Market Overview: Searching for New Leaders

The stock market has been struggling since the start of the year, with major indices showing downward trends. As traders and portfolio managers, identifying outperforming stocks (longs) and underperforming ones (shorts) is crucial. Looking at sector performance is a key strategy, and our weekly sector chart analysis has shown a clear trend: the market lacks strong new leaders.

Key observations:

• The technology sector peaked last year but has since declined.
• Financials (Goldman Sachs, JPMorgan, Bank of America) are holding up but showing weakness.
• The S&P 500 is down 5% year-to-date, with the NASDAQ experiencing a double-digit drop.
• European markets, particularly Germany, have performed better.

  

  S&P 500 Sectors vs S&P 500.

Commodities & Currency Update

• Gold: Up 18% YTD, making new highs, with strong Thursday and Friday performances.
• Copper: Also on a bullish run, showing a 27% gain over three months.
• U.S. Dollar: Down 4-5% versus most major currencies, aiding U.S. exports.
• Bond Yields: U.S. 10-year yield hovering around 4.25%, within the expected 4.1-4.7% range.

  

   

Sector & Industry Performance

• Underperformers: Technology, semiconductors, software, cloud computing, transportation, and retail.
• Defensive Plays: Consumer staples have performed well as investors shift to safer assets.
• Energy: Slightly outperforming but not showing significant strength.
• Market Volatility: Increased uncertainty has pushed volatility higher, with the S&P 500’s 30-day volatility above 21%.

Recession vs. No Recession?

A key market question remains: Are we heading for a recession?

• Recession Scenario: Could lead to a 30%+ market decline.
• No Recession: A more moderate drawdown of around 10%.
• GDP Growth Expectations: Initially projected at 2-3%, but now estimates for Q1 are being revised down to 1-1.5%.
• Soft Data vs. Hard Data: Leading indicators like ISM Services show mixed signals, while hard data remains stable but often lags behind economic shifts.

Key Market Trends & Trading Insights

• Options & Market Positioning: The S&P 500 has been influenced by major options positioning, particularly the JP Morgan 5,560 put, driving prices lower.

  

  S&P 500 last 5 sessions.

• Retail Investor Sentiment: Previously bullish, but recent weeks have shown declining inflows.
• Wealth Effect & Market Risks: The U.S. stock market has played a significant role in household wealth, but if stocks decline further, it could negatively impact consumer spending.

Upcoming Catalysts to Watch

• March 31: End of the month and quarter, expect potential market repositioning.
• April 2 & 4: Manufacturing and Services PMI reports.
• April 5: Non-Farm Payroll (NFP) report and Fed Chair Powell’s speech—both could be market-moving events.
• April 3: Tesla Q1 delivery numbers, which could impact broader market sentiment.
• Tariffs & Trade Policies: Additional tariffs could impact multiple industries and global trade relationships.

  

   

Final Thoughts

The market remains in a downtrend, with declining volumes in major sectors and increased volatility. Traders should keep an eye on economic data, earnings, and positioning trends. As always, adapting to market conditions and risk management are essential.

For those looking to deepen their market knowledge, consider joining our 4×4 Video Series https://duponttrading.com/4×4-course/ or one-on-one mentoring sessions https://duponttrading.com/mentoring/ to build a professional trading process.

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Stay informed, trade smart, and have a great trading week!

Greg📩 Contact: greg@duponttrading.com