{"id":1561,"date":"2024-02-29T00:08:39","date_gmt":"2024-02-29T00:08:39","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2024\/02\/29\/market-in-a-wait-and-see-mode-awaiting-important-inflation-data\/"},"modified":"2024-02-29T00:08:39","modified_gmt":"2024-02-29T00:08:39","slug":"market-in-a-wait-and-see-mode-awaiting-important-inflation-data","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2024\/02\/29\/market-in-a-wait-and-see-mode-awaiting-important-inflation-data\/","title":{"rendered":"Market In a \u201cWait and See\u201d Mode: Awaiting Important Inflation Data"},"content":{"rendered":"
\n

This is a big week for economic data\u2014durable goods, consumer confidence, GDP, and PCE.<\/p>\n

Durable goods fell in January, which didn\u2019t impact the stock market. Neither did the revised GDP number, which came in slightly lower.<\/p>\n

Inflation In Focus<\/h2>\n

Traders are anxiously awaiting the PCE data to find clues as to when the Fed will likely start cutting interest rates. Treasury yields are a little higher, probably because some of the more recent bond auctions on the 2- and 5-year Notes went well. The US dollar is moving lower.<\/p>\n

It\u2019s almost as if the stock market has adopted a \u201cwait and see\u201d approach. You\u2019ll have to wait until Thursday morning when the PCE comes\u2014will the stock market make a big move in either direction?<\/p>\n

Times Are Changing<\/h2>\n

This week saw some changes in the Dow Jones Industrial Average ($INDU) and Dow Jones Transportation Average ($TRAN). Amazon (AMZN) has joined the Dow, replacing Walgreens Boots Alliance (WBA). It remains to be seen if this addition will help the DJIA\u2019s performance, bringing it closer to the performance of the S&P 500. What\u2019s interesting is that between announcement and inclusion, stocks that are going to be added to an index tend to rise. After that, the stock price often declines, and the stock that was kicked out tends to do better. AMZN\u2019s stock price closed lower today, and the Dow is down about 97 points. But one day doesn\u2019t make a trend, so there\u2019s no need to sell AMZN.<\/p>\n

Uber Technologies\u2019 addition to $TRAN is an exciting change, since most companies that make up the $TRAN are shipping and freight companies. The addition of AMZN and UBER into the two Dow Jones indices reflects changing times.<\/p>\n

It\u2019s interesting to see how $TRAN has performed compared to $INDU (see chart below). While $INDU was hitting new highs, $TRAN was lagging. This goes against one of the tenets of Dow Theory: if $INDU and $TRAN trend in the same direction, the entire stock market trends in a similar direction. $TRAN isn\u2019t hitting highs while $INDU continues to hit new highs.<\/p>\n<\/p>\n

CHART 1. DOW JONES TRANSPORTATION AVERAGE ($TRAN) VS. DOW JONES INDUSTRIAL AVERAGE ($INDU). While $INDU has been hitting new highs this year, $TRAN hasn\u2019t been doing the same thing.<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

Meanwhile, in the equity space, chip stocks continue to carry the broader market higher. It\u2019s not just NVIDIA (NVDA); Micron Technology (MU) hit a new 52-week high on the news that it\u2019s starting high volume production of its High Bandwidth Memory E3 chips. These chips will be incorporated in the Nvidia H200 graphics processing units. Arm Holdings (ARM) has also been soaring this month after its alliance with some big AI players.<\/p>\n

Small-Caps Want To Join the Party<\/h2>\n

While the semiconductors continue to rally, small-cap stocks don\u2019t want to get left behind. The weekly chart of the iShares Russell 2000 (IWM) shows it\u2019s trying to break above the resistance of a trading range (see weekly chart below). Will it succeed?<\/p>\n<\/p>\n

CHART 2. ISHARES RUSSELL 2000 ETF (IWM) CLOSE TO BREAKING OUT OF A RANGE. The big question is, will IWM break out, or will it retreat to its trading range? A lot rests on when the Fed will start cutting interest rates.<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

It\u2019s still got a long way to go before hitting its November 2021 high. The first Fed rate cut may be when small caps take off, so monitor the S&P 600 Small Cap Index ($SML) on the StockCharts Market Overview panel (see below).<\/p>\n<\/p>\n

Cool StockCharts Tip. <\/strong><\/p>\n

If you want a bird\u2019s eye view of the stock market, select the different tabs in the Market Overview<\/strong> panel\u2014Equities, Bonds, Commodities, and Crypto\u2014to see how the broader market is performing.<\/p>\n

And Don\u2019t Forget Crypto<\/h2>\n

One area that\u2019s been showing strength is cryptocurrencies. Bitcoin ($BTCUSD) is showing its bullish power this week. It\u2019s on tap to have three consecutive big up days (see chart below). This spike has helped stocks like Coinbase (COIN), Marathon Digital (MARA), and Riot Platforms (RIOT) move higher. COIN and MARA hit a new 52-week high today.<\/p>\n<\/p>\n

CHART 3. DAILY CHART OF BITCOIN TO US DOLLAR. Three big up days with above-average volume shows this cryptocurrency has momentum. It\u2019s not too far away from its all-time high of 69355.<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

The Bottom Line<\/h2>\n

Equities are rallying, especially due to the AI buzz, so it\u2019s probably not the right time to be bearish on equities. The CBOE Volatility Index ($VIX) is still relatively low and shows no signs of investor fear. Thursday\u2019s PCE data will probably give the market a reason to move up or down.\u00a0That\u2019s tomorrow morning (Thursday) at 8:30 AM ET. Pre-market trading should provide some clues.<\/p>\n<\/p>\n

Disclaimer:<\/em><\/strong> This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.<\/em><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

This is a big week for economic data\u2014durable goods, consumer confidence, GDP, and PCE. Durable goods fell in January, which didn\u2019t impact the stock market. Neither did the revised GDP number, which came in slightly lower. Inflation In Focus Traders are anxiously awaiting the PCE data to find clues as to when the Fed will […]<\/p>\n","protected":false},"author":0,"featured_media":1562,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-1561","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/1561","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=1561"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/1561\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/1562"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=1561"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=1561"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=1561"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}