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December 29, 2024

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Week Ahead: While NIFTY Consolidates, Closing Above This Level Crucial To Avoid Weakness

After suffering a brutal selloff in the week before this one, the Nifty spent the truncated week struggling to stay afloat just below the key resistance levels. With just four working days, the Nifty resisted each day to the 200-DMA and failed to close above that point. The trading range got much narrower, and the Nifty oscillated in just 291.65 points before closing with a minor gain. The volatility also cooled off as compared to the previous seek. Against the surge of 15.48%, this week saw India VIX declining by 12.17% to 13.24. Following strong consolidation, the headline index closed with a modest weekly gain of 225.90 points (+0.96%).

From a technical perspective, we are now at a very crucial juncture. On the one hand, the Nifty has closed below the 200-DMA placed at 23861. On the other hand, the Index is just above the 50-week MA at 23568. Rounding off, this puts Nifty in a very fragile range of 23860-23500. The Nifty will have to stay above the 23500 level; any violation of this level will instill prolonged weakness in the markets and push them into intermediate corrective trends. It also needs to be noted that the technical rebound would be sustained only if Nifty is able to cross and close above its 200-DMA. The longer the Nifty stays below 200-DMA, the more vulnerable it will be to testing the 50-week MA again.

Given the holiday season, no major moves are expected globally. The Indian markets are likely to start on a quiet note. The levels of 24000 and 24150 are likely to act as resistance points. The supports come in at 23600 and 23450.

The weekly RSI is 43.74; it stays neutral and does not show any divergence against the price. The weekly MACD is bearish and stays below the signal line. A Spinning Top occurred on the candles, depicting the market participants’ indecisive mindset.

The pattern analysis shows that the Nifty has retested the 50-week MA placed at 23568 again. While the Nifty has closed above this level following a modest rebound, it remains below the crucial 200-DMA. This means that so long as the Nifty is within the 23860-23500 zone, it is unlikely to adopt any sustainable directional bias. A trending move would occur only if the Nifty takes out 23860 on the upside or ends up violating 23500 levels.

Overall, it is important to observe that the markets are not totally out of the woods yet. So long as they are trading below the 200-DMA, they remain vulnerable to a retest of the 50-week MA. A violation of this level would mean a prolonged period of incremental weakness for the markets. It is recommended that all fresh buying must be kept defensive while keeping leveraged exposures at modest levels. For a rebound to sustain, it is immensely important for the markets to cross and close above 200-DMA. Until this happens, we need to approach the markets on a cautious and highly selective basis.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs (RRG) continue to show Nifty IT, Banknifty, Services Sector, and Financial Services indices inside the leading quadrant. Although these groups are showing some slowdown in their relative momentum, they will likely continue outperforming the broader markets relatively.

The Midcap 100 index shows sharp improvement in its relative momentum while staying inside the weakening quadrant. The Nifty Pharma index is also inside this quadrant.

The Nifty PSE, Media, Infrastructure, Energy, Auto, Commodities, FMCG, and Consumption sectors are inside the lagging quadrant. They are likely to underperform the broader markets relatively.

The Nifty Metal index is inside the improving quadrant; however, it is rapidly seen giving up on its relative momentum. Besides this, the Realty and the PSU Bank indices are also inside the improving quadrant. They are expected to continue improving their relative performance against the broader markets.

Important Note: RRG charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

Wall Street Sees No Threat of Inflation

Generally, there are 3 key hedges against inflation – gold ($GOLD), commodities ($XRB), and real estate (XLRE). While the Fed has taken a renewed interest in the short-term rising inflationary picture, which, by the way, is in direct contrast to what Fed Chief Powell said in late August and September, Wall Street simply isn’t seeing the same picture. Talk is cheap. When it comes to the stock market, the true statement being delivered is reflected in the price chart, not on CNBC.

Everyone now seems to be taking a different trading stance too. Bonds have been sold, sending yields soaring again. Bond investors will sell bonds when inflation is center stage for one simple reason. Bond yields aren’t high enough, given the prospects of inflation, and bond investors demand a higher yield to take on the additional inflation risk. After all, do you want to hold a 4% 10-year treasury if you believe inflation might move to 6%? I’d hope not. That’s clearly a losing proposition. Personally, I think the recent selloff in bonds is completely unwarranted and that yields will ultimately drop as investors fail to see meaningfully-higher inflation materialize.

The Fed has stated that it wants to continue watching inflation data and that its target rate of 2% will more likely be achieved in 2027 vs. 2026. While they’ve indicated that interest rate cuts will occur just two times in 2025 vs. the previously-announced 4 rate cuts, one question that should continue to be asked is…..why would interest rates be cut AT ALL if you’re truly worried about inflation. And why would the Fed have already cut the fed funds rate by 100 basis points over the past 3 Fed meetings? Honestly, I think this nonsense is nothing more than the Fed Chief hedging and waffling.

Is the stock market concerned about inflation? Ummm, I don’t think so. Let’s get back to those inflation “hedges” and see how they’ve been performing recently vs. the S&P 500. After all, when inflation, or the threat of inflation, is REAL, the hedges should work and outperform the benchmark S&P 500, right? Take a look at this current RRG chart (I’ve included silver as well):

Does this look like Wall Street is rotating into these hedges to you?

To compare, let’s go back to 2022 and check out when inflation was an obvious problem:

A 6.5% annual rate of inflation is a problem and that was certainly one big reason why we followed that up with a cyclical bear market in stocks (which I called at our MarketVision 2022 event in early January of that year). Now let’s check out the movement in the fed funds rate in 2022 and, more recently, in 2024:

When inflation is truly a problem, you RAISE the fed funds rate, you don’t cut it. 2022 saw the fed funds raised incredibly fast and the total increases were significant. The Fed was increasing rates to slow demand and curb inflationary pressures, which they did. But if we fast forward to late 2024, the Fed is CUTTING rates and is looking ahead and saying more rate cuts are coming. This DOES NOT happen when inflation is a true threat.

Now, scroll up and take a look at the current RRG chart that shows money rotating AWAY FROM inflation hedges. It’s quite a different look than when inflation is a REAL problem. Check out this RRG chart, which shows rotation in February 2022 as inflation establishes its first annual rate of change peak:

Quite a different look, wouldn’t you say?

So my last question…….Does Wall Street truly believe inflation is a major threat? I say no.

MarketVision 2025

Well it’s time and we’re only one week away. How will 2025 unfold? I have a solid track record at these prior MarketVision events. This is year #6. In the previous 5, I’ve provided bullish outlooks for 2020, 2021, 2023, and 2024, which were all bullish. The only year I was cautious was heading into 2022 and it was due to a number of factors, including inflation. But the biggest question right now is…..Where are our major indices heading in 2025? Which sectors and industry groups are likely to be in favor? What about the dollar and commodities? Interest rates and the yield curve? Sentiment? International stocks? I have the answers and I’ll be sharing them with our EarningsBeats.com members next Saturday, January 4, 2025 at 10:00am ET. For more information and to register for MarketVision 2025, CLICK HERE! We’ll provide you ONE YEAR of EarningsBeats.com membership FOR FREE when you sign up for the event!

4 Trading Tips for 2025

I want to open up a new year with 4 important trading tips to help make 2025 a more successful and profitable year. for you. You can SIGN UP for these tips and they will be delivered to your email, beginning on Monday, December 30th. I hope you enjoy them as a THANK YOU for your loyalty and support in 2024!

On behalf of the entire EarningsBeats.com team, I want to wish everyone a happy, healthy, and prosperous 2025!

Happy trading!

Tom

Rick Rule, Gareth Soloway, David Morgan and More — Our 5 Most Popular Interviews of 2024

5. Peter Grandich, Peter Grandich & Company

Kicking off the list in the fifth spot is Peter Grandich of Peter Grandich & Company.

Speaking in early August, when gold was approaching the US$2,500 per ounce level, Grandich explained why he no longer sees US$5,000 as a ‘foolish’ price target.

4. Willem Middelkoop, Commodity Discovery Fund

Willem Middelkoop of Commodity Discovery Fund is next.

In this January interview, he shares his 2024 outlook on a wide variety of sectors, but also looks much longer term.

3. David Morgan, the Morgan Report

Morgan was positive on the metal’s prospects, but stayed conservative with his 2024 call.

2. Gareth Soloway, VerifiedInvesting.com

Gareth Soloway of VerifiedInvesting.com comes in at number two, and at the end of August he laid out a gold price target of US$2,660, saying it could get there later in 2024 or early in 2025.

Gold did ultimately reach that level in 2024, but Soloway also gave a much longer-term look forward. He shared how the metal could pass US$6,000, although he emphasized the difficulty of forecasting that far out.

1. Rick Rule, Rule Investment Media

At the beginning of the year, he mentioned several sectors he was looking at, including platinum, palladium and nickel, as well as oil and gas. However, of particular interest to him at the time was silver.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

This post appeared first on investingnews.com

Stock Futures Lower after S&P 500 futures ticked down 0.18%

Stock futures are trading slightly lower Monday morning as investors gear up for the final month of 2024. S&P 500 futures slipped 0.18%, alongside declines in Dow Jones Industrial Average futures and Nasdaq 100 futures, which dropped 0.13% and 0.17%, respectively. The market’s focus is shifting to upcoming economic data, particularly reports on manufacturing and construction spending, ahead of this week’s key labor data releases.

November was a standout month for equities, with the S&P 500 futures rallying to reflect the index’s best monthly performance of the year. Both the S&P 500 and Dow Jones Industrial Average achieved all-time highs during Friday’s shortened trading session, with the Dow briefly surpassing 45,000. Small-cap stocks also saw robust gains, with the Russell 2000 index surging over 10% in November, buoyed by optimism around potential tax cuts.

As trading kicks off in December, investors are keeping a close eye on geopolitical developments in Europe, where France’s CAC 40 index dropped 0.77% amid political concerns, while Germany’s DAX and the U.K.’s FTSE 100 showed smaller declines.

S&P 500 futures will likely continue to act as a key barometer for market sentiment, particularly as traders assess the impact of upcoming economic data and global market developments.

S&P 500 Index Chart Analysis

This 15-minute chart of the S&P 500 Index shows a recent trend where the index attempted to break above the resistance level near 6,044.17 but retraced slightly to close at 6,032.39, reflecting a minor decline of 0.03% in the session. The candlestick pattern indicates some indecisiveness after a steady upward momentum seen earlier in the day.

On the RSI (Relative Strength Index) indicator, the value sits at 62.07, having declined from the overbought zone above 70 earlier. This suggests that the bullish momentum might be cooling off, and traders could anticipate a short-term consolidation or slight pullback. However, with RSI above 50, the overall trend remains positive, favoring buyers.

The index’s recent low of 5,944.36 marks a key support level, while the high at 6,044.17 could act as resistance. If the price sustains above the 6,020 level and RSI stabilizes without breaking below 50, the index could attempt another rally. Conversely, a drop below 6,020 could indicate a bearish shift.

In conclusion, the index displays potential for continued gains, but traders should watch RSI levels and price action near the support and resistance zones for confirmation.

The post Stock Futures Lower after S&P 500 futures ticked down 0.18% appeared first on FinanceBrokerage.

S&P 500 climbed 0.3%, and Nasdaq-100 futures jumped 0.7%

Stock futures climbed on Wednesday, driven by strong performances from Salesforce and Marvell Technology, following upbeat quarterly earnings. Futures tied to the Dow Jones Industrial Average rose by 215 points (0.5%), while S&P 500 futures gained 0.3%, and Nasdaq-100 futures advanced by 0.7%.

Salesforce surged 12% after reporting fiscal third-quarter revenue that exceeded expectations, showcasing robust demand in the enterprise software sector. Meanwhile, chipmaker Marvell jumped 14% after surpassing earnings estimates and providing optimistic fourth-quarter guidance, indicating resilience in the semiconductor industry.

This movement follows a mixed session on Wall Street, where the S&P 500 and Nasdaq closed with small gains, while the Dow dipped slightly. The broader market has experienced a modest start to December, contrasting with November’s robust rally, but analysts anticipate a resurgence in momentum. LPL Financial’s George Smith pointed out that December historically sees strong market performance, particularly in the latter half of the month.

However, economic data introduced some caution. ADP’s report revealed that private payrolls grew by just 146,000 in November, missing estimates of 163,000. This signals potential softness in the labor market, with investors now awaiting Friday’s November jobs report for further clarity.

S&P 500 Index Chart Analysis

Based on the provided stock chart, which appears to be a 15-minute candlestick chart for the S&P 500 Index, here’s a brief analysis:

The chart shows a clear upward trend, with higher highs and higher lows indicating bullish momentum over the analyzed period. The index has steadily climbed from a low of approximately 5,855 to a recent high of 6,053.58, suggesting strong buying interest.

Key resistance is observed near 6,050-6,053 levels, as the price has struggled to break above this zone in the most recent sessions. If the index breaches this level with strong volume, it could lead to further upward movement. Conversely, failure to break out may lead to a pullback, with potential support around the 6,000 psychological level and 5,980, where consolidation occurred previously.

The candlestick patterns show relatively small wicks, indicating limited volatility, which could imply steady market confidence. However, the bullish rally could be overextended, warranting caution for traders, especially if any negative catalysts emerge.

In summary, the short-term trend is bullish, but traders should monitor resistance levels and volume for signs of a breakout or reversal. It’s also essential to watch broader market factors, as indices are often influenced by macroeconomic data and sentiment.

The post S&P 500 climbed 0.3%, and Nasdaq-100 futures jumped 0.7% appeared first on FinanceBrokerage.