🤑 It doesn’t get more affordable. Grab this 60% OFF Black Friday offer before it disappears…CLAIM SALE

BTIG: Market correction has more room to run

Published 07/29/2024, 07:34 PM
© Reuters.
NDX
-
US500
-
US2000
-
IXIC
-
XSD
-
XHB
-

Despite last week's pullback in the S&P 500 (SPX), the underlying indicators did not align with durable lows, as 60% of the benchmark index’s components remained above their 20-day moving average (DMA).

According to BTIG analysts, that inconsistency is partly due to the rotational nature of the market, with tech weakness being offset by cyclical strength.

"Regardless, we still expect a reading closer to 15% before this correction has run its course," they noted.

"We can probably drift a bit higher on SPX towards its gap at 5550, before moving lower to fill a gap at 5375."

Internally, market rotations have been intense, BTIG added.

The 12-day rate-of-change for the Russell 2000 versus the NASDAQ 100 is over 20%, ranking as the fifth largest such move since 1985, surpassed only by a few days in December 2000 and January 2, 2001.

Analysts believe a “reversal of that reversion” is likely, with semiconductors (SMH) oversold into support, while homebuilders (ITB) are overbought and rallying on anticipated rate cuts, despite higher rates being part of their bull thesis over the past couple of years.

“Correlation between ITB and SMH has gone from +.9 for much of the last two years to -.4. SMH vs. ITB is oversold into support,” analysts pointed out. While this may not be the end of correction for semis, they “should attempt” to bounce back from here.

Moreover, BTIG noted there are breakouts among defensive stocks, with sectors such as staples, utilities, REITs, and healthcare all looking strong.

US equities rose higher on Friday, ending a turbulent week on a high note as investors considered new U.S. inflation data.

The S&P 500 rose 1.11%, closing at 5,459.10, and the Nasdaq Composite increased by 1.03%, finishing at 17,357.88.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.