(14 January 2024) US stocks rebounded last week as lower PCE and PPI inflation data took bond yields lower and kept the dollar under pressure. The S&P 500 rose almost 2% on the week to 4783 while the Nasdaq-100 added 3% to 16,832. The broader indexes ended mostly flat, however. This bullish outcome was unexpected as I thought we might have seen more downside with the early week Mercury-Neptune and Sun-Saturn alignments.
With markets still focused on rates, last week’s retreat gave new hope to dip buyers as the large cap indexes are poised to make new all-time highs. The softer inflation data has brought about a bigger decline in short term rates and thus the 2/10-year yield curve inversion has been reduced to just -0.18%. While this steepening and de-inversion of the yield curve has been previously associated with the start of recessions, it remains to be seen if history will repeat. Nonetheless, we should monitor the speed of de-inversion and whether or not it can move above the October yield curve high of -0.13%.
Whether or not new highs in stocks are actually bullish is another matter, however, as marginal new highs can act as a sell-the-news type event that draws in retail investors while the big players on the street lighten up their positions. That scenario may well have taken place in cryptocurrency markets on Thursday as news of the SEC approval of the Bitcoin ETF pushed it to new highs. Bitcoin then promptly reversed lower and lost 10% amid widespread selling. The price action of Bitcoin may assume a special importance here since it has been leading stock prices in recent months as Bitcoin bottomed in September just a few weeks before stocks. The correlation between Bitcoin and the stock market is not carved in stone, however, as it bottomed in late 2022 a few weeks after the stock market.
The planetary outlook leans bearish. Despite some bearish-looking progressed and transit alignments, the markets remain surprisingly bullish. The various Saturn alignments have yet to coincide with any significant downside, although stocks did pullback a bit in early January. At least the rally is on pause for now as stocks are consolidating sideways following the Jupiter direct station in which this bullish planet reversed its direction. But the progressed Sun-Mars-Neptune alignment in the NYSE has yet to show any bearish impact whatsoever, although due to its relatively slow motion, it cannot be considered fully neutralized just yet…
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Photo Credit: arsheffield
