The Price Action Lab Report-Week of October 9, 2023
This report includes 14 charts and tables. Access to the full report requires a Premium Articles or All-in-One subscription. Also discussed in the report:
- Why bond yields will continue to rise
- A mean-reversion in currencies
- The reason for Friday’s rebound in stocks
Weekly Summary (October 2–October 6, 2023)
- Stocks ended the week higher after a rebound on Friday.
- Bond yields rose for the fifth week in a row.
- Commodities came under strong selling pressure.
- The US dollar broke an 11-day winning streak.
US stocks staged a rebound on the last day of the week and after stronger-than-expected employment data (see Section 7 below for the cause of the rally). The S&P 500 index ($SPX) was down 0.7% in the first two days of the week and tested the attractor level defined in previous reports, but then rallied 1.2% on Friday to end the week with a gain of 0.5%. The NASDAQ-100 ($NDX) finished the week up 1.8%. The Dow Jones Industrial Average ($DJI) fell 0.3%. The S&P 500 low volatility index ($SP5LVI) lost 1% and remains in oversold territory. The S&P 500 high beta index ($SP5HBI) and small caps ($RUT) ended the week down 1% and 2.2%, respectively.
The 10-year note yield soared 21 basis points to 4.78% after reaching a high of 4.88%. The US Treasury Bond Total Return Index lost 0.9% for the week. The bond market’s reaction to economic reports often diverges from that of the stock market for reasons discussed in Section 5 below. Commodities ($CRB) plunged 2.7% due to a broad sell-off triggered by heavy losses in the energy sector. The US dollar index ($USDX) broke an 11-week winning streak with small losses. Spot crude oil (@WTI) tumbled 8.8%. Gold on the spot market (@GC) lost 2.9% on the back of soaring bond yields and is overbold.
Year-to-date, tech stocks ($NDX) are up 36.9% and down 9.7% from all-time highs. The S&P 500 index ($SPX) has gained 12.2%. Gold (@GC) is up 0.4%, and crude oil (@WTI) is gaining 3.3%. Commodities ($CRB) are down 0.3% for the year. Low-volatility stocks are down year-to-date, with the S&P 500 low volatility index ($SP5LVI) losing 8.9%.
Tech stocks ($NDX) have the strongest 252-day momentum reading at 29.4%, with the S&P 500 Index ($SPX) following at 13.9%. Low-volatility large caps ($SP5LVI) have negative momentum at -2.3%, and the US dollar index’s momentum is at -6.1% despite the large gains in the past 12 weeks. Momentum is a lagging indicator.
Our PSI5TF trend-following strategy with 23 futures contracts (long and short) is up 9.6% year-to-date (backtest). The DBMF iMGP DBi Managed Futures Strategy ETF is down 0.6% year-to-date.
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