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US500 to turnaround?SPX500USD - 24h expiry Although the bears are in control, the stalling negative momentum indicates a turnaround is possible. A Doji style candle has been posted from the base. The primary trend remains bullish. This is positive for short term sentiment and we look to set longs at good risk/reward levels for a further correction higher. We look to buy dips. We look to Buy at 4682 (stop at 4660) Our profit targets will be 4737 and 4757 Resistance: 4750 / 4820 / 4920 Support: 4610 / 4500 / 4415 Risk Disclaimer The trade ideas beyond this page are for informational purposes only and do not constitute investment advice or a solicitation to trade. This information is provided by Signal Centre, a third-party unaffiliated with OANDA, and is intended for general circulation only. OANDA does not guarantee the accuracy of this information and assumes no responsibilities for the information provided by the third party. The information does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. You accept that you assume all risks in independently viewing the contents and selecting a chosen strategy. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, Oanda Asia Pacific Pte Ltd (“OAP“) accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore customers should contact OAP at 6579 8289 for matters arising from, or in connection with, the information/research distributed.
OANDA:SPX500USDLong
by OANDA
Global markets are turning lowerIn the first week of 2024, major U.S. indices turned to the downside. Year-to-date, the Nasdaq 100 declined by about 2.2%, the S&P 500 by 1%, the Dow Jones Industrial Average by 0.3%, and the Russell 2000 by 3%. The situation is no better overseas, where in the Chinese market, major indices also slipped lower. In particular, the Hang Seng Index lost about 5.3%, the CSI 300 lost 3.7%, and the Shanghai Composite Index lost 3%. The same story also played out in Europe, where the DAX declined by about 1.7%, the UK100 by 0.8%, and the French CAC40 by 2.3%. On top of that, Europe saw a reacceleration of inflation, putting much anticipation on these numbers in the U.S. that are scheduled for release on Thursday. If inflation is also reaccelerating in the U.S., it will likely put pressure on the FED to keep conditions tight for longer than expected. As a result, this can lead to repricing in the markets. Now, on the subject of technicals, there is a divergence between the price and RSI on the weekly graph. Simultaneously, the RSI is peaking below 70 points, which is a bearish sign. As for the daily chart, all RSI, MACD, and Stochastic continue to develop bearish structures, tilting the odds toward more weakness. Consequently, we will monitor the resistance near $4,700; if the price fails to regain ground above it (with at least two consecutive closes above it), it will be concerning. Illustration 1.01 The red and green arrows on the weekly chart of SPX show the divergence between the price and the RSI. Illustration 1.02 Illustration 1.02 displays the daily chart of the Hang Seng Index, which has been declining since 27th January 2023, erasing about 28.3% of its value. For the first week of the current year, the index is down approximately 5.3% Illustration 1.04 Illustration 1.03 shows the CSI 300 on the daily graph. The CSI 300 has been declining since 18th February 2021, losing about 44.6% of its value. Technical analysis Daily time frame = Bearish Weekly time frame = Slightly bearish Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.
SP:SPXShort
by Tradersweekly
2
S&P500: Top officially formed. Eyes 4,500S&P500 has turned neutral on the 1D technica outlook (RSI = 47.788, MACD = 28.200, ADX = 43.854) as it made a LL for the first time since the October 27th 2023 bottom, marking the end of that two month rally. That was the latest bullish wave of the 15 month Channel Up. According to the three prior peaks that formed HH on the Channel Up, the index should kickstart a pullback that should cross under the 1D MA50 and may extend as low as -9.00% even. The RSI Channel Down patterns among all those bearish waves look very much alike. Consequently we will stay bearish and set a less aggressive target over the 1D MA200 (TP = 4,500). See how our prior idea has worked: ## If you like our free content follow our profile to get more daily ideas. ## ## Comments and likes are greatly appreciated. ##
CAPITALCOM:US500Short
by InvestingScope
Will US500 suppress the early optimism?US500 - Intraday Previous support level of 4700 broken. Short term bias has turned negative. We are trading at oversold extremes. We look for a temporary move lower. Preferred trade is to sell into rallies. - We look to Sell at 4700 (stop at 4729) Our profit targets will be 4645 and 4615 Resistance: 4750 / 4820 / 4920 Support: 4610 / 4500 / 4415 Risk Disclaimer The trade ideas beyond this page are for informational purposes only and do not constitute investment advice or a solicitation to trade. This information is provided by Signal Centre, a third-party unaffiliated with OANDA, and is intended for general circulation only. OANDA does not guarantee the accuracy of this information and assumes no responsibilities for the information provided by the third party. The information does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. You accept that you assume all risks in independently viewing the contents and selecting a chosen strategy. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, Oanda Asia Pacific Pte Ltd (“OAP“) accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore customers should contact OAP at 6579 8289 for matters arising from, or in connection with, the information/research distributed.
OANDA:SPX500USDShort
by OANDA
Selling might not be done yet, what to watch out forRecently, we discussed how overbought conditions in the stock market were making a case for correction. Now, with the major market indices retreating slightly lower, we are looking for more clues about where the market might be headed next. To support a thesis about the SPX going lower, we would like to see RSI, MACD, and Stochastic continue declining on the daily graph. In addition to that, we would like to see the SPX break below Support 1 near $4,697 and further rise in the VIX. Contrarily, to support the bullish odds, we would like to see the SPX hold above Support 1 and a reversal in the mentioned technical indicators, along with the drop in the VIX. Illustration 1.01 Illustration 1.01 shows the daily chart of SPX within the upward-sloping channel and two simple moving averages. Interestingly, the value of the 20-day SMA closely coincides with that of Support 1; a failure of the moving average to hold selling pressure will tilt the odds to the bearish side. Technical analysis Daily time frame = Bearish Weekly time frame = Neutral Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.
SP:SPXShort
by Tradersweekly
US500 - Potential Bearish Momentum ❗️Hello TradingView Family / Fellow Traders, In accordance with my latest analysis, which is attached to the chart, we have been anticipating a rejection of the all-time high. 📉 For the bears to assume control and confirm the beginning of the correction phase, a break below the last major low highlighted in red is required. Meanwhile, until the bears take control, US500 would remain bullish and could still move within the green all-time high zone. 📚 Always follow your trading plan regarding entry, risk management, and trade management. Good luck! All Strategies Are Good; If Managed Properly! ~Richard Nasr
CAPITALCOM:US500
by TheSignalyst
TA vs FA - Do price forecasts offer value for traders? This came up in a conversation I had recently with a client, who asked if I agreed with the view that we’re in for another good year for equities based on the current median forecast of 4832 (source Bloomberg), with the range of 19 analyst calls set between 4200 to 5200. For starters let’s revisit the 2023-year-end call on the S&P500 made back in Dec 2022, where the median forecast was 4075 – 17% below the actual closing level in Dec 2023 of 4769.83. There was only one analyst – Tom Lee (Fundstrat) - who was anywhere near the final closing level, and at the time he was widely ridiculed for his uber-bullish call. We can also take the early forecast by Soc Gen, who had a 3650 call on the S&P500 by year-end. This proved to be wildly incorrect, but the call was ultimately revised higher throughout the year, and after tweaking the forecast to 4750 on 9 November, now looks like a hero. I'm not in the business of mocking bad calls, and understand most analysts are loath to make these forecasts but are required to do so. It's clearly very hard to do, and requires some degree of luck, where a lot needs to go right to be on the money. The math behind an index price target The basic logic for creating a year-end forecast is to firstly model a forward price to earnings (P/E) multiple that is deemed to be fair – we do this by forecasting factors such as where US bond yields will be at year-end, as well as the potential level of ERP (equity risk premium). We then need to model our earnings-per-share (EPS) assumptions for year-end. In 2023 the median estimate was for S&P500 earnings at $210, which actually wasn’t terrible a call. We can then multiply our EPS forecast by the fair forward PE multiple and you have a price target. As it stands, the median fair future PE ratio is 20.7x and the 2024 EPS assumption at $232.2 – so the median consensus is around 4813. Sound complicated? It certainly needs some study, but in many ways, this is the crux of many fundamental models which attempt to model a ‘fair value’ and hope the market can move towards that price over time. Perhaps the buy-and-hold investor crowd can find some value from targets, but then you have a plethora of sell-side analysts to follow – choosing one often plays into one’s own directional bias, where the thesis for getting to that endpoint reinforces one’s own belief systems. Some will also consider the analyst's pedigree and form in prior years and feel they are reading the tea leaves well. Forecasts can also be useful for multi-asset investors who look at expected returns. Where expected returns often dictate one’s portfolio composition and whether they’re underweight or overweight a specific asset class or sector. Where these models typically fall down is that they rarely account for human behaviour, emotion and structural flows. For traders, the analyst’s thesis (behind the forecast) can be helpful, as some of the trends and risks expressed can help us identify the future trading environment and event risks of note. However, I don’t know of any trader who has made money using forecasts. Not only is a year an eternity for traders, but it’s the price (P) element of the PE ratio that has driven equity markets through 2023. Where multiple expansion (a rising PE ratio without earnings growth) has been driven by funds happy to pay an ever-higher price, with active managers chasing returns, a more compelling perception of central bank liquidity, as well as bullish structural flows derived from options dealers hedging their gamma exposure, volatility-targeting funds, and CTAs (Commodity Trading Advisors) reacting to the one-way rally in price. Technical vs fundamental analysis? This is where technical analysis (TA) is often far superior for traders, as the principle is premised on reacting to flows and the aggregation of all decisions being made within a timeframe. While TA is a broad practice, at its heart it’s less about prediction, but offers key insights and understanding of how market participants feel at any one time. TA and price action is the best barometer of sentiment, and it helps us understand the distribution of outcomes for price. We can partly explain much of the rally in US equity from late October on the fall in US real rates, increased rate cut expectations and resilient US growth dynamics. But what really propelled the various equity indices to see some incredible returns was falling realized volatility, options hedging flows – made even more prevalent through the rise and rise of 0DTE options – and CTAs going max long in S&P500 and NAS100 futures. Few fundamental models account for this. At the end of the day, it's what works for you, and if you’ve made money following price targets then ignore everything I’ve said – it’s simply my observations. Yet, while a lot of these flows are quite opaque, we can see them front and centre in the price action – that – in so many ways it tells you all you need to know.
PEPPERSTONE:US500
by Pepperstone
S&P500 About to turn bearish for the next 2 weeks.S&P500 crossed and closed a (4h) candle today under the MA50 (4h) for the first time since December 7th. Even though that was a buy opportunity then, this time we expect strong selling as the two month Channel Up is on a very strong RSI (4h) Bearish Divergence. Trading Plan: 1. Sell once the price crosses under the Channel Up. Targets: 1. 4560 (MA50 1d and Support 2). Tips: 1. The RSI (4h) is also almost oversold besides showing this Bearish Divergence. Once it gets oversold and bounces, it can give an ideal sell entry near the MA50 (4h). Please like, follow and comment!! Notes: Past trading plan:
CAPITALCOM:US500Short
by TradingBrokersView
S&P500 Giant Cup and Handle and CORRECTION in play?The S&P500 index (SPX) almost hit the 4820 All Time High (ATH) level on the last trading session of 2023. That day completed the 9th straight green weekly (1W) candle, a feat last seen on the week of February 19 2019. This doesn't necessarily indicate that any sort of correction is due as a bullish market can run rallies fueled on fundamental news for even longer period of times. But the fact that the ATH test completes a Cup pattern, could be alarming as, especially on overbought 1W RSI levels, Cup patterns tend to deliver one final pull-back in the form of a 'Handle' structure before making a new clear All Time High. Technically, the 1W MA50 (blue trend-line) tends to be an intact Support during the year(s) of a Bull Market and so fart it was last hit in late October 2023. If 2024 is indeed a Bull Phase year, then the 1W MA50 should hold. If the Handle pulls back the current bullish trend, then the two could 'meet' at around 4500, which is marginally above the 0.236 Fibonacci retracement level. A stronger correction to the 0.382 level is highly unlikely unless pessimistic news (e.g. Fed, growth, inflation, unemployment) hit the market. ------------------------------------------------------------------------------- ** Please LIKE 👍, FOLLOW ✅, SHARE 🙌 and COMMENT ✍ if you enjoy this idea! Also share your ideas and charts in the comments section below! This is best way to keep it relevant, support us, keep the content here free and allow the idea to reach as many people as possible. ** ------------------------------------------------------------------------------- 💸💸💸💸💸💸 👇 👇 👇 👇 👇 👇
TVC:SPXShort
by TradingShot
3
BTCUSD → The potential for a rise to 50K is accumulatingBINANCE:BTCUSD is forming a good potential and prerequisites for further growth. The key resistance is the level of 44350, and the price continues to actively test this area. On the high timeframe we see the formation of a global range. The potential target from the point of view of technical analysis at the moment is the upper boundary of the range 65K - 70K, where a huge pool of liquidity is hidden. Fundamentally, bitcoin is doing quite well, as the SEC has recently been actively cooperating with companies that have applied for a spot ETF. Analysts expect the first BTC-ETF to be approved in early January 2024: some sources have indicated that recent indications from SEC officials are that the green light is likely to be given by January 10. In terms of technical analysis, an ascending triangle is forming on the chart. The key resistance of the pattern is the area of 44350 - 44500. This pattern can be interpreted as an active accumulation of buyers' potential for further overcoming the limit resistance formed by sellers. The price keeps testing the resistance and getting closer to the resistance. At the moment there are two possible scenarios: Retest of 43440 support, formation of a false breakdown with further retest of global pattern resistance and its breakout with further growth. Deeper correction: retest of the resistance of the previously broken ascending channel with further rebound and retest of the global resistance with the aim of its breakout. Support levels: 43440, 41664, 41200 Resistance levels: 44350, 48234 I expect that consolidation will end soon and the market will move to the phase of realization and growth to the specified target. Regards R. Linda!
BITSTAMP:BTCUSDLong
by RLinda
47
SPX500 - THE BIG SHORT To understand the logic behind my numerology actions, you can watch my video ideas. I believe that the spx500 will turn strongly downward in the near future, the reference point for me to start a set of shorts will be January 3, 2024. I will be gaining position by positioning. Targets to decline very strongly downward under possible geopolitical events in the future. In general, I expect a decline until March 2024, perhaps it will be in the spring. But I don't want to look that far, it will be the end of winter then I will make a new idea. See related ideas.
CAPITALCOM:US500Short
by FTT_TRADER369
S&P500 Is 4800 the end of the road after 9 green weeks?The S&P500 index (SPX) is currently on its 9th straight green week (1W candle) following the October 23 (weekly terms) bottom. That was a Higher Low on the 15-month Channel Up and based on that pattern, the index is approaching its top (Higher Highs trend-line). What adds more weight to the very high levels it is trading at, is that the All Time High is just above the current price at 4820. A peak on that level would represent a +17.40% increase, exactly the % rise of the first Bullish Leg of the 15-month Channel Up that peaked on the week of November 28 2022 and then corrected by -8.06%. With the 1W RSI almost overbought (70.00) as it was on July 24, which was the peak of the previous Higher High of the Channel Up that initiated a 3-month correction of almost -11% and the 1W MACD on a post Bullish Cross level similar to the highs of August 15 2022 and November 28 2022 that kickstarted corrections, the selling pressure has now considerably stronger parameters to start. This means that, at least from a technical perspective, this is the strongest sell opportunity since late July. A minimum correction of -8.00% would deliver a test of the 1W MA50 (blue trend-line) and as such, our target is 4450 (slightly above it). If however the bullish trend continues for a few more weeks and pursues the maximum % rally we have seen since 2021, which has been +20.95%, then we can see an extension at around 4950, in which case we will add an additional (2nd) sell and both our bearish targets will be restructured at 4580 (-8.00%). ------------------------------------------------------------------------------- ** Please LIKE 👍, FOLLOW ✅, SHARE 🙌 and COMMENT ✍ if you enjoy this idea! Also share your ideas and charts in the comments section below! This is best way to keep it relevant, support us, keep the content here free and allow the idea to reach as many people as possible. ** ------------------------------------------------------------------------------- 💸💸💸💸💸💸 👇 👇 👇 👇 👇 👇
TVC:SPXShort
by TradingShot
Overbought conditions make a case for correctionThe SPX is less than 1% away from the all-time high. Yet, its overbought conditions on the daily chart are starting to make a compelling case for a correction. To support this case, we would like to see the RSI break below 70 points (on the daily chart). Additionally, we would like to see MACD and Stochastic reverse and begin pointing to the downside. On top of that, we would also want to see a pick-up in volume accompanied by a weakness in the price. Illustration 1.01 Illustration 1.01 displays the daily chart of SPX, NDX, and DJIA. The green and red arrows highlight a volume growth followed by a subsequent decline that started around 15th December 2023. While the decline is not too significant, it should not be overlooked and dismissed (especially as indices are trending in overbought territory). Technical analysis Daily time frame = Bullish Weekly time frame = Bullish Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.
SP:SPXShort
by Tradersweekly
S&P500 Start selling. Top of Channel is near.S&P500 / US500 has almost completed a +17.30% rise, which is the prince range it grew by on the December 1st 2022 High. That was the first High of the long term Channel Up pattern that started on the October 13th 2022 bottom. The Channel Up still has a little more room to go upwards before reaching its top but since the price is already over the 0.786 Fibonacci level, we are already inside the long term Sell Zone. Sell and target 4570, which is a possible contact point with the 1day MA50 and the 0.5 Channel Fibonacci. Technically the decline can reach as low as the 0.5 horizontal Fibonacci at 4445. Previous chart: Follow us, like the idea and leave a comment below!!
CAPITALCOM:US500Short
by TheCryptagon
GOLD → False breakdown of 2070. Rollback to the end of the year FOREXCOM:XAUUSD strengthened quite actively last week. The price is retesting the resistance at 2069.8 formed in August 2020. There are reasons for further growth, but also reasons for further pullback. Let's see On D1 we can see that in the frame of distributive movement the price tests the resistance 2069.8 and forms a false breakdown, which activates a rather strong sell-off. A few hours before the end of the session the price loses 0.85%. In the coming week there is no news except Initial Jobless Claims , analysts are expecting an increase in claims from 205K to 210K. The GDP data weakens the dollar, the Fed's stance also suggests a possible rate cut next year, and in addition the inflation data . The overall fundamental background is unfavorable for the TVC:DXY and we see a decline in the index, which in the medium term is favorable for the gold market. Technically, there are a few days to go until the end of 2023, volatility and liquidity may decrease, but since Friday ended with a false break of resistance zones (2069.8, 2055), the current correction may last. The price may reach the support area before further growth. It is worth paying attention to the following levels: Resistance: 2055, 2050, 2065, 2069, 2075 Support: 2047, 2040, 2030, 2015 I advise you to study the work schedule of your brokers for Christmas and New Year holidays. Each broker determines its own regulations and therefore on these days some companies may work and others may not. Merry Christmas! Have a great holiday! Regards R. Linda!
OANDA:XAUUSD
by RLinda
6
GOLD → The price enters a new range of 2050 - 2070FOREXCOM:XAUUSD is breaking through resistances. Yesterday the US GDP was released, which showed weaker data than the market expected and this is favorable for the gold price. In part we were prepared for it. The TVC:DXY is breaking the pattern and retesting key support. High odds are high that the decline and weakening of the index will continue. Hence, it is bullish for gold to overcome the pattern and range resistance. Gold in a bullish move breaks through the limit barrier and consolidates above the mentioned line. Ahead of us today is the news at 13:30 GMT. I don't think they will change anything after the US GDP. Analysts expect the publication of about the same data as last period (with a slight correction). Volatility may increase in the market, be careful during trading. Gold enters a new range of 2050 - 2070, the intermediate target is 2062. Support levels: 2050, 2048 Resistance levels: 2062, 2075 I expect the continuation of growth even after the news, as yesterday's news defined the medium-term potential for the market. Targets are indicated on the chart. A pullback from 2062 to support before further growth is possible. Regards R. Linda!
OANDA:XAUUSDLong
by RLinda
13
S&P500: Holding the 4H MA50. Still bullish.The S&P500 index is now on a healthy green 1D technical outlook (RSI = 65.835, MACD = 82.010, ADX = 81.214) following a much needed technical pullback yesterday that eased the previously overbought technical indicators. On the 4H timeframe, the index is still inside a two month Channel Up, which found support yesterday on the 4H MA50. As long as it holds, we will stay buyers until the end of the year, aiming at its top (TP = 4,850). If the price crossed under the 4H MA50, we will short aiming at the 4H MA100. If that is crossed as well, we will target the 4H MA200, which is close to the bottom of the Channel Up. It has to be said that the RSI has been inside a Channel Down, meaning that at some point, this bearish divergence will start a correction. See how our prior idea has worked: ## If you like our free content follow our profile to get more daily ideas. ## ## Comments and likes are greatly appreciated. ##
CAPITALCOM:US500Long
by InvestingScope
S&P500 The rally still has one more High to give at least.The S&P500 index (SPX) pulled-back yesterday on the strongest 1D red candle since October. A natural technical reaction after weeks of rise-only price action and an overbought 1D RSI that almost hit 83.00. The long-term pattern remains a Channel Up since the October 13 2022 market bottom and as long as the 1D MA50 (blue trend-line) is supporting, it is likely to see one final upward extension towards its top (Higher Highs trend-line). The two major Higher High sequences (bullish legs) of this Channel have been around +20.50%, extending almost as high as the 2.0 Fibonacci level. As a result we are expecting a minimum of 4930, before any larger correction takes place, unless of course the index breaks above its Channel Up, in which case we will look for a new pattern. ------------------------------------------------------------------------------- ** Please LIKE 👍, FOLLOW ✅, SHARE 🙌 and COMMENT ✍ if you enjoy this idea! Also share your ideas and charts in the comments section below! This is best way to keep it relevant, support us, keep the content here free and allow the idea to reach as many people as possible. ** ------------------------------------------------------------------------------- 💸💸💸💸💸💸 👇 👇 👇 👇 👇 👇
CAPITALCOM:US500Long
by TradingShot
US500 Will Go Down! Sell! Take a look at our analysis for US500. Time Frame: 1D Current Trend: Bearish Sentiment: Overbought (based on 7-period RSI) Forecast: Bearish The market is approaching a key horizontal level 4725.8. Considering the today's price action, probabilities will be high to see a movement to 4497.2. P.S We determine oversold/overbought condition with RSI indicator. When it drops below 30 - the market is considered to be oversold. When it bounces above 70 - the market is considered to be overbought. Like and subscribe and comment my ideas if you enjoy them!
CAPITALCOM:US500Short
by SignalProvider
3
US500 - Critical Zone Ahead ❗️Hello TradingView Family / Fellow Traders, 📈 After breaking above 4100.0 high, US500 has been overall bullish trading inside the blue rising wedge pattern and it is currently approaching the upper bound of the pattern. Moreover, the zone 4800.0 is the current All-Time-High. 🎯 Therefore , the highlighted blue circle represents a significant area to consider for potential shift in momentum, as it marks the intersection of the green All-Time-High and the upper blue trendline. 📚 As per my trading style: As US500 approaches the blue circle zone, I will be actively searching for bearish reversal setups to capture the next bearish correction movement. For the bulls to invalidate the bearish scenario, we need a momentum weekly candle closing above the All-Time-High. 📚 Always follow your trading plan regarding entry, risk management, and trade management. Good luck! All Strategies Are Good; If Managed Properly! ~Richard Nasr
CAPITALCOM:US500
by TheSignalyst
The Fed Put is back – buy the dip is a key theme of 2024 As many try to put reasoning to the perennial grind higher in US equity markets, one clear factor is that the market sees one major difference between 2023 and 2024 – the ‘Fed put’ has been reborn and the metaphorical safety blanket for risky assets is back in the mix. Cast our minds back to January 2023, and investors were seeing inflation falling, with headline CPI coming in from 9.1% (in June 2022) to 6.4% (in December) – however, confidence of further falls was still low, and traders saw the path for inflation as evenly distributed. The absolute level was also still very high, and the Fed were hellbent on bringing that down, where at the time many felt that this could come at the expense of a recession - which was the big consensus view. We also knew that the Fed was focused on reducing its balance sheet through FWB:95B p/m in balance sheet runoff (or QT). For many, the perception of reduced liquidity meant being underweight or bearish on equity and credit. It’s not hard to understand why the market felt vulnerable, believing the historical saviour of the capital markets was no longer going to support, even on a 15-20% drawdown in the S&P500. 2024 is a very different dynamic In 2024, the Fed have a 5.3% fed funds rate to play around with and can cut rates if there is a need to support businesses and the consumer. A far cry from the zero-interest rate world we’ve been accustomed to for many years. Having reduced the balance sheet by over MIL:1T and having numerous case studies showing how effective the use of its balance sheet has been in providing targeted and immediate support. The markets know the Fed will not hesitate to utilize its balance sheet to provide target liquidity and capital to stave off any issue deemed potentially systemic. Most importantly, the distribution for US inflation is now considered skewed and one-sided, with a high probability of lower levels. Hence, the Fed has increased scope to ease policy should the need arise, and while Fed officials are saying their work is not done, and the last push to get to its 2% inflation target is the hardest part, they can front load cuts far more efficiently when core PCE is at 3.5% and falling. In recent times we’ve seen massive inflows in US equity and ETF funds, accelerated corporate equity buy-backs, which are suppressing volatility, and generally FOMO capital chasing returns. Within the flows, there’s been an active rotation into junk and high leverage equity, as well as high short interest plays – confidence is clearly euphoric. It’s easy to argue that traders know that if a tail risk event plays out in 2024, then this time is different, and the Fed (and other DM central banks) will support asset markets. The strike price for the 'Fed Put' has moved far closer to the market. Recent history has shown time after time when bad things happen, they are nearly always rectified in a positive fashion and we ‘climb the wall of worry’. Its why funds are consistent sellers of volatility on spikes. The buzz phrase for 2024 Talk of a ‘Fed Put’ will be a major buzz phase in 2024 – markets may even test it out and take on the Fed to search out its willingness to act and to support. For market participants, it suggests that equity drawdown will be supported and ‘buy the dip’ will be back in vogue once again – not that it really has gone away.
PEPPERSTONE:US500Long
by Pepperstone