US stock indices consolidate

28 Şub

There was a mixed close across US stock indices yesterday, as equities continued to consolidate. This morning brought more of a pullback particularly in tech and smaller stocks. NVIDIA was down over 1% overnight and has now lost about 3% from its record close last Thursday. Despite this, there still hasn’t been any hint of a significant pullback in the current rally since it began at the end of October. Looking at the S&P 500, the longest run of consecutive losing sessions is four, which took place between the end of December going into the New Year. That run resulted in a loss of less than 2%. Yet that remains the largest pullback in percentage terms as well as duration. This has proved very dispiriting for would-be bulls who failed to go long early on in the rally. All those were hoping for a significant dip to give better entry levels, but this never happened. Instead, fortune favoured the brave, or the foolhardy, or simply the traders prepared to close their eyes and pay up to go long. So far that gamble has paid off. But even a mild 5% sell-off would leave many investors underwater, given the shape of this market. Tomorrow sees the release of Core PCE, the Fed’s preferred inflation measure. If this number continues to trend downwards, giving a year-on-year reading under 3%, then this should lift those animal spirits once again. But if we were to see an uptick, as we did with recent CPI and PPI data, that may provide a catalyst for more profit taking.

It's worth noting that the daily MACD has dipped, setting up a negative correlation with the S&P. Could this signal more selling?