S&P 500 – time for a pull-back?

28 nov 2023

It feels as if the equity markets have lost some upside momentum as we approach the end of the month. But the big question is whether this is simply due to the quiet holiday trade we saw last week, or if investors are now unwilling to take on more long side exposure after such a strong month-long rally. Looking at the numbers since the close on Friday 27th October, the Dow, S&P, NASDAQ 100 and Russell 2000 have put on 9.3%, 10.5%, 12.5% and 10.1% respectively. So, once again it’s the tech stocks which have led the charge, but not by that much. In fact, it’s encouraging to see that the Russell 2000 has also joined the party. Its gains suggest we’re finally seeing some breadth across the US equity market, and that mid-cap domestically-focused stocks are also getting some love and attention. Now we’ll see if these indices can build further on this month’s gains, or if we need more of a pull-back and consolidation for a year-end rally. It would be disappointing if the market had already peaked.

Looking at the 4-hour S&P chart (above) we can see how the index hit the mid-point of the upward-sloping trendline that has been developing since October last year. We can also see some modest consolidation around this area. It’s also clear that the 4-hour MACD has turned lower, illustrating a fall in upside momentum. This is also starting to show up on the daily chart too. This doesn’t mean we’re definitely heading lower, but it’s certainly an amber warning.