Stock Market Outlook
For The Week Of January 26th =
Uptrend

ADX Directional Indicators: Uptrend
Institutional Activity (Price & Volume): Uptrend
On Balance Volume Indicator: Uptrend

ANALYSIS

The stock market outlook remains in an uptrend.

The S&P500 ( $SPX ) gained 1.7% last week.  The index is 2% above the 50-day moving average and ~9% above the 200-day moving average.

SPX Technical Analysis - January 26 2024

The ADX flipped to bullish last Monday.  Institutional activity looks okay; selling has subsided over the past two weeks.

Communications ( $XLC ) and Technology  ( $XLK ) sectors outperformed, while Energy stocks lagged ( $XLE ) with a down week for oil.

Following the improvements last week, a few more sectors moved back to bullish bias: Healthcare, Industrials, and Technology.  Materials tests a potential change at neutral. In the shorter-term, Communications, Consumer Staples, Financials, and Healthcare are overbought and Energy is oversold.

The Momentum style factor was the top performer again, with a gain of 4%.  The "worst" performer was High Dividend at +0.3%.  A few style factors also showed an improvement in bias:  Small Cap Growth, Quality, and Defensive moved to Bullish, Large Cap Value improved to Neutral.  That said, Large and Mega Cap Growth, Large Cap Value, Momentum, and Quality are now overbought.

Bitcoin ( $IBIT ) was the best performer again last week, while Oil took a breather.  In the near term, Gold and Equities are overbought; oil and the dollar are oversold.  No changes in bias.

COMMENTARY

Most of the equity market recovered from the recent round of selling, although a few sectors continue to struggle (i.e. Consumer Staples and Real Estate).  The dollar began a correction last week last week, which impacted commodities to the downside and equities to the upside.

A flurry of executive orders didn't put a damper on U.S. equities last week, as major tariffs remain under wraps for the time being.  The next deadline is Feb 1 for a 25% tariff on Mexico and Canada  Most federal agencies are evaluating U.S. trade policy and will provide recommendations, including potential tariffs, by April 1.

Then, at the World Economy Forum, President Trump said he would "demand that interest rates drop immediately", implying that he'll pressure the Fed for further cuts.  Expect this to be a topic of discussion at the next FOMC meeting...which happens to be this Wednesday.

Following the FOMC, the first Q4 GDP estimate is released Thursday, followed by the latest PCE reading on Friday.

Earnings season really picks up this week, with reports from 20% and 15% of the S&P500 and Nasdaq, respectively.

Best to Your Week, and Happy New Year!

P.S. If you find this research helpful, please tell a friend.
If you don't, tell an enemy.

Sources: Bloomberg, CNBC, Federal Reserve Bank of St. Louis, Hedgeye, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics

If you're interested in learning more about the relationship between price and volume, or how to find and trade the best stocks for your growth strategy, check out this book on Amazon via the following affiliate link:

How to Make Money in Stocks: A Winning System in Good Times and Bad.

It's one of my favorites.

IMPORTANT DISCLOSURE INFORMATION
This material is for general communication and is provided for informational and/or educational purposes only. None of the content should be viewed as a suggestion that you take or refrain from taking any action nor as a recommendation for any specific investment product, strategy, or other such purpose. Certain information contained herein has been obtained from third-party sources believed to be reliable, but we cannot guarantee its accuracy or completeness.
To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisors of his/her choosing. Invest Safely, LLC is not a law firm, certified public accounting firm, or registered investment advisor and no portion of its content should be construed as legal, accounting, or investment advice.
The material is not to be construed as an offer or a recommendation to buy or sell a security nor is it to be construed as investment advice. Additionally, the material accessible through this website does not constitute a representation that the investments described herein are suitable or appropriate for any person.
Hypothetical Presentations:
Any referenced performance is “as calculated” using the referenced funds and has not been independently verified. This presentation does not discuss, directly or indirectly, the amount of the profits or losses, realized or unrealized, by any reader or contributor, from any specific funds or securities.
The author and/or any reader may have experienced materially different performance based upon various factors during the corresponding time periods. To the extent that any portion of the content reflects hypothetical results that were achieved by means of the retroactive application of a back-tested model, such results have inherent limitations, including:
Model results do not reflect the results of actual trading using assets, but were achieved by means of the retroactive application of the referenced models, certain aspects of which may have been designed with the benefit of hindsight
Back-tested performance may not reflect the impact that any material market or economic factors might have had on the use of a trading model if the model had been used during the period to actually manage assets
Actual investment results during the corresponding time periods may have been materially different from those portrayed in the model
Past performance may not be indicative of future results. Therefore, no one should assume that future performance will be profitable, or equal to any corresponding historical index.
The S&P 500 Composite Total Return Index (the "S&P") is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. Standard & Poor's chooses the member companies for the S&P based on market size, liquidity, and industry group representation. Included are the common stocks of industrial, financial, utility, and transportation companies. The S&P is not an index into which an investor can directly invest. The historical S&P performance results (and those of all other indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual in determining whether the performance of a specific portfolio or model meets, or continues to meet investment objective(s). The model and indices performance results do not reflect the impact of taxes.

Investing involves risk (even the “safe” kind)! Past performance does not guarantee or indicate future results. Different types of investments involve varying degrees of underlying risk. Therefore, do not assume that future performance of any specific investment or investment strategy be suitable for your portfolio or individual situation, will be profitable, equal any historical performance level(s), or prove successful (including the investments and/or investment strategies describe on this site).

Investing Process Links