Sevens Report

Yesterday’s trading was notably quiet, with the S&P 500 showing an "inside day" pattern—meaning it had a lower high and a higher low than the previous day. Inside days are indicative of low conviction from traders, which makes sense after the uptick in volatility we saw last week. As we get closer toward the major corporate earnings, jobs report, and election all happening soon, yesterday’s intraday high and low will be important near-term technical levels to watch. Whichever one is violated first will likely see a follow-through move in that same direction. If there is any negative news, such as bad earnings from one of the big-tech giants reporting this week, fear and uncertainty can build in a hurry as conviction fades. #Stocks #Markets #Investing

Whether stocks hold and potentially extend the YTD gains will be determined by several critical tests all happening within the next two weeks. The rally’s four major supports will be tested, and if expectations aren’t met, we could see a significant pullback. Here’s how each can pass the test: ▶️Soft landing: Economic data needs to remain Goldilocks (not too hot to imply no landing and less rate cuts, but not too soft to hit at a recession). ▶️Earnings: We need to see guidance from major companies releasing reports soon, like GOOGL, AAPL, and AMZN, to remain upbeat and above expectations to show earnings growth is solid. ▶️Aggressive Fed rate cuts: Rate cut expectations need to stay at two 25 bps cuts in November and December (and not decline below 50 bps of additional easing). ▶️Political calm: We need to have political clarity coming out of the election and have current geopolitical tensions not spread or intensify. #Markets #Stocks #Economy #Investing

Bond markets can (and often do) lead stock markets. The bond market is considered the ‘smart market’ because corporate and government bond volumes are dominated by seasoned investors with vast resources at their disposal. High-yield ETF JNK is one to keep a particular eye on as it can often be looked at as a key indicator of the health of the high-yield bond market. Its recent movements mimic its bearish patterns in late 2021, suggesting investor confidence in high-yield bonds is waning. This breakdown is curious considering given stocks remain just off all-time highs. This could be a warning sign that the smart market’s economic outlook is dimming. #Bonds #Markets #Economy

Next week’s jobs report might decide whether the Fed cuts rates again or not. If it’s as strong as the last report, we will most likely see a reduction in rate cuts—and if not, prepare for increased volatility. #Jobs #Fed #RateCuts #Markets

Tune in at 1:30 p.m. ET today for our next Alpha webinar. Today’s we’ll focus on all things for the upcoming election: What the polls are saying, the outlook for Senate, and the market expectations and near-term risks to stocks. Sign up to become an Alpha member: https://lnkd.in/gfpWFYCr #Election #Stocks #Webinar

Despite the relentless rally in stocks 2024 has seen, sentiment data this month proved that there’s still anxiety despite the new highs. AII Investor Sentiment Survey shows 45.50% bulls, down solidly from September but still the fourth highest level of the year. Among other sentiment surveys, this indicates that while investors aren’t wildly positive, they may be complacent to current risks to the market. This isn’t enough of a reason to lighten up on stocks, but it does leave this market vulnerable to a short, sharp pullback. Expect markets to be sensitive to any bad news in upcoming weeks. #Investing #Markets #Finance

Utilities are up more than 30% this year not because investors are worried about a recession, but because of AI. With a massive increase in demand for power expected in the next few years, utilities may be one of the most creative and safest ways to play the AI boom. #AI #Investing #Markets

Can the good times last? Potentially not, according to Goldman Sachs. Following the strong returns we’ve seen in the markets this year, Goldman Sachs forecasted that the S&P 500 will yield an annualized return of 3%, significantly lower than the 13% yearly return over the past ten years. Whether that happens or not depends on economic growth. #Investing #Markets #GoldmanSachs #Finance

The 10-year yield hit 4.2% yesterday for the first time since late July, with one of the more frequently cited reasons for the rise being the upcoming election. However, with neither candidate having a clear plan to address the deficit, there may be a few simpler explanations: →Economic growth since the Fed rate cut has been almost universally better than expected →Inflation has firmed up since the strong September CPI report, implying a slowing decline in inflation →Fed rate cut expectations have declined from 75 bps through the rest of the year to possibly just 25 bps Bottom line: It’s more likely the yield has risen because growth and inflation have been firmer than expected. #Economy #Growth #Inflation

Utilities are the best-performing S&P 500 sector YTD by a solid margin, with XLU rallying more than 31%. As a defensive sector, they sport above-average yields and become attractive to investors as “safe” income. However, utilities have also benefitted from an odd marriage with AI, with tech juggernauts like Google, Microsoft, and Amazon announcing they would invest heavily in energy to power AI data centers. These investments are crucial, because the International Energy Agency estimates that electricity demand will more than double from 2022 to 2026 with the rise of AI, crypto currency mining, and EV charging. Bottom line: Utilities are defensive and provide higher yields, but they also now have a growth component in the midst of the AI gold rush. #Markets #Stocks #Utilities #AI