Market News & Analysis


Top Story

S&P500: Long Buybacks And Value?

Whilst the S&P500 bullish trend rages on, there are near-term signs of exhaustion. Yet looking at the leaders and the laggards, it also appears that the driving forces behind these new highs has changed.

It’s been a good week for energy stocks, with trade optimism and higher oil prices obviously helping. If the deal can go through and commodity prices rise, energy stocks appear quite attractive at their relatively cheap lows. And this shift in trade sentiment has also seen top performers of late reverse course, as real estate, utilities and healthcare have dipped. So, trade talks remain a clear driver of sentiment, and e can’t help but wonder if the December “phase one” signing has actually been aligned with good old Santa’s rally. Time will tell no doubt tell.

S&P500: The trend is undeniably strong and the break to new highs reaffirms the bullish channel from the June low. And we can also see that buybacks remain a key driver for the S&P500 as the buyback index ETF (lower panel) has broken to new highs in tandem with the S&P’s breakout.

That said, a series of indecision candles above the upper keltner band warns of potential trend exhaustion over the near-term which leaves the potential for a pause in trend or correction. And these candles have formed just beneath the monthly R1 pivot. It’s also worth noting that a bearish pinbar formed, despite the positive news that the US will roll back tariffs as part of a deal.




  • Bulls could look for prices to consolidate/retrace towards 3065.9 before seeking new longs.
  • If prices break below 3065.9 then a deeper correction is on the cards, although bulls could be eager to buy any dips above 3028 support given the significance of the level.
  • If bearish momentum takes prices notably lower, then bulls would be prudent to step aside until the dust settles. Moreover, if we see the yen and gold catch a bid again, then perhaps something larger is going down (whether economically, or yet another reversal of sentient with trade talks).


To finish up on a different angle, I can’t help but notice that value stocks are coming back into fashion whilst the S&P500 breaks to new highs. Value stocks are considered below fundamental value (therefore ‘cheap’ by some metrics) and have mostly underperformed the S&P500 since the 2009 low. Moreover, value stocks are outperforming both momentum and growth stocks. This could be quite telling regarding the relative value of the S&P500, as growth stocks revenues are expected to outperform relative to the average company (therefor higher prices) and momentum stocks are those which generally lead the index higher. So if momentum stocks are lagging and growth stocks are now not expected to grow relative to the average, what does this say about the underlying health of this bull market? Whilst this could take some time to play out, the dynamic has certainly changed and is worth keeping track of as this bull market develops.


Related analysis:
S&P500: The Long & Short Of It | SPX, SYS, ORLY, EBAY, TXN
Trade Deal Optimism From China Triggers Euphoric Mood - An Update On SPX, NDX & Hang Seng


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.