Uh-oh - As the market steams along, is that an iceberg ahead?

Reuters

Uh-oh - As the market steams along, is that an iceberg ahead?

9 ott. 2024, ore 4:05 GMT

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Main U.S. indexes advance ahead of FOMC minutes at 2 PM ET

Financials lead S&P 500 gainers; Comm Svcs weakest group

Euro STOXX 600 index up ~0.7%

Dollar up; gold, bitcoin, crude dip

U.S. 10-Year Treasury yield edges up to ~4.05%

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UH-OH - AS THE MARKET STEAMS ALONG, IS THAT AN ICEBERG AHEAD?

The U.S. stock market remains constructive on a trend-following basis. However, analysts at SentimenTrader are concerned over the potential for rough seas ahead as several potential warning signs have appeared on the horizon.

"These signs do not necessarily scream 'Sell Everything,' but they do suggest that investors review their contingency plans and not assume that everything is 'smooth sailing' for stocks," writes senior research analyst Jay Kaeppel in a note.

One such warning sign Kaeppel is dredging up is the "Titanic Syndrome" indicator which was created by Bill Omaha in the 1960s.

It highlights a technical market condition when stocks have recently been at a high, and then new 52-week lows suddenly jump vs new 52-week highs, suggesting developing weakness under the surface.

More specifically, in this case, SentimenTrader is applying these conditions to the Nasdaq 100. A signal is generated when 1) the Nasdaq 100 .NDX closes at a 52-week high at some point in the past seven sessions, and 2) New 52-week lows outnumber 52-week highs on the Nasdaq.

Kaeppel says this is "not a precision timing tool," but a warning sign that typically precedes some form of trouble over the next 1-3 months. That said, in his opinion, signals like this do not constitute an outright "sell" signal.

However, Kaeppel believes they can remind us of the old adage, "Hope for the best, prepare for the worst."

"As long as the major market indexes hold above their longer-term moving averages, indicator signals like the above are more 'alerts' than 'warnings.' But if things start to break down, investors might be wise to have some contingency plans already in place to reduce risk."

Here is a chart using LSEG data showing the Nasdaq 100 and Titanic Syndrome signals:

(Terence Gabriel)

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FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:

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U.S. STOCKS TICK UP AHEAD OF THE MINUTES - CLICK HERE

S&P 500 INDEX JUST SHY OF ITS RECORD HIGHS - CLICK HERE

BULLISH FACTORS BEHIND GOLD RALLY TO CONTINUE - UBS - CLICK HERE

U.S. ELECTION RISK RIPPLES THROUGH MEXICAN PESO OPTIONS - CLICK HERE

NO NEED TO PANIC AS TURBULENT EARNINGS SEASON LOOMS - CLICK HERE

STOXX INCHES UP, OFF 2-WEEK LOWS - CLICK HERE

EUROPEAN FUTURES POINT TO MUTED START - CLICK HERE