|
The S&P 500’s record streak above its 50-day average highlights resilience, but weak breadth, stretched valuations, and rising fear indicators suggest fragility. Investors face a crossroads: whether to trust the trend or prepare for a correction.
What’s been happening on Wallstreet and Mainstreet?
- U.S. stocks have rallied strongly since April, with the S&P 500 achieving its longest streak above the 50‑day moving average since 2007, extending to 133 sessions.
- The Nasdaq Composite also maintained a similar streak, its longest since 1995.
- AI enthusiasm and corporate earnings have fueled gains, but breadth is narrowing and consumer‑linked sectors are struggling.
- The labor market appears stable on some measures (jobless claims, payroll deposits), but hiring is slowing and job postings are at their lowest since 2021.
What Red-Flags is the Market waving?
- Investor sentiment is deteriorating: the VIX is elevated, Fear & Greed Index in “extreme fear.”
- Despite this strength, both indexes briefly dipped below the 50-day average before recovering.
- The government shutdown has delayed official employment reports, creating blind spots in economic data.
- Conflicting private reports show layoffs surging to pandemic‑era highs, while other indicators suggest stability.
- Weak breadth (majority of stocks in downtrend) raises concerns that the rally is masking fragility. (62% of U.S.-listed stocks are in a downtrend, with consumer-related sectors hit hardest.)
What Do You Think Wallstreet Gurus are Asking at Their Cocktail Tables?
- Is this pullback just another “buy‑the‑dip” moment, or does it mark the start of a deeper correction?
- Can investors trust the rally when labor market signals are mixed and official data is unavailable?
- How much damage will the shutdown and slowing hiring inflict on corporate profits and consumer spending?
Stay the Course, but Be Prepared & Selective and Embrace Volatility:
- Analysts expect selectivity to matter more: AI‑linked stocks may continue to lead, but consumer‑linked sectors and weaker breadth point to fragility.
- Pullbacks are normal, but this one feels more precarious given labor market uncertainty, stretched valuations, and delayed government data.
- The bull market isn’t necessarily over, but investors should brace for volatility, monitor labor market signals closely, and prepare for a possible 10% correction.
- The rally’s resilience above technical thresholds is colliding with fundamental uncertainty in the labor market. Without clear government data, investors are navigating mixed signals — making this a market at a crossroads, where caution and selectivity are more important than indiscriminate risk‑taking.
In the meantime, the S&P 500 and the Nasdaq may bounce off the 50-day moving average, but whether that is sustainable remains to be seen.That's when our daily update in MyCompass trading room comes in handy. Until then, take good care of yourself and one another. Namaste!!!
Best Wishes from
From MyCompass Trading community to you
|
