Curious about what the market will do next? Look no further than the charts. Charts are a powerful tool that showcase the fundamental principles of supply and demand. Here are 5 must-see charts that suggest the market may be closer to a bottom than you think:
CNN Fear & Greed Index
The CNN Fear & Greed Index measures investor sentiment in the US equity market. It takes into account various factors such as market trend, stock price strength, trading volume, and safe-haven demand. Based on these metrics, CNN assigns a score from 0 to 100, with 0 indicating extreme fear and 100 indicating extreme greed.
Spin: The Fear & Greed Index can be used as a contrarian indicator. Currently, the index is at an extreme greed level and at its lowest point in 2023, which could suggest a potential year-end rally for bulls.
Image Source: CNN
The US Dollar
An overly strong US dollar can negatively impact US equities. For instance, a strong dollar can hurt American exporters by increasing the cost of US goods and services, reduce the profits of US-based multinationals, and discourage foreign investment in US equities.
Spin: The US Dollar Index (DXY) and the Invesco USD Index Bullish Fund ETF (UUP) have experienced eleven straight weeks of gains and are approaching resistance levels. A potential pullback in the US dollar could be supportive of equities.
Image Source: TradingView
Historic seasonal trends have been remarkably accurate in 2023 and provide a useful roadmap for investors. The pre-presidential election roadmap suggests that equities tend to rally into late summer and hit a bottom in late October.
Spin: Given the accuracy of seasonality in recent months, there is little reason for investors to abandon it now. A rally into year-end could be in the cards.
Image Source: Ryan Detrick, Carson Research
SPY Weekly Trendline
In equity trading, trendline support refers to a specific price level or line on a chart where the instrument’s price tends to find buying interest and bounce upward. It is typically drawn as a diagonal line that touches at least three significant points on the chart. Longer time frames tend to have more significance for traders.
Spin: So far this week, the S&P 500 Index ETF (SPY) found support at its weekly trendline almost exactly and reversed strongly, signaling a bullish sign.
Image Source: TradingView
Semiconductor stocks like Nvidia (NVDA) and Advanced Micro Devices (AMD) are crucial to the current bull market. The bullish case for equities revolves around the expectation that the AI revolution will drive higher earnings and allow high-tech stocks to grow into their high valuations.
Spin: The Direxion 3x PHLX Semiconductor Sector Index (SOXL) stood out recently, rising more than 7% and finding support at its 200-day moving average. Buying interest in semiconductors indicates a “risk on” sentiment.
After a period of relative calm, several charts suggest that equities may experience a significant upswing into year-end.
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Please note that the views and opinions expressed in this article are those of the author and do not necessarily reflect the views of Nasdaq, Inc.