Two Years in a Row with 20%+ Returns in the Making

Not a market to short, but a market to be cautious about.

Dec 01, 2024

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An unstoppable train? The S&P 500 is on a historic run, setting a new record for the 53rd time this year. With a staggering 26% year-to-date gain, the index is poised for its second consecutive year of 20%+.

This unprecedented surge has raised questions about its sustainability. In the past 75 years, only eight instances of two consecutive 20%+ years have occurred, with six of them followed by positive returns. However, the 2000 Dot-com bubble and 1977 serve as a cautionary tale.

While the current rally has broadened beyond the "Magnificent Seven," the dominance of U.S. stocks in a global context is evident. As investors seek relatively safer assets, U.S. equities have become the preferred choice, outperforming European stocks in eight of the past ten years.

As the rally continues, it's crucial to monitor the performance of leading stocks like Nvidia, Microsoft, and Apple. While Nvidia has been a significant driver of the recent market surge, a potential slowdown in its momentum could impact the broader market. Microsoft has a warning sign that is also studied in this edition.

From the previous Weekly Compass:

SPX built on the thesis of a blow off top, staying above the central S/R level and following the bullish weekly and daily timeframes. The setup analyzed for the VIX anticipated more fuel for the market during the week. TLT jumped 3.96% as the bullish setup indicated, and the U.S. Dollar and the 10 year note both fell as expected last week; $106 proved to be a strong resistance for DXY.

Last week this publication anticipated contrarian (bearish) signs in tech, and NDX had a marginal 0.7% increase for the week closing with indecisive weekly price action. Tesla and Bitcoin are showing signs of consolidation also as anticipated.

For the month of November, the red moves in GDX and Silver were anticipated at the end of October, this publication includes the most relevant monthly charts.

If you invest or trade SPX, NDX, IWM, DJI, TLT, GOOG, AAPL, TSLA, NVDA, META, MSFT, AMZN, GDX, SILVER, NAT GAS, BITCOIN, QQQ, SPY, ES=F, NQ=F, and ETHEREUM, this publication is for you.

Other publications from this week that can be navigated for people who were celebrating Thanksgiving, or for new subscribers: