"Successful trading is about finding the rules that work and then sticking to those rules." — William O'Neil
Positive economic news couldn’t break through the September blues, making for a choppy week in the markets. Investors are balancing good economic data with the possibility that Fed may start bond tapering soon.
This week investors wrestled with worries over a slowing economic recovery and the timing of the Fed’s bond tapering this fall. The short week opened with the Nasdaq reaching a new all-time high, but prices faded from that point through the end of the week. Glitches in cryptocurrency platforms sent Bitcoin and Ethereum lower, while NFTs sent Litecoin higher.
Employment data kept investors guessing about the Fed’s timeline for bond tapering. However, that did not keep the Nasdaq and S&P 500 from hitting new all-time highs. Defensive sectors led the week, but growth sectors also closed the week with gains.
Last week’s fears melted away to optimism. The Nasdaq rallied to a new all-time high and record weekly close. The S&P 500 marked yet another record close, which has become a common occurrence this year. Yet, the bigger story was with small-caps and the Russell 2000, leading the market higher and building some structural support in the market to continue the rally in the final quarter of the year.
Fears of a slowing economic recovery among rising cases of the Delta variant drove investors through a volatile week in the stock market. To make things worse, the Fed meeting minutes indicated that tapering could begin within this year. Despite the bad news, investors stuck with equities but rotated into defensive sectors.
The S&P 500 and Dow Jones set new records this week while the Nasdaq struggled with a rotation and indecision from investors. Small caps took a step back while value stocks marched forward.
Where does the market want to go next? That is the question to be answered after a week of mixed economic news met with COVID fears and uncertainty around what’s happening with the infrastructure bill and government debt. Equity markets set new record highs as Treasury yields rose, setting up a possible pivot for next week.
This week’s story has many parts, including Chinese stocks, Earnings Reports, the Infrastructure Bill, and a two-day Fed meeting which all ended with advances in small-caps and gains in commodity prices. Each made its influence felt across the market as investors shifted to respond to the implications of each.
This week ended much better than it began. All indications at the market open on Monday were that we were going to have a bearish week. The CNN Fear & Greed indicator was in the Extreme Fear range, and the put/call ratio was nearing 0.9. Worries about the new delta strain putting new pressures on the economic recovery sent investors into defensive sectors.
This week’s uncertainty around how fast the economy is recovering drove volatility in cyclical sectors while sending Treasury yields on a slide that exasperated investors’ worries. Still, the major indexes narrowly secured gains for the week while the S&P 500 and Dow Jones Industrial Average (DJI) set new records.
