1/ SPX in Negative Streak
2/ US Economy Expanded
3/ Silver Pulls Back to Test Support
4/ Growth/Value ratio
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1/
SPX in Negative Streak
The S&P 500 ($SPX) closed lower for the third straight day after fumbling an attempted rebound. It was up nearly +1.2% this afternoon but went negative in the final 30 minutes, closing lower by -0.51%.
Courtesy of StockCharts.com
The index continues to fall and the 5250 support level comes into play. Momentum has fallen rapidly from overbought and is very close to the oversold zone.
Courtesy of StockCharts.com
Today’s movement in the S&P 500 index reflects a market in a wait-and-see mode, influenced by mixed corporate earnings and economic data. Investors appear to be cautious, possibly awaiting more clarity from upcoming economic reports and Federal Reserve announcements.
2/
US Economy Expanded
The US economy expanded an annualized 2.8% in Q2, up from 1.4% in Q1, and above forecasts of 2%, the advance estimate showed. This growth has been driven primarily by increases in consumer spending, inventory investment, and business investment, despite a rise in imports which subtracts from GDP calculations.
Courtesy of US Bureau of Economic Analysis
Robust consumer spending, a key driver of GDP growth, benefits sectors like retail, consumer goods, and services. The strong GDP growth data for the second quarter of 2024 is likely to have a positive effect on the stock market, particularly for sectors tied to consumer spending and business investment.
We are facing what could be a sector rotation from an ultra-concentrated technology sector to others that had been laggards, including mid- and small-caps.
3/
Silver Pulls Back
Silver has shown a mixed performance recently, with the market experiencing significant volatility. As of mid-July 2024, silver prices faced resistance around the $32, failing to sustain momentum and pulling back to test support levels at approximately $28.
While silver’s short-term outlook is somewhat uncertain due to recent resistance levels, the longer-term prospects remain bullish with strong industrial demand and supportive macroeconomic factors.
Courtesy of StockCharts.com
The current breaks in the $GOLD/$SILVER ratio suggest near-term deterioration in the silver price with the RSI still below the 50 level. The silver price needs to hold this level to avoid further declines.
Courtesy of StockCharts.com
4/
Preferences change?
Analyzing the VUG (Vanguard Growth ETF) to VTV (Vanguard Value ETF) ratio provides insights into market preferences between growth and value stocks.
As of 2024, growth stocks (VUG) have significantly outperformed value stocks (VTV). Year-to-date, VUG has returned approximately 30%, while VTV has returned around 8%.
Courtesy of StockCharts.com
Since the end of June, market dynamics have shifted, making value stocks potentially more attractive. The VUG/VTV ratio encountered resistance and was rejected, suggesting a possible shift towards value stocks.
A shift towards value stocks might indicate a maturing economic cycle or a defensive stance by investors. This scenario is not necessarily positive for the market as it reflects increased caution. The last time a similar shift occurred was at the end of 2021.
Sectors traditionally categorized as value, such as financials, utilities, and consumer staples, might outperform. In contrast, sectors like technology and consumer discretionary, which contain many growth stocks, could see relative underperformance.
While this does not confirm a change in market trend, it is an important sign. Investors should remain cautious and consider this shift in their investment strategies.
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Originally posted 26th July 2024
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