Is Bad news becoming bad news for Stocks?  Trends intact for now

Key Takeaways
  • Thursday’s sharp decline takes SPX, QQQ back to near support
  • Bond yields have plummeted which ordinarily is seen as positive by Stocks this year
  • IWM has not dropped enough to argue that Small-caps have peaked
https://vimeo.com/993754750/b123b2a353?share=copy
Is Bad news becoming bad news for Stocks?  Trends intact for now

SPX and QQQ failed to break down meaningfully enough to think that markets have peaked out for the Fall.   While the correlation briefly reversed today, as Bad news on the economy actually did prove to be bad news for the stock market, this has not been the trend all year.   Bond yields accelerated lower on the dovish Fed, with the 2-year nearly having reached December 2023 lows and TNX now having retreated under 4.00%.  Meanwhile, US Dollar looks to be “next in line” to break down to new monthly lows.   Small-caps underperformed in recent days, but still look more attractive than Large-caps for outperformance over the next 3-5 weeks.   Technology has had an abnormally big effect on SPX, but it’s the breakout to new highs in Healthcare, Industrials and Financials strength that seems important to concentrate on.  Overall, I don’t feel its right to be bearish, despite Thursday’s sharp drop, and will stay bullish barring a break of 5390.

A couple things are important to reiterate following Thursday’s decline:

-Stock indices sold off violently, yet breadth wasn’t abnormally negative

-No evidence of fear-based selling as TRIN registered 1.63 reading, the lowest all week

-Four sectors finished positive out of 11 in Thursday’s session: REITS, Utilities, Healthcare, and Staples.

New York stylized skyline
Get instant access to this report
Complimentary Research to all of our visitors! Subscribe to receive three types of reports. Receive FSI Academy, Community Questions and Signal from Noise to you inbox every month.

Please enter your name.

Get Access Now

What is FS Insight?

FS Insight is a market-leading, independent research boutique. We are experts in U.S. macro market strategy research and have leveraged those fundamental market insights to become leading pioneers of digital assets and blockchain research.

View of Tom Lee icon

Tom Lee's View

Proprietary roadmap and tools to navigate and outperform the equity market.

Macro and Technical Strategy icon

Macro and Technical Strategy

Our approach helps investors identify inflection points and changes in equity leadership.

Deep Research icon

Deep Research

Our pioneering research provides an understanding of fundamental valuations and risks, and critical benchmarking tools.

Videos icon

Videos

Our macro and crypto videos give subscribers a quick and easy-to-understand audiovisual updates on our latest research and views.

US Policy Analysis icon

US Policy Analysis

Our 40-year D.C. veteran strategist cuts through the rhetoric to give investors the insight they need.

Signal from Noise icon

Signal from Noise

A gimlet-eyed look at financial markets, with timely investment ideas in concise and engaging prose.

Disclosures (show)

Don't Miss Out
First Month Free

Events

Trending tickers in our research