Crypto, ETFs, and Industrials Lead November’s Strong Market Gains and Economic Recovery

Stay Informed and Stay Ahead: Market Watch, November 22nd, 2024

Late-Week Wall Street Markets

Key Takeaways

• Economic Recovery and Consumer Optimism: November's strong PMI data and rising consumer sentiment suggest economic recovery, with particular strength in the services sector. Despite inflation concerns, expectations remain stable, signaling continued optimism in the face of policy uncertainty.
• Mixed Commodity and Crypto Performance: Commodities showed mixed performance, with precious metals rising while energy and agricultural sectors faced declines. Meanwhile, Bitcoin and altcoins like Ripple and Litecoin saw significant gains, alongside bullish sentiment in high-volume ETFs focused on MicroStrategy and Bitcoin.
• Picture Caption: China's microchip imports from the U.S. increased by 60%, as Beijing stocks up in anticipation of potential tech curbs under a second Trump term.

Market Overview

• Market Performance: The DOW, S&P 500, and NASDAQ rose, with Industrials leading and Communication Services lagging. Notable industry gains were seen in Automobiles and Textiles Apparel & Luxury Goods.
• Economic Insights: November's US PMI data showed economic recovery with strong service sector growth (PMI 57.0), while consumer sentiment rose to 71.8. Inflation expectations remained stable, signaling optimism despite policy uncertainty.
• Yields & Commodities: Treasury yields slightly dropped on long maturities but rose on shorter terms, with a flat or inverted yield curve. Commodity had mixed performance: Crude Oil, Gold, and Silver rose, while Natural Gas, Copper, and Wheat fell.
• Crypto & ETFs: Cryptocurrency markets, Bitcoin rose +0.89% to $98,980.86, reflecting continued investor interest. Ripple led with +21.88%, while Ethereum Classic (+3.13%) and Litecoin (+2.40%) also advanced. High-volume ETFs, like T-Rex 2X Long MSTR (+13.38%, 10.3M volume) and Defiance 2X Long MSTR (+8.79%, 10.2M volume), show strong bullish sentiment on Bitcoin and MicroStrategy.
• Market Strategy: Maintain long-duration bonds and consider leading mortgage refinancing firms like Rocket and SOFI, anticipating Q4/Q1 ’25 rate cuts. Long positions in AI are prudent; diversify with Russell 2000 ETFs.
• Rate Cut Outlook: October CPI rose 2.6% YoY, showing disinflation. The Fed remains cautious but signals a continued easing path ahead.?

Indices & Sector Performance:

• DOW, S&P 500 AND NASDAQ rose. Eight out of eleven sectors saw gains, with Industrials leading and Communication Services lagging. Noteworthy Industry performances were seen in Automobiles, Textiles Apparel & Luxury Goods.

Technical Analysis:

Dow Jones Industrial Average (DOWI):

• 5-Day: Moving average at 43,646.77 (+1.96%) with low volume, signaling short-term recovery but cooling momentum (stochastic %D at 39.37%).
• 20-Day: Solid gain (+5.18%) with moderate volume decline, stochastic %D at 67.95%, indicating strengthening momentum.
• 50-Day: +7.01% gain, high stochastic %D (77.07%) suggests volatility.
• 100-Day: Strong long-term gain (+12.69%) with bullish MACD (2,326.30).
• 200-Day: Consistent growth (+14.38%), moderate volume supports upward momentum.
• YTD: +17.53%, reflecting broader market strength.

Indicators: Overbought conditions in stochastic readings and moderate RSI indicate potential for consolidation, while long-term MACD remains bullish. Caution is advised due to short.

S&P 500 Index (SPX):

• 5-Day: Moving average of 5,929.15 (+1.68%), showing modest gains, stochastic %D at 45.58% indicates potential growth.
• 20-Day: Moving average at 5,886.69 (+2.78%), with stochastic %D at 71.94%, signaling upward momentum but possible consolidation.
• 50-Day: Stronger gain of +6.10%, stochastic %D at 82.20% suggests overbought conditions.
• 100-Day: +7.81% gain, moving average at 5,660.42, MACD at 284.63 signals long-term bullishness.
• 200-Day: +19.44%, affirming solid growth trajectory.
• YTD: +25.15%, highlighting strong performance.

Indicators: Overbought stochastic levels (50-day: 82.20%, 100-day: 89.98%) suggest caution. Moderate RSI (50-day: 58.98%) shows potential for growth with possible consolidation. Strong long-term MACD momentum supports bullish outlook but recommends caution for short-term corrections.?

Nasdaq Composite (NASX):

• 5-Day: Moving average of 18,944.30 (+1.73%), stochastic %D at 46.81% signals balanced momentum.
• 20-Day: Moving average of 18,835.10 (+2.62%), %D at 68.16%, indicating strengthening trends but nearing overbought.
• 50-Day: +7.46% growth, stochastic %D at 80.94%, suggesting caution.
• 100-Day: +4.48%, moving average of 17,969.72, strong MACD at +1,011.02.
• 200-Day: +20.32%, solid growth.
• YTD: +26.60%, strong market momentum.

Indicators: Overbought stochastic levels (50-day: 80.94%, 100-day: 88.83%) suggest short-term correction. Stable RSI (50-day: 56.72%) indicates moderate growth. Strong long-term MACD (+1,011.02) signals bullish momentum, though short-term cooling may occur. Long-term growth remains optimistic, with potential short-term consolidation.

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Sector Performance:

Sector Performance Analysis (1-Month Focus):

• The S&P 500 gained +1.43% last month, led by Consumer Discretionary (+8.31%), Energy (+6.15%), and Financials (+5.22%), while Communication Services rose +3.35%. Health Care (-6.02%), Materials (-4.78%), Real Estate (-2.33%), and Utilities (-0.40%) underperformed amid rate pressures. Investor Takeaways: Investors should focus on Consumer Discretionary, Financials, and Energy for growth, balance with Communication Services, and selectively explore Technology. Health Care and Materials offer long-term value. A balanced approach aligns with ongoing market rotation and sector opportunities.

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Economic Highlights

• S&P Global Flash US PMI? – November 2024: Economic activity rose in November as Composite PMI hit 55.3 and Services PMI 57.0, a 31-month high. Manufacturing PMI improved to 48.8, inflation hit a 4-year low, and optimism reached its strongest since May 2022, signaling recovery.

• November Consumer Sentiment Trends and Market Implications: The University of Michigan revised November U.S. consumer sentiment to 71.8 (from 73.0), up from October's 70.5, with Current Conditions at 63.9 and Expectations at 63.9. Year-ahead inflation held at 2.6%, while five-year expectations rose to 3.2%, reflecting policy uncertainty.

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NASDAQ Global Market Update

• Trading Volume: 6.077 billion shares traded, with NVIDIA ^NVDA and Super Micro Computer, Inc ^SMCI leading in volume.

US Treasuries & Bond Markets

• Yield Movements: Treasury yields fell slightly on long maturities (30-year: 4.60%, -0.003; 10-year: 4.42%, -0.007) but rose on shorter maturities (2-year: 4.39%, +0.029). Yield spreads remain flat (10-2 year: 0.03) or inverted (10-3 month: -0.11). Investor Implications: Favor long-duration bonds for stability amid declining yields; maintain caution on short-term instruments as inversions signal potential economic uncertainty or slower growth. Diversify across yield curves for balanced exposure.

• Bonds: Global bond yields fell: U.S. 10-year 4.417%, Germany 2.248%, U.K. 4.392%, Japan 1.080%, Australia 4.555%, and China 2.089%, reflecting global economic uncertainties. Market Implications: Lower yields suggest cautious investor sentiment, favoring defensive strategies.

Volatility Overview

• VIX Index, over multiple periods, key metrics show a declining trend in short-term moving averages (e.g., 5-Day: -5.58%, 20-Day: -25.04%) but strong gains in longer-term averages (100-Day: +26.05%, YTD: +22.41%). Stochastic indicators reflect declining momentum, while relative strength stays moderately strong at 40.11%-49.28%. Volatility remains high across periods.

• The Fear & Greed Index currently registers “Greed,” while the Volatility Index remains “Neutral.”

Commodities & ETFs

• Commodities showed mixed performance: Crude Oil +1.65%, Gold +1.37%, and Silver +1.38% rose, while Natural Gas -5.20%, Copper -1.01%, and Wheat -0.88% declined. The Bloomberg Commodity Index edged up +0.07%. Market Implications: Rising precious metals signal safe-haven demand, while energy and agricultural declines reflect softer near-term demand or oversupply. Favor metals for hedging and monitor energy for potential recovery.

• Notable high-volume ETFs, led by T-Rex 2X Long MSTR (+13.38%, 10.3M volume) and Defiance 2X Long MSTR (+8.79%, 10.2M), reflecting strong bullish sentiment on Bitcoin and MicroStrategy.

Crypto’s & Currency Markets

• Cryptocurrency markets: Bitcoin rose +0.89% to $98,980.86, signaling renewed investor interest. Ripple led gains with +21.88%, while Ethereum Classic (+3.13%) and Litecoin (+2.40%) also advanced, reflecting strong momentum in select altcoins amid mixed overall crypto market performance.

• Currency: The U.S. Dollar strengthened, with the Euro and British Pound both declining. The Swiss Franc rose, while the Chinese Yuan and Japanese Yen showed slight changes. Market implications suggest a stronger dollar may pressure global trade and investments.

Stocks to Watch

• Stock movements today Quantum Corp. (QMCO) jumped +127.11% with 38.4M volume, leading stock gainers. Nano Labs (+89.02%) and Exicure (+69.24%) followed. Investors should watch Quantum’s momentum, as high trading activity indicates strong market interest and potential further upside.

Earnings

• As of late November 2024, the S&P 500 reports its fifth consecutive quarter of growth with Q3 earnings rising by 4.6% year-over-year. Key contributors included Information Technology, Communication Services, and Healthcare, while the Energy sector faced declines. Revenue growth reached 5.6%, the highest since Q3 2022. Analysts forecast 10% earnings growth in 2024 and 15% in 2025. For investors, these trends highlight sector-specific opportunities, particularly in technology and communication services, while emphasizing caution in energy-related investments.

Global Markets Summary

• Global markets show divergence: Asian markets, especially China, face challenges with the Shanghai Composite down -3.06%, while European and UK indices perform stronger. Focus should be on European stocks, with cautious exposure to China due to ongoing economic concerns.

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Historical Patterns and Market Impact

• Historically, November has been one of the strongest months for the S&P 500, with positive returns in 11 of the past 12 years. In election years, gains tend to be amplified, with median returns often exceeding 5%. This aligns with expectations for the current year, which has seen a 20% increase in the index. The market could potentially reach new highs by year-end, with some analysts forecasting the S&P 500 could reach up to 6,000 points. The outlook remains positive for the remainder of 2024.

Strategic Investment Adjustments

• Focus on long-duration bonds using leveraged ETFs like ZROZ (PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF) and EDV (Vanguard Extended Duration Treasury Index ETF) to capitalize on continued rate cuts through 2025.
• Strong long-term potential in Nasdaq, tech, AI, and semiconductors. Consider diversification with Russell 2000 ETFs and bank index ETFs; the year following election years with increased stimulus typically enhance market performance.

• Strategic Investment Approaches
• US Treasury Long Bond Opportunity
• Small Cap Opportunities Fall 2024
• Top 10 Fastest-Growing Technology Sectors Through 2028

In the News

Central Banking, Monetary Policy & Economics

• U.S. Private-Sector Activity Picks Up Pace as Firms Look Forward to a New Government - WSJ
• Economists See Stubborn Inflation, Gradual Fed Rate-Cut Tempo - Bloomberg

Business

• UPS Ordered to Pay $45 Million for Overvaluing Freight Business - WSJ
• Hedge Funds Slash Bullish Wagers on Gold Before War Jitters - Bloomberg

China

• China races to stockpile US chips before Trump ramps up sanctions - SCMP