Stock Market Update Friday September 6, 2024

Stock Market Update Friday September 6, 2024 The latest mixed payrolls report offered little solace to bullish investors, as equity markets slumped, with the S&P 500 shedding 1.7% and the Nasdaq 100 tumbling 2.7%. This marked the most significant weekly decline since March 2023.

Away From Stocks: Treasury yield curve steepened; two-year yields dropped by nine basis points to 3.66%, while the yield on the 30-year bond inched up slightly to 4.03% from 4.02%. In commodities, WTI crude oil fell to a year-to-date low of $68 per barrel, gold declined to $2,495 per ounce, and Bitcoin retreated nearly 5%, landing at $53,400. Meanwhile, the VIX, a measure of market volatility, climbed above 22, signaling heightened investor anxiety.

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Stocks have been on a steady decline since the start of the month, with today's sell-off extending weekly losses to roughly 4.14%. From our perspective, the recent market weakness lacks a solid fundamental basis. The August jobs report, which showed a gain of +142k (versus the expected +165k) and a slight drop in the unemployment rate to 4.2% from 4.3%, suggests a stable labor market. This "middle-of-the-road" report reflects an improving job market without signaling any dramatic shifts in economic conditions. Despite this, equities have come under pressure following the report.

With the August CPI report on the horizon, which is expected to confirm a continued decline in inflation, and the Fed's anticipated rate cut on September 18th, the current market reaction seems unwarranted. However, fear is building in the market, as evidenced by the equity put/call ratio, which is poised to close at its highest level in a year. The last time we saw these levels was during the August 2024 lows.

Bottom Line: The purple line is an important support level that the bulls needed to hold. Today the SPY ETF closed below the purple line. Given this environment, we believe it may be prudent to pause any stock accumulation. If the market weakness continues into Monday, our algorithm could potentially trigger a sell signal, signaling a shift in our strategy.

SPY ETF Daily Chart Elliot Wave Count 4 An Elliott Wave Count 4 refers to the fourth wave in the Elliott Wave theory, which typically follows a corrective pattern after three impulsive waves.

Here are key characteristics of Wave 4:

Corrective Nature: Wave 4 is a corrective wave, meaning it moves against the larger trend of the impulsive waves (Waves 1, 3, and 5).
Time & Complexity: It is often longer in duration than Wave 2 and can take more complex forms like a triangle, flat, or zigzag.
Support Levels: Wave 4 typically finds support at Fibonacci retracement levels (38.2% or 50%) of Wave 3.
Overlap Rule: In most cases, Wave 4 should not overlap with the top of Wave 1 in terms of price, especially in a standard impulse wave.

Once Wave 4 concludes, traders often expect Wave 5, which is the final impulsive leg in the Elliott Wave structure.