Stock Market Update Wednesday November 8, 2023 - Nasdaq Composite Extends Winning Streak Despite Signs of Fatigue
The Nasdaq Composite Index managed to edge higher, marking its ninth consecutive day of gains, while the S&P 500 logged its eighth day of advance, though by a narrow margin. This incremental progress suggests that the momentum, while still present, is showing signs of weariness. In contrast, the Dow Jones Industrial Average and the Russell 2000 didn't partake in the upward trend, hinting that the broader market's enthusiasm may be waning and suggesting that a pause could be on the horizon for the market's recent run.
What's Next for the Bulls?
While the resilience of the Nasdaq Composite and the S&P 500 is notable, the lack of participation from the Dow and Russell 2000 indicates that the market's forward march is not without its hurdles. Investors may interpret this divergence as a sign that those who have been driving the market higher might need a period of consolidation to gather strength for the next leg up.
Looking ahead, the behavior of these three key indicators will be crucial in determining whether the bullish sentiment has the endurance to continue or if the market is due for a period of consolidation. Market participants should keep a close watch on these charts as they navigate through the evolving landscape. Three Critical Charts to Watch 👇
1. **The DXY U.S. Dollar Index**: This index, which measures the dollar against a basket of other major currencies, is hinting at a potential "bear flag" formation. Should this pattern complete, it would likely lead the index to descend towards the 103 level. A weaker dollar is generally supportive of stocks, as it makes American goods more competitive abroad and can lift multinational corporations' profits.
2. **The TLT (iShares 20+ Year Treasury Bond ETF)**: This ETF has shown signs of breaking out from its downward trend. If this breakout is sustained, it would be a positive signal for stocks. It indicates a shift in investor sentiment towards bonds that could lower yields and reduce borrowing costs, possibly leading to more liquidity in the stock market.
3. **Crude Oil Prices**: The downward trajectory of crude oil prices is a key point of interest. Lower oil prices could signify a reduction in inflationary pressures, which is a welcome development for the stock market. Reduced inflation might lead to less aggressive interest rate hikes from the Federal Reserve, which is typically a bullish cue for stocks.
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