1/ Mid Cap & Small Cap
2/ AGG Reaches Key Zone
3/ Possible Fall for FEZ?
4/ General Motors Falls
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1/
Mid Cap & Small Cap
The S&P 500 remained near the flat line on Tuesday as traders braced for earnings reports from large tech stocks. In contrast, small-cap and mid-cap stocks continue to offer interesting opportunities for investors.
Small-cap stocks are poised for significant growth due to their earnings potential and attractive valuations, while mid-caps present a balanced option with strong financial fundamentals and substantial upside potential.
Courtesy of StockCharts.com
Having oscillated sideways within a defined price range for just over two years, their recent breakouts continue to offer appealing risk/reward ratios.
Both indices were the only ones to close with gains on a day when most major indices closed nearly flat. This reinforces recent moves out of ranges and points to further upside in the coming days.
Courtesy of StockCharts.com
The shift to small caps also comes as investors grow increasingly excited that the Federal Reserve will soon begin lowering interest rates, a move seen as particularly helpful for smaller and more cyclically oriented companies.
2/
AGG Reaches Key Zone
Bond prices and interest rates have an inverse relationship. When interest rates fall, bond prices rise, and vice versa. Therefore, when the price of the AGG ETF (iShares Core U.S. Aggregate Bond ETF), which represents a broad spectrum of the U.S. bond market, rises, it can indicate various economic and financial implications.
If the price of AGG is rising, it could be a sign that interest rates are falling or are expected to fall.
Courtesy of StockCharts.com
The price has reached a zone where the VWAP drawn from the 2020 highs coincides with a resistance that has previously contained any attempts to reverse the prevailing trend.
If the Fed ultimately decides to cut rates, we could see AGG break forcefully above this zone and aim for previous highs.
3/
Possible Fall for FEZ?
The FEZ ETF tracks the Euro STOXX 50 Index, which includes 50 of the largest and most liquid stocks in the Eurozone. It provides investors with broad exposure to leading companies in various sectors across Europe, making it a popular choice for those looking to invest in European equities.
FEZ is currently considered undervalued by several analysts, suggesting potential for further gains. Recent strong economic indicators from major European economies, including robust retail sales data from the UK and positive earnings reports from several key European companies, have buoyed investor sentiment.
Courtesy of StockCharts.com
However, what catches my attention is that momentum has been falling since the end of March. This scenario has repeated twice in the last three years, and the immediate consequence has been a pullback.
The SPDR Euro STOXX 50 ETF (FEZ) remains a strong candidate for investors seeking diversified exposure to European markets. With its solid recent performance, attractive valuation, and positive economic indicators, it presents opportunities. However, due to the reduction in momentum, I would pay attention and avoid adding additional capital while tightening stop losses.
4/
General Motors Falls
General Motors stock was down 6.4%. The automaker raised its outlook for the year after reporting second-quarter pretax adjusted earnings of $3.06 per share, surpassing analysts’ estimates of $2.70. GM now expects to generate $13 billion to $15 billion in operating profit for 2024, up from its previous guidance range of $12.5 billion to $14.5 billion. However, cautious commentary about the company’s operations in China contributed to the stock decline.
Courtesy of StockCharts.com
The price has fallen from its 52-week high, indicating a possible throwback to the recently broken level, which now acts as support. Despite concerns over momentum, GM remains a strong candidate for investors seeking exposure to the automotive sector. The company’s continued innovations in electric vehicles and strategic partnerships are expected to drive long-term growth. The consensus among Wall Street analysts is a “Moderate Buy” rating for GM, with an average price target of $55.61.
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Originally posted 24th July 2024
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