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December 23, 2024

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In Stocks

Will the Stock Market’s Santa Rally Bring Holiday Cheer to Investors?

6 Mins Read

A smart investor listens to the stock market and this week’s stock market action was a perfect example of why this is important. 

It was a roller-coaster week in the stock markets leading many investors to quickly sell holdings when there was a big selloff and scramble to go long again on Friday when the broader stock market indexes turned higher. This is why it’s a good idea to always look at a longer time frame chart to get a sense of the long-term trend before making hasty decisions. 

If you pull up a weekly chart of any of the three major indexes you’ll see that the S&P 500 ($SPX) and Nasdaq Composite ($COMPQ) are trending higher. The Dow Jones Industrial Average ($INDU) is also doing the same but it’s just hanging in there by a whisker.

The Ups and Downs

Comments from Fed Chairman Jerome Powell on Wednesday sent investors into selloff mode which spilled over into Thursday. But Friday’s slightly lighter-than-expected November PCE may have reversed investor sentiment. The broader stock market indexes moved higher spreading some holiday cheer to an otherwise gloomy week. 

What made the market move higher? It doesn’t make sense to look for a reason for the reversal in sentiment. Remember, it’s best to listen to the market and follow along. That said, a few interesting data points are worth noting.

The Federal Reserve indicated their focus was on a cooling of the labor market in their last few meetings. However, Wednesday’s comments from Chairman Powell suggested that the labor market is doing fine now but the Fed’s focus has switched to inflation. That may have made investors nervous and triggered the massive selling we witnessed on Wednesday. Friday’s light November PCE may have been a sigh of relief that brought back the optimistic sentiment. 

Despite the optimistic sentiment, one important news we can’t lose sight of is the possibility of a US government shutdown. A shutdown doesn’t necessarily impact the stock market but there may be inconveniences such as a reduction in government services that may send ripples through the economy.

The Year-End Party

As 2024 winds down, there will likely be very light trading days but there are some important events that unfold at the end of the year. There’s the January Effect which is when small-cap stocks start rallying. Small-cap stocks got a boost post US election but since late November they’ve been sliding lower. The daily chart of iShares Russell 2000 ETF (IWM) shows the small-cap trend is still bearish. 

FIGURE 1. DAILY CHART OF IWM. Small cap stocks took a big hit in December. Look for the full stochastic oscillator to cross above the 20 level with some follow-through to confirm their seasonal rally. Chart source: StockCharts.com. For educational purposes.

The full stochastic oscillator is deep in oversold territory and a cross above the 20 level would be encouraging for small-cap stocks. But there needs to be follow-through for the small caps to have a bullish rally.  

In addition to the January Effect, there’s the eagerly awaited Santa Claus rally, which is supposed to start next week. Friday’s price action may have reignited the possibility of having Santa show up this year. But I wouldn’t hold my breath just yet. 

If you look at the daily chart of the S&P 500 below, you’ll see that the three market breadth indicators displayed in the lower panels had started declining in late November, which should have signaled that the market was ripe for a selloff.

FIGURE 2. S&P 500 HOLDS ON TO SUPPORT. Friday’s price action may look slightly bullish but it needs more follow-through to confirm a reversal. Chart source: StockCharts.com. For educational purposes.

What is concerning is that Friday’s price action didn’t change the market breadth narrative. So even though Friday’s rise was sizeable, with a bullish engulfing pattern that closed at the 50-day simple moving average, I wouldn’t rush to buy the dip just yet and certainly not on triple-witching Friday. For all you know, there could have been some short-covering going on. I’ll need to see more follow-through of the upside move before adding more positions to my portfolio. At least the S&P 500 stayed above the support of its mid-November lows.

The daily chart of the S&P 500 Equal Weighted Index ($SPXEW) vs. the S&P 500 gives you an idea of how dominant the heavily weighted stocks influence the index.

FIGURE 3: S&P 500 VS S&P 500 EQUAL-WEIGHTED INDEX. The less-heavy weighted stocks in the S&P 500 are lagging the S&P 500. The equal-weighted index is trading below its 100-day moving average and has a long way to go before re-establishing its uptrend. Chart source: StockCharts.com. For educational purposes.

$SPXEW is trading below its 100-day SMA. Note that Friday’s high came close to the 100-day SMA. A close above the 100-day SMA would be the first sign of a trend reversal in the equal-weighted index. But one day’s action doesn’t make a trend. A series of higher highs and higher lows needs to be established before a trend has indeed reversed. It would be more confirming if the non-Mag Seven stocks showed signs of catching up with the big S&P 500 index.

Volatility Pulls Back 

One encouraging point to end the week is the Cboe Volatility Index ($VIX) closed below 20 (see chart below). Investors were getting so complacent towards the end of November but if you had noticed the VIX creeping higher, you’d have seen the selloff coming. 

FIGURE 4. DAILY CHART OF THE CBOE VOLATILITY INDEX ($VIX). The VIX was at very low levels from November but it slowly started moving higher signaling that investors were getting fearful. This led to Wednesday’s spike. Chart source: StockCharts.com. For educational purposes.

The pattern in the chart of the VIX shows that a similar pattern occurred from June to July, right before the August spike. Could a similar scenario unfold this time?

The Mark Twain quote, “History doesn’t repeat itself but it often rhymes,” explains it so well. So as you navigate the stock market, listen to the rhythm and follow its lead. 

The bottom line: Set up your Dashboard panels on the StockCharts platform and get a bird’s eye view of the stock market.

End-of-Week Wrap-Up

  • S&P 500 down 1.99% for the week, at 5930.85, Dow Jones Industrial Average down 2.25% for the week at 42,840.26; Nasdaq Composite down 1.78% for the week at 19,572.60
  • $VIX up 32.95% for the week, closing at 18.36.
  • Best performing sector for the week: Technology
  • Worst performing sector for the week: Energy
  • Top 5 Large Cap SCTR stocks: Applovin Corp. (APP); Palantir Technologies (PLTR); Reddit Inc. (RDDT); Astera Labs, Inc. (ALAB); MicroStrategy Inc. (MSTR)

On the Radar Next Week

  • November Durable Goods Orders
  • November New Home Sales
  • October S&P/Case-Shiller Home Prices

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

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In World news

After years of war, 6.8 million Ukrainian refugees’ lives are still mired in uncertainty

5 Mins Read

She arrived in London with just one suitcase, full of mostly children’s clothes, and her young daughter in tow. Her home engulfed by war, Ukrainian mother Yana Felos found herself in the United Kingdom in April 2022 with no friends, no family and no community.

“I just started a new life from scratch,” recalled Felos, 34, who fled Russia’s full-scale invasion to come live with a host family – strangers at the time – who offered to take in Ukrainian refugees.

After close to three years of war, the situation has flipped. Felos says she has nothing to return to in Ukraine.

Felos’ last connection to Ukraine was her husband – but he could not leave and after she was abroad for so long, they recently finalized their divorce.

“He kept saying that the war would be over… wait a little, wait a little. The war will be over soon, and we will be together,” Felos said. But she gave up hope a long time ago that Ukraine would ever be safe enough to raise a family there.

Felos and her daughter are among the 6.8 million Ukrainian refugees who remain abroad, mostly in Europe, their lives mired in uncertainty.

Every day, she thinks about what will happen if the British government doesn’t extend her refugee visa in 2025. “There is no such thing as a backup plan,” she said.

Yana Felos and her 6-year-old daughter Alisa pictured in London, where they are building a new life after fleeing Ukraine shortly after the Russian invasion.
courtesy Yana Felos

Meanwhile, she has been building a life in London – securing her own apartment and a job teaching English at a lifelong learning center. Post-divorce, she has no intention of returning to Ukraine and wants to focus instead on opportunities to give her 6-year-old daughter Alisa a brighter future.

As communities become more fragmented, and the economy struggles, the Ukrainian government wants to encourage those who fled as refugees, most of them women and children, to return. It’s setting up a Ministry of National Unity tasked with creating programs and incentives to encourage people overseas to come home.

“We can’t pressure, push people to come back. I can give very loud message to Ukrainians who are abroad to come and help, to work in defense industry, to help our soldiers, to pay taxes, to support Ukraine,” President Volodymyr Zelensky said in an October press conference.

It comes as Ukraine grapples with boosting national morale, among both civilians and troops on the frontlines, many who have been unable to rotate out to have time off.

Last month, Zelensky spoke about the need to end the conflict in 2025, saying, “from our side, we must do everything so that this war ends next year, ends through diplomatic means.” Incoming Trump administration officials in the United States have also been weighing proposals to stop the war.

As it drags on, though, Ukraine appears increasingly concerned about the economic consequences of a hollowed-out population, and the future ramifications of a brain-drain.

“Every month of the ‘hot’ phase of the war leads to more people adapting abroad and more destruction here, so fewer people will return,” said Ella Libanova, an economics professor and director of the Ptoukha Institute for Demography and Social Studies of the National Academy of Sciences of Ukraine.

And in the nearer term, it’s possible that more Ukrainians could leave.

The overall security situation remains difficult, with Ukraine hit by a recent surge in Russian ballistic missile strikes, and drone attacks increasing each month. Russia launched 2,434 drones in November alone.

On one of her return visits to see her former husband in Ukraine, Felos recalls telling her daughter that the sounds of nearby explosions were fireworks.

Russia also continues to bombard Ukraine’s energy infrastructure as winter arrives and residential areas are regularly hit. The Kyiv School of Economics estimates that as of January 2024, almost 250,000 buildings had been damaged and destroyed, including 222,600 private houses and 27,000 apartment buildings. In a significant number of cities, more than half the housing stock has been damaged.

Even so, many Ukrainians are aching to go back.

For some, the life they once built in Ukraine feels too substantial to simply abandon. People saved their whole lives to buy homes, build businesses and get professional qualifications there.

“It’s been called the most professional refugee wave in recent (history),” Voronovych said, adding that most are now underemployed, working “low-paid jobs” that don’t match their capabilities.

For some Ukrainians, the decision to return has less to do with economics or government incentives, and everything to do with the practicalities of everyday life – mothers are waiting for schools to reopen, or for schools operating underground to protect students from Russian attacks to return to normal.

Victoria Rybka, 40, from the city of Kharkiv in eastern Ukraine, spent the first few weeks of the war sheltering in a basement with her two young children, before fleeing with them to Europe. But in Germany, one of her daughters struggled to communicate in school, and her other daughter developed a skin condition, believed to be stress-related.

Just two months later, Rybka decided to return, feeling a pull to return to her job in the police force and to her family.

“I can’t leave my husband. We’ve been through a lot together,” Rybka said.

Kharkiv was eerily empty at the time, with mostly men and elderly people who stayed behind, she said. Only one other mother in their block of flats came back in the early days of war, but more have since trickled home as schools reopened underground.

“Everyone makes their own choice,” she acknowledged. “I made my choice – this is my home.”

This post appeared first on cnn.com

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In Business

Party City to close all of its stores, report says

2 Mins Read

Party City on Friday announced it will close all of its stores and has initiated corporate layoffs effective immediately, according to a CNN report.

CEO Barry Litwin told corporate employees in a meeting viewed by CNN that Party City has to “commence a winddown process immediately,” and that Friday would be their last day of work for the company.

“That is without question the most difficult message that I’ve ever had to deliver,” Litwin said at the meeting, according to the report.

CNN reported the company’s closure was due to ongoing financial challenges at the party supply retailer, which less than two years ago filed for bankruptcy protection over its inability to pay off $1.7 billion in debt.

The New Jersey-based chain exited bankruptcy in September 2023 through a plan that included transitioning into a privately held company and canceling nearly $1 billion in debt. A majority of its 800 U.S. stores were able to stay open as it emerged from bankruptcy.

Litwin was named CEO in August and said at the time he saw “many opportunities to strengthen our financial performance and build a leading end-to-end celebration experience for consumers,” according to a press release. 

Prior to his appointment, he was the CEO of Global Industrial Company, a distribution leader in industrial products.

Competition in the party goods and costume space has grown in recent years, including Spirit Halloween’s continued rise within and outside of the spooky season. The holiday costume chain announced in October that it would open 10 new “Spirit Christmas” stores, with some of the stores being converted from existing Spirit Halloween locations.

Online retailers have also added pressure to Party City’s operation, even as the company began to offer items on Amazon in 2018.

Representatives for Party City did not immediately respond to CNBC’s request for comment on CNN’s report or potential story closures. Read the full CNN report here.

This post appeared first on NBC NEWS

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