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Navigating Market Dynamics: Bulls Charge Ahead While Bears Struggle - A Detailed Monthly, Weekly, and Daily Analysis

Monthly Analysis: May 2024

May 2024 turned out to be an exceptionally strong month for the markets. Historically known for its volatility, May defied expectations this year:

  • Dow Jones: Up 870 points
  • Nasdaq: Up 1077 points
  • Russell 2000: Up 96 points
  • S&P 500 (SPX): Up 241 points

In summary, four of the last five months have seen upward trends, with only April experiencing a downturn.

Weekly Analysis: Last Week of May; 22nd Week of 2024

The past week marked the end of a five-week winning streak. Here's a closer look at the weekly performance:

  • Dow Jones: Down 383 points
  • Nasdaq: Down 186 points
  • Russell 2000: Barely up 0.5 points, forming a doji pattern
  • S&P 500 (SPX): Down 27 points

The week saw a mixed performance, with most indices facing a downturn. Friday, however, witnessed a slight recovery across the board.

Daily Analysis: Week of May 28th, 2024

This was a short trading week due to the long holiday weekend. Here's the breakdown:

  • Dow Jones: Down for three days, but up 574 points on Friday
  • Nasdaq: Up on Tuesday, down for the rest of the week
  • Russell 2000: Down on Tuesday and Wednesday, up on Thursday and Friday
  • S&P 500 (SPX): Up one point on Tuesday, down on Wednesday and Thursday, up 42 points on Friday

On Friday, the S&P 500 saw significant movement. The index touched 5200, a critical support level, before recovering to close at 5299 due to short-covering and strong buying pressure.

Market Breadth and Correlations

  • Market Breadth: Closed at a low 12.92%, indicating potential choppiness ahead. The market breadth is neutral, suggesting a balanced participation between buyers and sellers. The VIX, in the 10 to 13 range, suggested low volatility but with the possibility of sudden spikes.
  • Fear and Greed Index: Currently at 48 (neutral). Last week it was at 45, showing a slight increase in confidence. A month ago, it was at a fearful 40, while a year ago, it was at a greed level of 64.

Correlations

The correlation between major indices remains high, with SPX, NDX, and Russell showing correlations in the high 80s to low 90s. Volatility (VIX) is inversely correlated at 75%, and the USD is inversely correlated at 31%. Commodities like gold, oil, Bitcoin, and copper show positive correlations with the market, albeit at lower levels around 30%. Copper, in particular, is a leading indicator, moving in sync with the market.

Future Price Action

To provide a clearer picture of what lies ahead, here is the forecasted price range for the upcoming week, including deviations:

Symbol Up Down Deviation
SPX 5340 5212 64
NDX 18813 18265 274
Russell 2105 2037 34

Upcoming Market-Changing News

Next week, several key economic reports are scheduled to be released, including:

  • CPI Data
  • Consumer Confidence Report
  • MBA New Home Sales
  • GDP Report
  • Fed Balance Sheet
  • Unemployment Rate

These reports are crucial as they provide insights into the health of the economy and can significantly impact market movements. Investors should be vigilant and monitor these releases closely to gauge potential shifts in market trends.

June over the years in Election Cycle

Historically, June has been a predominantly positive month for the markets, especially during election years. From 1980 to the present, June has been an up month 99% of the time, with only two exceptions: 1992 and 2008, the latter being an anomaly year due to the financial crisis. Over the last 10-12 years, June has consistently shown strong performance during election years. Additionally, June 1st ranks as the sixth-best first trading day of the year, suggesting a strong start to the month. This historical trend indicates that June is typically a favorable month for the markets, with expectations of positive movement from the outset.

Conclusion

The past week has been challenging, with the markets experiencing a mixed performance. Despite setbacks, the Nasdaq showed resilience, buoyed by strong performances in the technology sector. The SPX and other indices faced challenges but managed to recover slightly towards the end of the week.

As we look ahead, it is essential to remain cautious. The upcoming economic reports will play a crucial role in determining market direction. Understanding the interplay between economic indicators, market trends, and investor sentiment is vital for navigating the current landscape. By staying informed and responsive to market signals, investors can make more strategic decisions in this dynamic environment.

This week's market may have ended with mixed results, but the game continues. The bulls and bears will continue their battle, setting the stage for the next chapter in this ongoing saga of market dynamics.

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