs) or a correction in the equity market downturn that started 3-months ago.
While it has been only three days, the market testimony is thus far mixed, which in itself is a negative for the bull’s case. It is about what is missing. No breadth thrusts, no 10:1 up days, no spike in stocks above their 50 dma’s (moving averages) – all solid signals of the start or restart of a bull market. All missing.
The action so far this week in small caps does not (yet?) help the bull case either. The majority of stocks are classified as small-caps, so breadth thrusts are impossible without them at least participating. As noted above, last week was the best for the Russell 2000 in years. However, small-caps have not been able to hold their relative gains this week.
Another disappointment for bulls may be how quickly sentiment indicators are reversing. From deeply oversold/pessimistic levels just last week (some of the fuel for last week’s rally), short-term sentiment has moved to the edge of overbought at lightspeed for this indicator – unusual.
There is a good technical argument for the equity market to move higher in the coming days. The 4400 level on the SPX is pretty good resistance (see Bloomberg SPX Chart below). At 4382 last night, 4400 will likely be taken out which will provide a little fuel for higher prices.
Can the equity market move up into year end with the seasonal tailwind and carry-over momentum from last week – surely it can. But is the snap back rally that started last week the resumption of the bull market – the early poll data leans no, so far. With what looks like a challenging economic environment next year, I’m not surprised.
Be well,
Mike
Disclosures
Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security, has not been tailored to the needs of any specific investor, and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any investment decisions. The information contained herein was compiled from sources believed to be reliable, but Robertson Stephens does not guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens. Performance may be compared to several indices. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. A complete list of Robertson Stephens Investment Office recommendations over the previous 12 months is available upon request. Past performance does not guarantee future results. Forward-looking performance objectives, targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are speculative and involve substantial risks including significant loss of principal, high illiquidity, long time horizons, uneven growth rates, high fees, onerous tax consequences, limited transparency and limited regulation. Alternative investments are not suitable for all investors and are only available to qualified investors. Please refer to the private placement memorandum for a complete listing and description of terms and risks. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2024 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere.