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Stocks Await CPI DataStocks remain subdued, with the S&P 500 maintaining a narrow range all week and hugging lows. The APAC session suggests that the markets are bracing for another extremely hot CPI figure, which some are saying could still be in the 8% range. A hot figure would confirm the Fed's hawkish stance and stymie hopes of a pivot to more dovish rhetoric. The Kovach OBV is completely flat as the markets await this print. We have a vacuum zone down to 3547, if current levels do not hold. On the other hand, we must break through 3617 and 3624, which have formed a hard uppr bound for now, if we hope to establish higher levels.
FX:SPX500Short
by quantguy
Weakness Prevalent in the S&P 500Stocks appear to have bottomed out at 3584, with support confirmed by green triangles on the KRI. As predicted, we made an attempt for higher levels, but two levels at 3617 and 3624 are providing tough resistance. This is exactly what we predicted yesterday. If we are able to break through the next area of resistance is likely 3676. Risk sentiment is still slighted to the risk-off side, so we don't anticipate any significant rally in stocks any time soon. If we fall further, then 3547 is the next target.
FX:SPX500Short
by quantguy
Stocks Correct the RallyThe S&P 500 has completely retraced the small rally we saw at the beginning of October as sobering reality smacks down hopeful exhuberance. The markets are pricing in more hawkish rhetoric, and bracing for CPI on Friday. We made a valiant attempt to hit 3800, but quickly rejected the move all the way back to lows at 3584. We are seeing some support from green triangles on the KRI, but the price action is looking weak and if we break through, 3547 is the next level down. A relief rally will hit resistance at 3617 or 3624.
FX:SPX500Short
by quantguy
Two Factors Weighing on StocksStocks have wavered as the markets digest higher weekly unemployment rates and new statements from the Fed. The Fed remains unconvinced at how effective the 'Inflation Reduction Act' will be and Kashkari has stated that the Fed has 'more work to do' to bring down inflation. The S&P 500 has topped out at 3810 with multiple red triangles confirming resistance. We are seeing support in the 3750's, suggesting that we may be forming a bull wedge or other consolidation pattern. If things turn south, 3714 should provide support. A breakout could test 3825.
FX:SPX500Short
by quantguy
Stocks Rally Expecting A Fed PivotThe S&P 500 rallied off of increased confidence that the Fed will pivot their pervasively hawkish stance. This is likely to be transient and the market was due for a relief rally, anyway. We are currently testing a dense patch of levels in the 3740's, and will face significant resistance here. If we can break through, then 3792 is the next target. If we reject current levels, the most likely scenario, we should have support from 3714 or so, at the base of the 3700 handle.
FX:SPX500Short
by quantguy
More Gloom For Stocks?The S&P 500 has edged lower yet again, showing little buying interest even at these levels. The fourth quarter has just begun and all indications point to more gloom for stocks. We have broken our level at 3584, finding support just above the next level down at 3547. Multiple green triangles on the KRI are suggesting good support here at these levels, but the lack of a buyback suggests we are not out of the woods yet. We are looking incredibly oversold and due for a pullback. If so, we must break through 3610 and 3617, which seem to be providing significant resistance. If we edge down yet again, then 3547 is the next target.
FX:SPX500Short
by quantguy
1
Will Support Hold for Stocks?The S&P 500 is still in bear-mode, though it appears to have found some support at 3645 as we reported yesterday. We do appear to be seeing some meager consolidation with a narrow range forming between this lower bound and 3714. A red triangle on this level confirms strong resistance. The Kovach OBV does appear to be trekking upward, which may indicate that a relief rally is due. If so, it is not likely we will be able to break past 3749. If we sell off further, 3624 is the next target.
FX:SPX500Short
by quantguy
S&P 500 Slammed AgainThe S&P 500 has been slammed by recession fears, a hawkish Fed, pervasive risk-off themes in the news, and a potentially disastrous hurricane barreling toward the gulf of Mexico (oil refinery hub) and Florida. We have completely given up the 3700's, and are deep into the 3600's with 3645 providing support at the moment. The Kovach OBV is hugging lows and appears to be very oversold. A relief rally could attempt 3700 again, but otherwise the sentiment is extraordinarily bearish. Our next target is 3624.
FX:SPX500Short
by quantguy
SPX SUMMER RALLY BREAKING DOWN? With the SPX rallying over 18% from trough to peak over the last few weeks it looks like the recent upward trend could be under threat. As we can see on the chart above price is threatening to breach the lower third standard deviation (-3SD) off the linear mean at 4058.16. Given the high central tendency of signal to revert toward the linear mean(Pearson’s R^2 = 0.92), a deviation this far to the edge of the regression channel is not insignificant. We can also see that our 1 day RSI has gone below its midline into bearish trend territory and our MACD has rolled over with signal exhibiting wide downside divergence at the mouth. These are not bullish signals. If SPX price action fails to bounce back into the channel next week and falls firmly below the 4K line for a couple days or touches down to the 3850 price region, either of those would be enough to shatter the recent rally from a structural perspective. (Not financial advice.)
SP:SPX
by Firewalker_Charts
1
Stocks Brace for the FOMCThe small rally we saw in stocks yesterday was quickly batted down. We managed to make a run for 3909, which was our target and lower bound of some congestion from earlier this month. However, we promptly rejected that level, as anticipated, and immediately sought support again at lows just above 3825. The markets, usually quiet before an FOMC, reacted out of one last burst of fear for the impending meeting today at 2PM EST. It is expected that we will get yet another 75 bps rate hike, with some saying it could be as high as 100 bps. After this, it is likely that we see a relief rally that could test the 3900's again, with 4009 being the ultimate target for a rally. If we sell off again then we should have support at the base of the 3800's.
FX:SPX500
by quantguy
Stocks Brace for Fed Rate HikeStocks are edging lower yet again, as investors price in a potentially historic rate hike. In order to combat the highest inflation we have seen in 40 years, most agree that we are looking at a 75 bps rate hike , but some suggest it could be as high as 100 bps . However, multiple indicators suggest we are in the thicket of a recession, and after this rate hike, they are likely to pivot to a more dovish stance, with maybe one more rate hike in the tank before they're forced to start cutting again. The S&P has edged lower and dow futures have plunged more than 200 points as the market brace for the tightening. The S&P is testing 3848, and the Kovach OBV is still bearish. We do appear to be seeing some support here confirmed by green triangles on the KRI. If we can pivot, 3909 will be the next target, but we don't anticipate to break that any time soon. If we fall further, we should expect support at the base of the 3800's.
FX:SPX500Long
by quantguy
What to Expect with Stocks?Stocks got slammed yesterday after retail sales suggested several areas of the economy are being hurt by inflation. The Fed is still expected to hike rates, and some fear that this will tip us deeper into a recession. Stocks closed lower, extending the worst selloff in over two years. We broke support here at 3887, and appear to be testing 3867, but a green triangle on the KRI appears to be suggesting we are finding support here. The Kovach OBV has taken a sharp dive, and does not appear to be showing many signs of picking up. If we are able to pivot, we will have several levels to break through in the 3900's before we can consider the 4K's again.
FX:SPX500Short
by quantguy
Looking back at Equity Factors in Q2 with WisdomTreeMarkets in Q2 2022 continued to suffer from entrenched inflation and aggressive rate hikes from central banks. They also reacted to the slowdown of the global economy and the increased risk of a recession in developed economies. These changing market conditions impacted equity factors differently. In this instalment of the WisdomTree Quarterly Equity Factor Review1, we aim to shed some light on how equity factors behaved in Q2 2022 and how this may have impacted investors’ portfolios. -High dividend continued to dominate, followed by a revival of min volatility -Value started to show signs of slowing down due to its cyclical nature -Momentum and size continued to suffer -Quality strategies continued to deliver mixed results depending on their portfolio’s overall valuation Over July, central banks aggressive tightening continue to slow down the global economy, raising the probability of a global recession.The impact of this slowdown has been clear with rate hike expectations lowering leading to a factor rotation in favor of quality and size. Looking forward, uncertainty around recession and economic growth will continue to rise. Investors are facing the need to balance their portfolio between building wealth over the long term and protecting their portfolio during economic downturns. This environment could therefore favour high dividend and quality stocks. Performance in focus: high dividend continues to lead, but min vol is catching up In the second quarter of 2022, equity markets suffered from a deep drawdown, leading to the worst first half year in decades. The MSCI World lost -16.2%. Unusually, the US underperformed European markets with -16.9% versus -9%. Emerging markets suffered as well with -11.4%. Q2 2022 factor performance continued to be driven by inflation surprises on the upside and the hawkish stand of developed countries' central banks. However we also saw two new entrants this quarter with heightened volatility and the fear of recession rocking markets further. Faced with such a brutal landscape, some factors continued to do well, and some did not: -High dividend dominated in most regions. This factor finished first in all developed geographies -Pushed by increasing volatility and heightened fears of recession, min volatility followed closely: second in developed markets and first in emerging markets (EMs) -Value is the last factor that managed to outperform consistently this quarter thanks to rate hikes and despite the volatility increase -Momentum, size and growth suffered the most over the quarter, delivering underperformance across regions -Quality sat between those two groups, delivering mild underperformance in European and global equities but outperforming in US equities. However, like in Q1, the definition of quality and the criteria used would have hugely impacted the result. Quality, left unattended, tends to tilt toward growth (investors pay for quality, after all) and would have suffered from that tilt. For example, highly profitable companies and dividend growers have fared better over the period using their value/high dividend tilt to outperform. Looking at the outperformance of factors over the last six months, we notice that: -After a very strong start, value showed signs of slowing down in Q2. Value is a mostly cyclical factor, and an inflationary environment with aggressive rate hikes is very supportive. Fear of recession and increased volatility are not -High dividend is the overall winner for the 2022 first half and went from strength to strength -Min volatility started a bit slower in Q1 but has picked up speed in Q2 on the back of recession fears -Size and momentum suffered across the full six months in an environment that was not supportive of cyclical stocks -Finally, quality suffered the most in the first six weeks of the year and has hovered around the same level since then. With the market turning more defensive toward the end of Q2, quality is showing signs of life. Here again, highly profitable companies and dividend growers, for example, have fared better. It is worth noting that since the end of June, markets expectation of a recession has continued to grow. This has led to a revision downward of the expectation on future rate hikes. Equity factors have reacted to this change pretty strongly, with quality and size taking the lead for that month while value and high dividend released some of their performance. This rotation has been particularly strong in Europe where economic predictions are the most dire. Having said that, the performance difference in the first 6 months were so high that the full year to date picture remains similar. Valuations continue to come down across the board In Q2 2022, valuations continued to decrease across the board for factors. Momentum and quality saw the largest drop in valuations in all geographies. On a relative basis, high dividend stocks and value stocks got more expensive versus the market on the basis of lower drop in their price to earning ratios. The re-opening trade in 2021 has evolved into the ‘recession trade’ in 2022, owing to a tardy start to the hiking cycle by central banks. Their aggressive tightening plan is slowing the global economy, raising the probability of a global recession. Leading economic data (LEI) shows economic momentum is fading quickly. The impact of this slowdown has been clear in July with rate hike expectations lowering leading to a factor rotation in favor of quality and size. However, this risk of recession only adds to the uncertainty for investors. They need to carefully balance the risk in their equity allocation. All-weather assets continue to be best positioned, delivering balance between building wealth over the long term whilst protecting the portfolio during economic downturns. This environment could therefore favour high dividend and quality stocks. World is proxied by MSCI World net TR Index. US is proxied by MSCI USA net TR Index. Europe is proxied by MSCI Europe net TR Index. Emerging Markets is proxied by MSCI Emerging Markets net TR Index. Minimum volatility is proxied by the relevant MSCI Min Volatility net total return index. Quality is proxied by the relevant MSCI Quality net total return index. Momentum is proxied by the relevant MSCI Momentum net total return index. High dividend is proxied by the relevant MSCI High Dividend net total return index. Size is proxied by the relevant MSCI Small Cap net total return index. Value is proxied by the relevant MSCI Enhanced Value net total return index. Sources 1 Definitions of each factor are available below This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
AMEX:HDV
by aneekaguptaWTE
What Yesterday's CPI Means for the Fed and StocksA hotter than expected CPI print tanked stocks yesterday, wiping out this week's rally and then some. The markets were hoping that CPI, which is the Fed's favorite inflation gauge, would show that inflation is plateauing and that their policies are working. Under these assumptions it would be reasonable to think that after September's rate hike, they would take a more dovish position. However with red hot inflation beating expectations, this is clearly not the case, and some think the Fed will double down on their stance, hiking rates to 100 bps when 50 bps was more likely just a few days prior. The S&P 500 responded accordingly, smashing through the 4000's, and reestablishing the 3000's, finally finding support at our level at 3928. It is likely the markets will equilibrate as we digest CPI, so expect the S&P to remain bounded by 3909 and 4009 for now. We will need to wait for more data to come out this week (retail sales on Thursday and University of Michigan sentiment on Friday) to get a clearer picture of the state of the economy, and how the markets will react further.
FX:SPX500Short
by quantguy
Stocks Edge Higher Ahead of CPI DataStocks have edged higher, breaking through to our next target of 4122, exactly as we predicted yesterday. Stocks are up ahead of key US inflation data, expected to come in at 8.0% , which is still high, but hopefully at least plateauing. It looks like we are meeting some resistance as confirmed by red triangles accumulating on the KRI. The Kovach OBV is still strong but may be rounding off slightly. While we may be in for a retracement, if momentum can sustain, then 4144 or 4178 are reasonable targets. If we reject current levels watch 4068 for support.
FX:SPX500Long
by quantguy