Weekly Indices Review - 23 November

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For the past few weeks we have focused on the US 500, US Tech 100 and UK 100 so for this week we take a look at Wall Street.

The weekly chart shows how this narrower index has performed since the pandemic lows of early 2020. Through 2022 the market has retraced some of the post pandemic gains. The retracement lines show how the index here found support around the 38.2% area, broadly around 30,000. This is interesting as readers may recall how the US Tech 100 made moves all the way down to its 61.8% retracement level.

Highlighting how much of the falls posted through 2022 so far have been down to interest rate compression as the Fed started to aggressively lift rates to combat inflation. Which has a higher impact on growth stocks as valuations are based on future earnings, which have to be discounted back to present value using the now higher interest rates.

This demonstrated how Wall Street was able to weather the storm better in Q3 than the more growth orientated US Tech 100. The chart also suggest that this out-performance has continued more recently, as the index through 2022 has been in a clear negative trend, but price action has recently broken above this resistance line and is already threatening to post a fresh medium term higher high.

Has a longer-term bottom already been seen?

This break of the medium-term bearish trend line, and its support found around the 38.2% retracement is giving some bulls confidence that a longer-term low may have been posted in Q3. This is still a little too early to call in our opinion, but if the index could cross the August 2022 highs around 34,275, we could see this more optimistic view starting to gain some more traction.

Trading volumes are traditionally low in the week of Thanksgiving, and momentum may remain light ahead of the next CPI report in early December. But in the value side of the market positive arguments have started to build, with perhaps only a CPI shock needed to dent the green shoots of optimism.