{"id":65768,"date":"2023-09-26T18:36:54","date_gmt":"2023-09-26T22:36:54","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/when-will-the-stock-market-pain-end-here-are-3-clues-that-investors-should-watch-out-for\/"},"modified":"2023-09-26T18:36:57","modified_gmt":"2023-09-26T22:36:57","slug":"when-will-the-stock-market-pain-end-here-are-3-clues-that-investors-should-watch-out-for","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=65768","title":{"rendered":"When will the stock-market pain end? Here are 3 clues that investors should watch out for."},"content":{"rendered":"
\n

The S&P 500 has only fallen 5.5% from its late-July high, and already many investors are scanning for signs that the stock-market pain might be coming to an end.<\/p>\n

With that in mind, Seaport Research Partners Victor Cossel shared a few technical charts that could offer some clues about the timing of a potential turnaround. But the upshot \u2014 at least for now \u2014 is that there\u2019s likely more pain ahead, unless the relentless march higher in Treasury yields and the U.S. dollar ends. <\/p>\n

\n

First, the percentage of Nasdaq 100 components trading below their 200-day average needs to catch down to the number of S&P 500 and Russell 2000 members trading below their 200 DMAs. <\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

Moving averages are used by analysts to gauge the directional momentum in a given security. Looking at these trends among index components can give analysts an idea of exactly how dependent an index\u2019s performance has been on a small core group of stocks, a phenomenon that has been prominent in U.S. equity markets all year thanks to the emergence of the \u201cMagnificent Seven.\u201d<\/p>\n

The \u201cMagnificent Seven\u201d is a group of megacap technology stocks that have seen the biggest boost from the artificial-intelligence craze. It includes Nvidia Corp.
\n NVDA,
\n -0.74%<\/bg-quote>,<\/span>
\n Microsoft Corp
\n MSFT,
\n -1.70%<\/bg-quote>.<\/span>
\n , Apple Inc.
\n AAPL,
\n -2.34%<\/bg-quote>,<\/span>
\n Meta Platforms Inc.
\n META,
\n -0.62%<\/bg-quote>,<\/span>
\n Tesla Inc.
\n TSLA,
\n -1.16%<\/bg-quote>,<\/span>
\n Amazon.com Inc.
\n AMZN,
\n -4.03%<\/bg-quote>
\n and Alphabet Inc.\u2019s Class A
\n GOOGL,
\n -1.94%<\/bg-quote>
\n and Class C
\n GOOG,
\n -2.06%<\/bg-quote>
\n shares. <\/p>\n

According to the latest numbers supplied by Cossell, which were accurate through the close of Monday\u2019s trading, 61% of Nasdaq 100
\n NDX
\n members were still above their 200-day moving averages, compared with 45% for the S&P 500
\n SPX
\n and 35% for the Russell 2000
\n IWM,<\/span>
\n although those numbers may have changed slightly following Tuesday\u2019s bruising selloff in U.S. stocks. <\/p>\n

Should the selling pressure intensify, traders will be looking to see if the S&P 500 can hold the line at 4,200, which has served as a long-term support level for the large-cap index. <\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

A break below 4,200 could spell more trouble for stocks ahead, since traders would likely see such a break as a signal that momentum is accelerating to the downside. <\/p>\n

However, some of the frothiness in the market that likely inspired, at least in part, the Federal Reserve\u2019s latest higher-for-longer guidance is starting to disappear. <\/p>\n

For example, the S&P 500 information-technology sector officially entered correction territory Tuesday when it closed at 2,869.6 after falling 1.8% on the day. The drop brought the index down 10.5% from its 52-week high of 3,207.29. A stock or index is said to be in correction territory once it has fallen 10% or more from recent highs. <\/p>\n

The central bank\u2019s plans for interest rates unveiled after the close of its September policy meeting have been widely blamed for driving recent moves in Treasury yields and the dollar.<\/p>\n

To be sure, rising real rates \u2014 that is, bond yields adjusted for inflation \u2014 could continue to create headaches for stocks. As Cossel showed in a chart from earlier this week, the S&P 500\u2019s valuation on a forward price-to-earnings basis remains conspicuously stretched based on where 10-year real rates are trading. <\/p>\n

The 10-year real rate Cossel used here measures the 10-year nominal Treasury yield
\n BX:TMUBMUSD10Y
\n adjusted for the 10-year breakeven spread. <\/p>\n

<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

\u201cUnless rates fall, the S&P 500 looks vulnerable at current levels,\u201d Cossel said in the note. <\/p>\n

U.S. stocks closed sharply lower Tuesday, with the Dow Jones Industrial Average
\n DJIA
\n seeing its worst daily drop since March, while Treasury yields pushed higher and a popular gauge of the U.S. dollar\u2019s value reached its highest level in 10 months. The ICE U.S. Dollar Index
\n DXY,<\/span>
\n the gauge mentioned above, rose 0.2% to 106.18. <\/p>\n

The Dow fell 338 points, or 1.1%, to 33,618.88, the S&P 500
\n SPX
\n shed 63.91 points, or 1.5%, to 4,273.53, and the Nasdaq Composite
\n COMP
\n fell 207.71 points, or 1.6%, to 13,063.61.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The S&P 500 has only fallen 5.5% from its late-July high, and already many investors are scanning for signs that the stock-market pain might be coming to an end. With that in mind, Seaport Research Partners Victor Cossel shared a few technical charts that could offer some clues about the timing of a potential turnaround. […]<\/p>\n","protected":false},"author":1,"featured_media":65769,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-65768","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nWhen will the stock-market pain end? 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