Market Update 4/26/2024
Latest recap:
The Pullback Of 2024 - April To May [Bounce time Over?]
Inflation Report In The Focus Today
Market Sentiment: Fear remains, so stay cautious!
S&P 500 Levels - S: 5104 or 10MA; R: 5180 or 20MA/50MA
MY BULL/BEAR RATIO: NEUTRAL BIAS
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The Pullback Of 2024 - April To May [Bounce time Over??]
How do you call it when the economy is stagnating but inflation remains growing? STAGFLATION!
Stagflation is the worst possible condition an economy could be in and the nightmare to all central bankers like the Federal Reserve.
After multiple hot CPI readings in 2024 (we are in April!), the US gross domestic product (GDP) advanced at a 1.6% annualized rate in the first quarter of 2024, significantly slowing down compared to both the 3.4% growth in Q4 2023 and the 2.5% expected. It also marks the lowest expansion since the contraction in Q2 2022.
According to this new reality, the Federal Reserve really has to make a decision that either bankrupts the economy (rate hikes or high rates staying for longer) or bankrupts the middle class / low incomers by giving up inflation fight by cutting rates and cash injections to stimulate the slowing economy.
And we had this movie before - eldery generations of traders and investors may remember the situation in the U.S. economy in the 1970s that was heavily influenced by the aftermath of the Vietnam War, which strained federal finances and forced the government to abandon the gold standard in 1971 to allow the Federal Reserve more flexibility in printing money to finance the war.
This departure from the gold standard set the stage for a decade marked by economic instability, starting with a recession in the early 1970s. The situation worsened with the 1973 Arab Oil Embargo that triggered an energy crisis and soaring inflation, leading to a period of stagflation. The worst economic downturn occurred in 1975, characterized by deep recession and high unemployment. Despite occasional recoveries, inflation remained a persistent challenge, exacerbated by a second oil crisis in 1979, leading to another severe recession by the end of the decade as the Federal Reserve aggressively hiked interest rates to control inflation.
2024 April moving forward:
We started 2020 with Covid pandemy and worldwide lockdowns, that was addressed with an unprecendented stimulus!
Two years later, in 2022, NATO’s proxy war in the Ukraine against Russia has started that shifted energy supply/demand worldwide and put the focus on the war economy again.
Another year later, in 2023, Israel has been fighting a war against Iran-backed militants, potentially leading to a new energy supply crisis that could end up in another Arab Oil embargo.
This year we are dealing with “another possible” front, the third one, far east between China and Taiwan that could lead to supply chain disruption on semiconductors worldwide (e.g. tech stocks that are producing chips or are in need of chips are highly at risk!)
Latest economic updates are suggesting we are going into a reccession but inflation may remain elevated.
I am not calling for the world wide doom effect and WW3 scenario, but I believe that we are seeing right now in front of our eyes the same script playing like it was in the 1970tees! And in this decade, there were some asset classes that outperformed all other asset classes by far in a stagflationary environment - one I can truly reveal you already: Gold/Silver miners!!!
Big tech / mega cap stocks that reported earnings this week has shown some interesting characteristics that investors cannot ignore:
Tesla: Earnings were a disaster but the overall guidance sounded promising - Share price spiked as the growth story may remain
Meta: Earnings were outstanding but the revenue guidance was not meeting expectations - Share price tumbled as the growth story may has come to an end
Microsoft: Earnings beat on all ends and a guidance that satisfied Wall Street dreams with more growth expected and sharebuybacks - Share price spiked as the growth story may remain
Alphabet (Google): Earnings beat on all ends and a guidance that satisfied Wall Street dreams with more growth expected and sharebuybacks - Share price spiked as the growth story may remain
To recap this weeks big tech earnings, we have a neutral stance. Including Netflix earnings from last week, we can say the famous “Magnificent 7” story has officially come to an end.
As of now, only 2 big tech stocks can be counted as growth leaders (Alphabet & Microsoft). Will Amazon and Apple (both next week) and Nvidia (in 4 weeks!) keep also up with the growth story?
Whatever the results of the upcoming reportings will be, the stellar earnings from Alphabet and Microsoft helped major indices to turnaround yesterday!
Inflation Report In The Focus Today
Today we will get another round of economic updates and one is the most expected of all: The Core PCE - the Federal Reserves preferred inflation reading, the one they are really taking into account to formulate its strategic inflation target. After the CPI has recently signalled that inflation is growing faster again on a year-over-year & month-over-month basis, Fed members including Fed Chair Jerome Powell and Econimists are highly watching for the data release today.
If also the Fed’s preferred inflation data is coming in hot today, expect the markets to crater as it would cleary communicate that the Fed has to give up on early rate cuts, if following its usual monetary policy transcript. If however, and that is what everyone is hoping for now, the numbers coming in at least as expected or even cooler, the hope for rate cuts in 2024 would remain and markets could even rally a little further into the Fed meeting next week.
Worse than expected consumer sentiment data could also help to offset neutral inflation data reading to boost the markets.
Market Sentiment
Imagine the market is rallying but traders sentiment remains fearful… yes, this is where we are now! Stay cautious traders, dont fall in love to the upside!
Live S&P500 Futures - Pre-Market Analysis
The current price of the S&P500 has jumped back above the 10MA which is usually a bullish signal over the very short-term, depending on the Core PCE inflation data reading outcome today. The chart tells us whatever news will be released, its going to be news the markets will like. Lets see.
Despite the very short-term bullishness however, the overall question remains if the S&P500 is also able to get above the 20MA/50MA! As of now, we got a bearish deathross on the 20/50MA which is usually a bearish sign over the short-term and often act as strong resistance.
As long as this question remains uncleared, I remain neutral. However, I believe traders will get by the end of today’s trading session a clear signal, and if not today, then for sure by Wednesday - THE FED DAY!
Of course my neutral stance does not neccessarily mean you must stay on the sideline. Certainly, you can also play range bounces (long/short) daytrades.
Levels to watch S: 5104 or 10MA; R: 5180 or 20MA/50MA
Pro Bullish:
New ALL-TIME-HIGHs!Bullish momentumAt the daily 20MAAbove the daily 10MA, 100MA, 200MA
Above the weekly
10MA, 20MA, 50MA, 100MA, 200MAAbove the monthly 10MA, 20MA, 50MA, 100MA, 200MA
10/20MA daily goldencross10/50MA daily goldencross20/50MA daily goldencross
20/100MA daily goldencross
50/100MA weekly goldencross
Strong Fourth Quarter of 2023
Strong First Quarter of 2024
Strong January Month of 2024
Strong February Month of 2024
Strong March Month of 2024
Price Target: 5,100-5,200 ACHIEVED (Wall Street Consensus for 2024!)
NEW Price Target: 5,500 (Oppenheimer Wall Street Bank March Update)
NEW Price Target: 5,700 (Fundstrat's Tom Lee April Update)
Blow-Off Top: 5,500-6,136
Pro Bearish:
Market is rolling over
Long-term trendline break confirmed!
Weak April month
Wall Street’s 5100 price target for the year 2024 already achieved!
Wall Street’s 5200 price target for the year 2024 already achieved!
Market Sentiment was at EUPHORIA level
Below the daily 10MABelow the daily 20MA
Below the daily 50MA
10/20MA daily deathcross
10/50MA daily deathcross
20/50MA daily deathcross
Weakening bullish momentum / Bearish momentum
Potential bearish head and shoulders pattern
Geopolitical Risk: Middle East Crisis / Ukraine Crisis
Currency Risk: Japan’s Yen Currency, US-Dollar crisis looming/happening
PULLBACK PT: 4,808-4,980
MY BULL/BEAR RATIO: NEUTRAL BIAS
Thanks for reading my newsletter!
Have a happy trading day and weekend!
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