Analyzing the Stock Market Trends and Financial Outlook
Introduction:
Welcome to this week’s edition of Stock Market Timing, where we delve into the recent happenings in the stock market and analyze the financial landscape. In this blog post, we’ll focus on the key highlights from the past week, including bond yields, currency trading, and the performance of major tech stocks. Additionally, we’ll take a closer look at the current state of the financial sector and discuss the future outlook for investors.
Bond Yields and Market Sentiment:
Last week, the stock market was closely influenced by the movement of bond yields, which experienced a significant uptick. Rising bond yields typically lead to a decline in bond prices. Notably, the 30-year bond witnessed a modest decrease of just under two and a half percent. Looking ahead, the upcoming Fed meeting in July is expected to result in a 25 to 50 basis points interest rate hike. While this is already priced into the market, the market’s reaction to the Fed’s statements can often overshadow its actions. Currency traders, in particular, are keeping a watchful eye on the developments, as they have been relatively inactive in June, awaiting potential market shifts in July.
VIX, Tech Stocks, and Market Stability:
The VIX, a volatility index commonly known as the “fear index,” experienced fluctuations last week. After reaching a peak on Thursday, it saw a pullback on Friday but remained on a daily buy signal. From a short-term perspective, this volatility is generally considered negative for stocks. Currently, the VIX seems to be encountering resistance at 15.63, and if it manages to break out and close above this level, the next significant resistance point would be 18.75. However, it is crucial to remember that short-term market movements do not significantly impact long-term investors. For now, the focus remains on whether the VIX can close this week above $17.49, which could potentially raise concerns for long-term investors.
Tech Stocks and Financial Sector Performance:
In recent times, the stock market has witnessed a select few tech stocks leading the way. These large-cap tech giants, including Apple, Meta, Microsoft, NVIDIA, and Tesla, have not only seen a rise in their market capitalization but have also been the most actively traded stocks in the US. The performance of these tech stocks holds substantial influence over the broader market. Therefore, investors should keep a close eye on any signs of weakness, particularly if these stocks close below the previous week’s low. Their potential decline may trigger a cascading effect on the overall market sentiment.
While the tech sector has been on an upward trajectory, the financial sector has faced some challenges. Although the SPDR Financial ETF experienced a higher low in March, indicating a potential bullish trend, it has failed to gain momentum. The insurance sector has shown some positive price action, but overall, the pros haven’t taken control of the market. Similarly, Canadian banks have not generated a weekly buy signal, and the pros have exhibited limited interest. Regional banks in both the US and Canada have also struggled to gain momentum. It appears that the pros are neither aggressively selling nor buying, possibly due to the anticipation of rising interest rates throughout the year.
Conclusion:
In summary, the stock market experienced notable movements last week, with bond yields, currency trading, and the performance of tech stocks taking center stage. The upcoming Fed meeting in July will undoubtedly influence market sentiment, with investors closely monitoring the central bank’s statements. Additionally, the performance of major tech stocks and the stability of the financial sector will play a crucial role in shaping the market’s future trajectory. As always, it is important for investors to remain informed, exercise caution, and make well-informed decisions based on their long-term investment goals.
Stephen Whiteside
Sunday, July 9, 2023
