Market Momentum Shifts as 2024 Comes to a Close
As the curtain falls on a remarkable year for the stock market, a closer examination of technical conditions reveals a mixed bag. While some indicators point to extreme optimism, others suggest a weakening of market strength.
A Year of Ups and Downs
The market’s journey began with a strong rebound from its October 2023 low, followed by a remarkable rally that lasted until July. However, a series of setbacks in the following months took its toll. After bottoming out in August, the market experienced a period of relative calm, punctuated by occasional bouts of volatility.
Breadth Indicators Tell a Story
A key metric, the percentage of S&P 500 stocks above their 200-day average, has been declining steadily since December. At the start of the year, a robust 79% of stocks were above this threshold; today, that number stands at 58%. The S&P 100 index tells a similar tale, with 84% of its constituents above their 200-day average at the beginning of the year, compared to 63% currently.
Nasdaq 100: A Tale of Two Rallies
The Nasdaq 100 index presents a more complex picture. Initially, a staggering 87% of its holdings were above their 200-day average. However, this number has since dropped to 58%. Notably, the two periods of deterioration coincided with rallies in the index.
Sentiment Indicators Flash Warning Signs
As we enter the new year, it’s essential to acknowledge the disconnect between technical conditions and sentiment indicators. While some metrics suggest extreme optimism, others hint at a weakening of market momentum. As investors, it’s crucial to remain vigilant and adapt to shifting market dynamics.
Leave a Reply