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The Stock Market Balloon: Is it Ready to Pop?

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The Stock Market Balloon: Is it Ready to Pop?

The year 2024 has witnessed an astonishing 17 record highs in the stock market. Yet, beneath the surface, there are murmurs of caution swirling among investors, hinting at potential storm clouds on the horizon.

Masking Hidden Weakness

Despite the seemingly unstoppable rally, there are undercurrents of concern. The Dow Jones Transportation Average’s failure to corroborate the soaring highs of the Dow Jones Industrial Average – known as β€˜non-conformation’ – in line with Dow Theory, signals a potential red flag. Dow Theory asserts that new peaks in the Industrials, unconfirmed by transportation stocks, may signal instability ahead. Moreover, the lagging performance of riskier market segments such as high-yield bonds and high-beta stocks against Treasuries and low-volatility stocks, respectively, is another cause for apprehension.

Technology: A Double-Edged Sword

The driving force behind this bull market has undeniably been technology. The fervor surrounding AI and the robust earnings growth of tech giants have propelled the market to new heights. However, warning signs are emerging as the S&P 500 tech sector’s relative ratio has failed to validate the breakout in the S&P 500 index. David Rosenberg, the astute founder and President of Rosenberg Research, has remarked, β€œThese key stocks, which once steered the market, seem to be losing their grip.” The longer this divergence persists without affirmation of the S&P 500 highs, the greater the threat of a downturn.

Finsum: The year 2024 has been characterized by remarkable stock market growth, typified by the soaring S&P 500 index. Nevertheless, there are inklings that this upward trajectory might be reaching its limits.

Category: Eq: Total MarketΒ 

Keywords: #S&P 500; #bull market; #tech; #equities; #risk;Β 

  • S&P
  • bull market
  • tech
  • equities
  • risk

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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