Daily market review July 26, 2024 (Market rebound by 1% or higher, at important inflection point ahead of Central bank meeting next week.)
Broad market overview
Market had a bounce on Friday, every major US indices are gaining 1% or more. Notably, some display morning star candlestick pattern ( DJIA, transports, RSP, S&P 400 mid cap ), but how far it can go depends on Bank of Japan and Federal Reserve meeting on July 31st.
Benchmark indices such Nasdaq 100 & S&P 500 again around 1%, while Dow Jones industrial average gain 1.64%.
While mid and small cap gain 1.63% and 1.81% respectively.
Overall, Equal weighted indices perform equally as well as cap weighted indices.
S&P 500 11 sectors overview
Communications, Industrials and real estates are the best performing sectors. While healthcare and Energy are the bottom ranking sectors.
MOVE index
Move index is currently at 97.76, bond price implied volatility is expected to be around 9.78% per annum.
MOVE is the space to watch, as the BOJ is expected to launch QT. Because bond yield has high correlation across different country, higher yield in Japanese bond can reverberate around the globe.
USDJPY has been trending lower as Japan 10Y yield shot up, while Nikkei has fallen.
NYSE & Nasdaq market internals
There are more Advancer than Decliner.
On July 26 2024,
4.48 to 1 NYSE Advancer to Decliner ratio (2288/511)
2.55 to 1 Nasdaq Advancer to Decliner ratio (3027/1184)
% of SPX stocks above 20D 50D 200D moving average
improvement in breadth while price is still stuck at 50D MA.
% of SPX stock above 20D MA : 67.6%
% of SPX stock above 50Day MA : 69.8%
% of SPX stock above 200Day MA : 77.8%
Outflow of large institution funds from technology
Tell me there’s a sell off without showing me the market charts of S&P500, Nasdaq 100.
Large funds has been liquidating Technology holdings as early as June…
Central bank meeting in the Week ahead
On July 31st, we will have twin Central bank meeting, Bank of Japan and Federal Reserve FOMC rate decision.
BoJ will announce their Quantitative tightening plan while Fed is not expected to cut rate. There are some chatter that Fed may cut rate next week, if it does it will cause market panic, because it may send signal that things are deteriorating fast, fed knows somethings are wrong that the market don’t, often a bad sign.
Having said that I still support cutting Fed rate for the following reasons,
1. Avoid embarrassment from getting inflation wrong twice.
2. Normalize the yield curve.
3. Head off any recessionary tendencies.
4. Help housing via mortgage rates.
5. Help banks rollover commercial property loans.
6. Help the stock market.
7. Synchronize with the ECB (and Riksbank and SNB).
8. Help the current White House and/or avoid accusations of political bias if delayed to after the Nov election.
9. Prevent “higher for longer” from morphing into “higher for too long”.
This will be 1 of the many decisive influence towards the development of NDX and SPX
NDX and SPX charts
NDX
NDX at trendline support from December 2022 bottom and close to testing 100DMA, will monitor closely if one of the following 3 scenario applies,
Scenario 1: Bounce from it
Scenario 2: Undercut the trendline slightly and bounce from it
Scenario 3: Breach the trendline and retest deeper MA
SPX
SPX at confluence of trendline support from October 2023 bottom & 50D MA, will monitor closely if one of the following 3 scenario applies,
Scenario 1: Bounce from it
Scenario 2: Undercut the trendline slightly and bounce from it
Scenario 3: Breach the trendline and retest deeper MA
Bitcoin
According to the foremost Global Liquidity Expert, Bitcoin track the Global Liquidity relatively closely, lagging only by about 6 weeks, it display the quickest responsiveness to changes in liquidity conditions.
Bitcoin daily chart
Selloff in Bitcoin is officially over. It retested and bounce from 20D MA, creating a higher swing low.
also the following happened as it emerge from bottom
1) Price rose above 20D, 50D, and 200D MA in quick succession
2) making a higher high
Bitcoin ETF flow
Bitcoin ETF is witnessing largest inflow since march of this year, bodes well for BTC if inflow continue to increase.
What is the reason for the current stock market plunge and when will it stop ? I believe there are confluence of several factors.
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