Weekly Market Brief: February 26, 2024

You can’t keep a good market down. Two weeks ago, a hotter-than-expected inflation print pushed the S&P 500 to a lower weekly close for just the second time since markets bottomed last October. This past week, stocks more than erased the decline, led by another blowout earnings report from AI leader NVIDIA. Further supporting the rally was a decline in the US Dollar Index - the first one of the year. The weaker Dollar also helped the gold prices, which rose 1.1%.

Market Internals

Breadth was a concern for most market watchers throughout 2023, as the rally in growth stocks obscured lackluster performances from value-oriented names during the spring and late-summer months. Index-level declines in August, September, and October had breadth as weak as it had been all year. A surge in prices to end the year laid any lingering concerns about participation to rest, and the strength has continued into 2024. 73% of S&P 500 members are above their 200-day moving average.

Long-term trends are healthiest in the Financials, Industrials, and Information Technology sectors, where more than 84% of constituents have moved above their long-term moving averages. Traditionally considered a risk-off area, the Utilities sector is the most weakly positioned. Just 37% of stocks in that group are in long-term technical uptrends.

If there’s one thing the breadth bears can hold onto, it’s that the list of stocks setting new 52-week highs stopped going up more than 2 months ago - despite a steady stream of record highs at the index level.

But a lack of new new highs alone isn’t enough to derail a rally. In order to see true weakness below the surface, we’ll need to see an increase in the number of stocks setting new lows. Even on a shorter-term basis, we just aren’t seeing that. The list of stocks setting new 6-month lows has been subdued all year.

What's Ahead

Here's what to watch in the week ahead: