January 29, 2024
Good morning,
For all the daily headlines of new all-time highs for U.S. stocks lately, you wouldn’t be faulted for thinking that the stock market was on fire and that you were missing out. For all the bluster, the S&P 500 was up a whopping +1.05% last week. Headline distortion is what runs sentiment to extremes in bull and bear markets. As you would imagine, sentiment is overly optimistic now, and has the market is technically overbought. It is the key ingredient for a spike in volatility, a euphemism for a correction.
The week ahead has all the ingredients a market-chef might request for concocting a correction. There is the Federal Open Market Committee (lFOMC) meeting and their Wednesday afternoon announcements. There are multiple key mega-cap earnings reports (GOOG, MSFT, AMZN, AAPL, META and 26 other non-Mag7 mega-caps – that’s busy). Then, on Friday, there is the January Employment Data (Nonfarm Payrolls, Average Hourly Earnings, Unemployment Rate.
The longer-term technical signals are mostly all bullish due to the extreme rally in the last two months of last year. There has been a deterioration in shorter-term technical indicators this month, despite the headlines. February is the worst-performing month for technology over the past 20 years (Bloomberg Data). I suspect the road ahead for markets is going to be a bumpy one.
Be well,
Mike
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