The announcement of Donald Trump's reelection triggered a significant acceleration in U.S. stock markets, pushing major indices like the S&P 500 and the Russell 2000 to new highs in 2024. However, this momentum was quickly followed by a marked pullback: these two indices have since lost nearly 2.5% and 6%, respectively, from their recent peaks.
This retreat comes amid widespread optimism among portfolio managers surveyed in the Bank of America Global Fund Manager Survey, as well as record-breaking weekly net inflows into large-cap U.S. equities.
Such strong bullish positioning could leave many investors exposed to turbulence, as the market rally seems to be taking a breather, signaling potentially more volatile trading sessions ahead.
That said, the approach of Thanksgiving in the U.S.—a historically favorable period for markets—could present interesting opportunities.
A key indicator to watch is the behavior of the Russell 2000, which is currently filling the gap observed on Wednesday, November 6. This "gap" refers to the space on the daily chart created when the day’s opening trade is significantly above the previous day’s closing price. Interestingly, the bottom of this gap often acts as a technical support level, which could slow or reverse the current selling pressure.
However, if this support level fails to hold, we may see a more pronounced pullback, potentially challenging the prevailing optimism and shaking the current level of investor complacency.
Source: The Market Ear. SPX Stalls, Tech Crumbles, SOX Sinks and Bulls Bet Big, November 15, 2024.
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