Market at a Crossroads: Stability Amid Uncertainty | September 12, 2024
The market appears to be digesting the latest inflation data and job claims, which are generally moving in the right direction. While stocks are not making significant moves, the stability over the past few days, marked by a meaningful rally yesterday, is encouraging. The S&P 500 has reclaimed levels above 5550, retracing losses from last Friday, and pushing above recent highs, indicating a potential uptrend.
Today is crucial for follow-through, as maintaining this upward momentum would solidify the positive trend. The market has been characterized by high volatility, with swings to the downside followed by strong recoveries. This morning’s stability is a positive sign, suggesting that the gains are holding, which is important after yesterday’s strong performance. Futures are flat, which is preferable as it indicates that the market is not giving back gains.
In the crypto assets space, there has been a slight fade, but the movement is minimal. Yesterday’s market saw a reduction in volatility, which is a good development.
Bitcoin is flat today, with minimal movement. Yesterday, it saw a small gain but lagged behind the broader market. While the stock market rebounded strongly after a weak start, Bitcoin sold off and only closed slightly down, showing weaker performance. Today, it’s attempting a modest recovery but is hovering around a key pivot line that separates bullish and bearish trends. This level is crucial in determining Bitcoin’s next move. Watch how it behaves around this line to gauge whether it will continue its current trend or shift direction.
The focus now includes WTI, which is hovering near $70. A firming in WTI could be beneficial, even though inflation isn’t the primary concern at the moment. The debate on whether the Fed will cut by 25 or 50 basis points is leaning towards 25, which is seen as positive for the market. Markets have tended to struggle when the odds of a 50 basis point cut are priced in, as this usually coincides with weaker economic data.
The bond market remains in focus, particularly the relationship between bond yields and stock performance. Yesterday’s simultaneous rally in stocks and bonds was notable. A rise in bond yields today, if accompanied by strength in stocks, would reinforce the current positive market sentiment. On the other hand, if bonds bid up and yields drop, it might signal some caution.
The dollar’s recent strength, despite a disconnect with yields, suggests that defensive positioning remains. However, this gap will likely need to close, either through a weakening dollar or rising yields. The S&P 500’s recent breakout through resistance levels is significant, expanding the trading range and setting the stage for potential swings. The market’s ability to hold onto gains and push higher will be key to sustaining the current positive momentum.
