Thu, December 14, 2023 | 10:24AM ET

2024 Technical Outlook: Broad-based rally back to new all-time highs likely in 2024

Name: FS Insight
Price range: $$$

Mark L. Newton, CMT ^AC

Head of Technical Strategy

REMINDER: My 2024 Technical Outlook is today (12/14) at 2:00 PM Est. Please Register HERE.

Additionally, please find my Outlook Deck attached HERE.

CONCLUSIONS – 2024 Is a Bull Year; SPX target 5,175

It’s likely that 2024 could prove “easier” for investors than either 2022 or 2023; A broad-based rally is possible from Spring 2024 into Spring 2025 given the prospects of Treasury yields and US Dollar falling.
Emerging markets are likely to make a comeback in 2024. Most of Europe remains a laggard to US stock indices while India is a standout outperformer. China is thought to finally begin a much-needed rally after dramatic underperformance, but areas like India, Mexico are more technically attractive choices.
US stocks likely will follow-through on the rebuilding efforts of broad-based sector strength to recover the damage suffered from July-October 2023. While Technology has disguised some of the weakness in other groups, it’s thought that Industrials and Energy should both join Technology to lead in 2024.
While both Yields and US Dollar might pull back into Summer/Fall 2024, it’s likely that both will resume their uptrends back to highs sometime in late 2024 into 2025. It’s expected that any bounce in yields into January/February of 2024 should prove temporary ahead of a larger 2024 drop.
Small-caps are likely to outperform in 2024 as US Treasury yields begin a larger decline in 2024. This should also be supportive for sectors like Technology to outperform. However, Small-caps might not have more than 9-12 months of a window before Large-Caps regain control.
Growth is preferred over Value for 2024; However, Value has begun to emerge since October in Small cap and Mid-cap with the prospects of Yields turning down in a larger fashion in 2024, particularly Small cap Growth. Heading into 2024, Value is outperforming short-term but should prove temporary.
Commodities are thought to snap back and rally in 2024 with particular strength out of Crude Oil from January/February into September 2024 along with precious and Base metals.
Election-year seasonality should prove bullish for markets, and despite normal election year cycles proving to be less robust than pre-election year cycles, 2024 should prove bullish for investors.
Sentiment has improved into December but optimism is largely more individual investor related than institutional; Sentiment heading into year-end is much less bullish than 2021, or 2017. Any Q1 weakness should create an excellent risk/reward opportunity for risk assets for 2024.

2024 Technical Outlook: Broad-based rally back to new all-time highs likely in 2024 — Source: Fundstrat

Outperform:
▪ Industrials – Industrials remains technically attractive following its relative rally to
multi-year highs vs. SPX
▪ Technology – Should remain resilient with rates starting to drop in 2024
▪ Energy – Exploration and Production stocks likely to lead. WTI Crude oil likely
snaps back and rallies from January into September 2024.
▪ Emerging Markets – LatAm could dominate performance in 2024 and expect China
makes a comeback – India still the most technically attractive of Emerging markets
▪ Cryptocurrencies – “Crypto Winter” is likely over, but 1st Quarter 2024 pullback
probable before strengthening from April into Fall 2024

Underperform:
▪ Defensive groups – Utilities, Staples, REITS
▪ European Stocks

1st Half STRONG/ 2nd Half- Weak
■ Treasuries – Expect 2024 should bring about a decline in Yields into Summer before
yields begin turning back higher. (1st Half outperformance/ Second half
Underperformance)
■ Precious Metals – Gold and Silver are bullish and should show technical strength in
1st Half 2024

Technical Positives to consider heading into 2024

SPX has rallied over 12% since late October 2023, just under seven weeks ago. This has helped breadth and momentum start to show meaningful improvement and both weekly and monthly MACD are now positive and not overbought
Breadth expansion has been robust since October with ~65% of SPX issues above their respective 200-day moving average (m.a.) and nearly 85% of all stocks now trading above their 50-day (m.a.)
Cycles look quite positive for 2024, and following a possible consolidation into early 2024, Weekly cycle composites remain bullish until Spring 2025
Financials, Discretionary and Healthcare have all begun to strengthen in the last couple months as rates have begun to fall. A more meaningful decline in interest rates likely helps to jump-start broad-based participation in Regional and Money Center banks along with Healthcare. This would help to add conviction to the longevity of the rally.
Seasonality shows Election years being the 2nd best of the four-year cycle behind Pre-election years. Thus, 2024 is likely to show further gains on the heels of 2023’s positive performance
Sentiment remains more Neutral than bearish on an Institutional level, and far less ebullient than levels seen in either late 2017 nor 2021 which preceded the 2022 bear market. Markets would require a much larger rally before this becomes bullish enough to trigger any sentiment-based warnings

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Mark L. Newton, CMT, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships. Neither I, nor a member of my household is an officer, director, or advisory board member of the issuer(s) or has another significant affiliation with the issuer(s) that is/are the subject of this research report. There is a possibility that we will from time to time have long or short positions in, and buy or sell, the securities or derivatives, if any, referred to in this research.

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