Bulls Getting Lethargic,At Risk of a Minor Corrective Decline
US SPX 500: Bulls Getting Lethargic, and At Risk of a Minor Corrective Decline
The US 10-year Treasury yield has pierced above 4.06% & its 200-day moving average; a sign that recent easing liquidity conditions have started to abate.
A 3-year low seen in the implied correlation among S&P 500 constituents may trigger an imminent spike in the VIX.
The S&P 500 is now at risk of forming a short-term top below 4,820 resistance.
After stellar Q4 quarterly and 2023 annual performances of 11.24% and 24.23% respectively, the US S&P 500 has started 2024 on a lacklustre footing, in the past two and half weeks, it has recorded an accumulated loss of -0.64% at this time of the writing after missing just a whisker to retest its all-time high of 4,818 set on 4 January 2022 with an intraday high of 4,802 printed on last Friday, 12 January 2024.
In the past week, the prior bullish tone seen in Q4 2023 for the other major US stock indices has also tapered off; with current 2024 year-to-date losses seen in the Nasdaq 100 (-0.53%), Dow Jones Industrial Average (-1.12%), and Russell 2000 (-5.62%).
The primary driver that caused the current state of lethargic behaviour seen in the US stock indices has been a snap-back of the major easing liquidity conditions that have taken form since late October 2023.
Several Federal Reserve officials have attempted to “talk down” the current state of optimism being priced by the interest rates futures market on the magnitude and pace of the expected Fed funds rate cut cycle in 2024. In the past two months, a chance of 70% to 80% was being priced by market participants for the first rate cut of 25 basis points to be enacted on the 20 March FOMC, these odds have been reduced to 59% as of yesterday, 17 January based on data from the CME FedWatch Tool.
Also, yesterday’s upbeat US retail sales data release for December that beat expectations (5% y/y vs. 4% y/y consensus) has trimmed off some of the prior frothy dovish expectations on the pace of the projected US interest rate cut cycle for 2024.
The US 10-year Treasury yield has pierced above 4.06% & its 200-day moving average; a sign that recent easing liquidity conditions have started to abate.
A 3-year low seen in the implied correlation among S&P 500 constituents may trigger an imminent spike in the VIX.
The S&P 500 is now at risk of forming a short-term top below 4,820 resistance.
After stellar Q4 quarterly and 2023 annual performances of 11.24% and 24.23% respectively, the US S&P 500 has started 2024 on a lacklustre footing, in the past two and half weeks, it has recorded an accumulated loss of -0.64% at this time of the writing after missing just a whisker to retest its all-time high of 4,818 set on 4 January 2022 with an intraday high of 4,802 printed on last Friday, 12 January 2024.
In the past week, the prior bullish tone seen in Q4 2023 for the other major US stock indices has also tapered off; with current 2024 year-to-date losses seen in the Nasdaq 100 (-0.53%), Dow Jones Industrial Average (-1.12%), and Russell 2000 (-5.62%).
The primary driver that caused the current state of lethargic behaviour seen in the US stock indices has been a snap-back of the major easing liquidity conditions that have taken form since late October 2023.
Several Federal Reserve officials have attempted to “talk down” the current state of optimism being priced by the interest rates futures market on the magnitude and pace of the expected Fed funds rate cut cycle in 2024. In the past two months, a chance of 70% to 80% was being priced by market participants for the first rate cut of 25 basis points to be enacted on the 20 March FOMC, these odds have been reduced to 59% as of yesterday, 17 January based on data from the CME FedWatch Tool.
Also, yesterday’s upbeat US retail sales data release for December that beat expectations (5% y/y vs. 4% y/y consensus) has trimmed off some of the prior frothy dovish expectations on the pace of the projected US interest rate cut cycle for 2024.