Month: October 2024

Q3 GDP Rises 2.8% on Strong Domestic Demand (GS)

Real GDP rose 2.8% annualized in the advance reading for Q3, 0.1pp below consensus expectations. The composition was strong, as real private domestic final sales increased by +3.2% annualized and the volatile inventories component subtracted 0.2pp from GDP growth this quarter (0.5pp below our expectations).

Consumption increased 3.7%, above expectations.

Business fixed investment increased +3.3%, reflecting an 11.1% increase in equipment investment, a 0.6% increase in intellectual property products investment, and a 4.0% decline in structures investment.

Government spending growth increased by more than we expected to +5.0%, reflecting a 9.7% increase in federal spending—driven by a 14.9% rise in defense spending—and a 2.3% increase in state and local government spending.

The GDP price index rose by +1.8% (QoQ AR), slightly below expectations and partly reflecting a slowdown in the consumption (+1.5%) and exports (-1.4%) deflators.

Core PCE prices rose +2.16% annualized in Q3, slightly above consensus expectations.

Weakening?

BTW, Consumer spending rose 3.7%, the strongest quarterly increase since Q1-2023, led by a 6.0% rise in goods spending.

BTW #2: Payroll processor ADP said its measure of private-sector job growth unexpectedly surged ahead in October. ADP said employers added 233,000 jobs in October, up from a revised 159,000 in September. That is the strongest job creation reported in 15 months, and it occurred despite major hurricanes in the Southeast that analysts expected would drag down payroll numbers. (Axios)

China Economy Picks Up on Stimulus Push Ahead of US Election Still-weak new export orders weigh on manufacturing sector

Factory activity unexpectedly expanded in October after five months of contraction, the National Bureau of Statistics said Thursday. The official manufacturing purchasing managers’ index rose to 50.1, higher than a forecast of 49.9 by economists. The non-manufacturing PMI showed activity in construction and services expanded after staying little changed the previous month. (…)

Data released Thursday showed new export orders for manufacturing companies remained weak and continued to contract this month, even as overall new orders stabilized. (…)

John Authers:

The fog around Beijing’s fiscal stimulus is slowly dissipating. Investors are beginning to believe that the economic rescue mission entails putting a floor under a potential crisis, rather than driving a new wave of growth. The challenge has never been in doubt — rather, it’s about the effectiveness and timeliness of the firepower to be deployed.

If reports are anything to be believed, a fiscal package of about $1.4 trillion, or 10 trillion yuan, falls below the initial estimates of up to $3 trillion as what’s required to make a meaningful impact on the Chinese economy.

Given the whatever-it-takes stance that officials signaled before the Golden Week break, investors shouldn’t be dismissive of the package, even if it falls short of what they they think necessary. With the rally in Chinese equities long halted, it’s possible that investors are just biding their time. Both the CSI 300 index of stocks quoted in Shanghai and Shenzhen, and the offshore “red-chip” companies in Hong Kong’s Hang Seng China Enterprises Index have been going sideways. (…)

Even without the government pressing heavily on the accelerator, the economy is recovering. That shows up in the latest PMI numbers, for October. Further, the research group China Beige Book shows that consumer spending rose in October, with a more active Golden Week than in 2023, suggesting that the splurge of reforms announced before the break had an impact. Among the consumer sectors, hospitality firms saw the strongest sales expansion while chain restaurants also improved:

The troubled property sector remains in the doldrums, however, despite the extra policy support, with firms reporting another monthly slowdown in sales prices. It has had a protracted slump that cannot be reversed overnight, but the point for policymakers is to put a floor under the sector. That means that evidence reported by China Beige Book that interest rates are actually rising, despite the central bank’s attempt to ease them, is disconcerting:

This is a risk, if stimulus turns out to simply mean more money for the supply side. October’s credit data had a surprise: Interest rates went up, not down, per firms on the ground. More evidence that Beijing’s credit transmission mechanism is not working as quickly as assumed — or possibly at all. Investors should remain skeptical of monetary easing boosting the economy.

It will garner little attention given next week’s other events, but the National People’s Congress Standing Committee will hold a meeting where the 10 trillion yuan fiscal boost could be approved. The package is expected to include 6 trillion yuan for debt replacement for local governments and 4 trillion yuan earmarked for buying property. If these impressive figures are passed, their overall impact could still be limited.

The debt exchange amount barely scratches the surface of overall local credit overhang. Bloomberg Economics’ David Qu and Eric Zhu argue that it’s inadequate, given that local government financing vehicles have massive “hidden debt.” The IMF estimate is 60 trillion yuan. Regardless, Gavekal Research’s Andrew Batson believes these efforts do show a new urgency:

To keep Local Government Financing Vehicles from defaulting, local governments need to prioritize supporting these hidden debts. One way they do that is by delaying other payments, creating another implicit debt that does not accumulate interest. LGFVs are, in turn, delaying payments to other companies, adding to a liquidity squeeze for the private sector. Any fiscal expansion would get diverted to dealing with these debt burdens.

(…)

China Is Becoming a Bigger Problem for Europe’s Profit Scorecard Industrials, tech among sectors warning about profit weakness

A broadening array of European firms is blaming China for glum earnings outlooks, as weak demand, government scrutiny and tariff spats with the trading partner put pressure on stocks.

Beyond China-reliant sectors such as luxury goods and miners, chip equipment giant ASML Holding NV, medical technology firm Royal Philips NV and French electrical-equipment distributor Rexel SA are among those that have raised concerns about Chinese demand.

Shares of all three are down in October after they cut guidance. Philips and ASML are set for their worst months in at least two years, buffeted by various headwinds including weaker demand, tighter regulations or the prospect of export restrictions.

“Weakness in demand from China started in a few sectors and has spread out beyond the consumer,” said Mark Schumann, head of European large-cap mutual funds at DWS. “The reasons for this weakness appear to be more complex and multi-layered,” he added, citing a prolonged property crisis in the country and higher regulatory scrutiny of US and European businesses.

An analysis by Barclays Plc found that European company executives had a negative tone 65% of the time when discussing China on post-earnings conference calls — the worst among topics that included the economy, profit margins and layoffs. That’s despite Beijing’s broad stimulus efforts unleashed in September to boost growth. (…)

While China accounts for about 8% of European firms’ overall revenue, some industries like luxury rely on it for up to a quarter of annual sales. Tech investor Prosus NV gets 74% of its revenue from there, while miners generate between 20% and 60%, according to data from Goldman Sachs Group Inc.

Many of these firms aren’t seeing much reprieve yet. Cosmetics maker L’Oreal SA said China’s beauty market continued to deteriorate, while LVMH warned consumer confidence was similar to the “all-time low reached during Covid.”

The world’s biggest brewer Anheuser-Busch InBev NV and Danish peer Carlsberg A/S both reported lower volumes Thursday, partly due to weak demand in China. (…)

An unprecedented rise in the 10-year Treasury yield

Over a rolling 30-day period, the 10-year Treasury yield has climbed over 65 basis points, a magnitude of change exceeded in only 4% of trading days since 1962.

Although a 65 bps increase over 30 days has occurred 47 other times when using a reset below zero to eliminate repeats, none took place in tandem with the Federal Reserve’s initial rate cut until now.

Whenever the 10-year Treasury yield rose by 65 basis points over 30 days, coupled with a Fed easing cycle featuring one to three rate cuts, the benchmark yield often decreased over the following months. From three to twelve months later, yields dropped in the 1980s, whereas post-1995, they tended to increase.

Except for an untimely signal in 1981, which occurred within the context of a bear market, a scenario unlike today, the S&P 500 rallied consistently across all time frames, culminating in a 100% win rate over the next year.

The market’s ability to absorb a sudden and sharp rise in rates suggests that economic fundamentals were healthy during these periods, providing a positive backdrop for equities. (…)

Many factors could be driving the sharp and sudden surge in the 10-year Treasury yield. Those include a resilient economy, Treasury issuance, or a technical bounce in yields following a decline. Regardless of the narrative, similar spikes in the 10-year Treasury yield near the outset of a Federal Reserve easing cycle have often reversed, leading to lower yields over the subsequent months.

Notably, these reversals have correlated with S&P 500 rallies, especially over the following year. This trend likely reflects a healthy economy that fuels corporate profits, fostering a more favorable stock market environment.

Meanwhile, from Goldman Sachs:

The borrowing estimates released on Monday showed $546bn in net borrowing for 4Q24 and $823bn for 1Q25, with assumed end-of-quarter cash balances of $700bn and $850bn, respectively.

While the borrowing numbers came in somewhat above our projection, once adjusted for TGA assumptions the discrepancy appears to reflect a more front-loaded (and only slightly higher overall) path for deficits than our projections.

Treasury’s cash balances and privately held borrowing estimates imply around $71bn and $382bn in net bill issuance to the public for 4Q24 and 1Q25, respectively.

1Q25 numbers assume a debt limit suspension or increase that quarter, but an extended debt limit impasse could see significantly more back-loading of bills supply in 2025 (and a larger TGA drawdown in H1.)

Most importantly, Treasury maintained the guidance on keeping nominal and FRN sizes unchanged for “at least the next several quarters,” but kept some flexibility by noting this guidance is “based on current projected borrowing needs.”

America’s stock market optimism

The largest share of Americans on record believe the run will continue, Axios’ Courtenay Brown writes.

The Conference Board, a business research group, asks consumers whether they expect stock prices to increase in the coming year. In October, slightly more than half said yes — the highest reading in the survey’s history.

Ed Yardeni’s chart on II Bulls & Bears is not quite as extreme:

JOLTS: Some Cold Water on the Last Jobs Report

Total job openings dropped to 7.44 million on the last business day of September, a decline of more than 400K from August’s downwardly-revised reading of 7.86 million.

The headline miss and negative revision to August run somewhat contrary to the latest readings on small business hiring plans and overall Indeed job postings, which suggest that the pullback in labor demand is decelerating.

However, the preponderance of the data has yet to persuade us that labor demand has stabilized. New job postings from Indeed have slowed sharply thus far in October and are currently just 8.7% higher than in February 2020—a stark drop-off from this time last year when the level of new postings was 44% higher than pre-pandemic.

In September, only 34% of businesses reported job openings they could not fill. This was a six point drop from August and the lowest reading since January 2021. The past month’s drop in job openings brings the vacancy rate to its lowest level since 2020 in another sign labor conditions have normalized after the post-pandemic hiring frenzy.

The number of job openings per unemployed person, an indicator cited by monetary policymakers when assessing labor market supply and demand imbalances, was unchanged in September at 1.1. Presently, the ratio signals a still-strong labor market with more open positions than unemployed workers even as the measure has nearly halved from its recent peak.

Yet, its slip is reflected in workers having become less confident in the prospects of finding work. Separately released data on consumer confidence showed the share of consumers who report jobs as “plentiful” less the share reporting jobs as “hard to get” having increased in October, but nevertheless down more than 10 points from the first few months of this year.

  

The quit rate fell to 1.9% in September—well below the 2.3% rate that prevailed in 2019. The gross hiring rate improved slightly throughout September but still remains stuck near 2013–2014 levels.

In this largely static labor market, subdued involuntary separations (i.e., layoffs and other discharges) have been a bright spot. The layoff & discharge rate ticked up to 1.2% in September, although the increase was driven by separations in durable goods manufacturing, likely reflecting spillovers from the ongoing strike at Boeing.

Even so, layoffs remain historically subdued on trend and still sit notably below their pre-pandemic level. Overall, that separations remain historically low is playing a large role in keeping the labor market from non-linear deterioration.

With retention significantly improved over the past year and demand for new workers ebbing, the labor market no longer poses a threat to the price stability side of the Fed’s dual mandate. We expect to see growth in employment costs (Q3 data released Thursday) continue its downward trend in the quarters ahead.

  

On net, the JOLTS report demonstrates that despite solid payroll gains in September, demand for labor continues to moderate. For the FOMC, these data may take on slightly elevated importance for its upcoming November 7 meeting. Although the Committee will receive one more employment report during the blackout period, distortions caused by the impacts of Hurricanes Helene and Milton and a large strike at Boeing lead us to expect the Committee to put much less weight than usual on the jobs report. Instead, we see monetary policymakers as focusing on the broader trend of the jobs market having cooled substantially over the past year, and while not weak in an absolute sense, by many accounts is somewhat softer than prior to the pandemic.

Wait! We need to insert the weather here:

There are still plenty of job openings. They did fall by 418,000 last month to 7.4 million. However, 78% of those losses were in the South. Hurricane Helene hit Florida four days prior to the end of September, when job openings are measured. (Ed Yardeni)

The uptick in hiring brings the rate closer to pre-pandemic norms and suggests that hiring activity may be picking back up. (Indeed)

• Small Business Jobs Index 

Using aggregated payroll data from businesses with fewer than 50 workers, the index offers a monthly, up-to-date measure of change in small business employment.

• The national jobs index gained 0.22 percentage points in October to 100.06. This marks the second-largest gain in 2024. The only region to slow in October, the South dropped 0.09 percentage points to an index level of 99.91.

CONSUMER WATCH

According to the Advance Economic Indicators Report, the goods trade deficit widened by more than expected to $108.2bn (seasonally adjusted) in September. Goods exports declined by 2.0% (month-over-month, seasonally adjusted) while goods imports increased by 3.8%.

Goods exports increased for food (+4.8%) and autos (+3.6%) but declined for consumer goods (-6.3%), capital goods (-3.2%), and industrial supplies (-2.5%). Goods imports increased across all categories, with the largest increase in consumer goods (+5.8%). (GS)

This while prices are declining!

US Efforts to Contain Xi’s Push for Tech Supremacy Are Faltering The world outside the US is increasingly driving Chinese electric vehicles, scrolling the web on Chinese smartphones and powering their homes with Chinese solar panels.

Since Donald Trump hit Xi Jinping’s government with punitive tariffs in 2018, his push to cut the trade deficit has snowballed into a full-scale bipartisan effort to stop China from becoming the world’s biggest economy and obtaining technology that threatens American military superiority. (…)

New research by Bloomberg Economics and Bloomberg Intelligence shows that Made in China 2025 — an industrial policy blueprint unveiled a decade ago to make the nation a leader in emerging technologies — has largely been a success. Of 13 key technologies tracked by Bloomberg researchers, China has achieved a global leadership position in five of them and is catching up fast in seven others.

That means the world outside the US is increasingly driving Chinese electric vehicles, scrolling the web on Chinese smartphones and powering their homes with Chinese solar panels. For Washington, the risk is that policies aimed at containing China end up isolating the US — and hurting its businesses and consumers. (…)

Chinese companies like BYD Co. and Contemporary Amperex Technology Co. Ltd., known as CATL, are world leaders in making goods such as EVs, batteries and solar panels — the pillars of Xi’s “new productive forces” to drive growth as authorities seek to deflate a property bubble. (…)

The struggle now is focused on whether the US can prevent China from catching up in advanced technology like manufacturing the most cutting-edge chips used for AI, which are currently only made with equipment from ASML. (…)

Made in China 2025 shows how far Xi’s efforts have come. Although China is still struggling to develop manufacturing processes for advanced semiconductors — the main focus of US export controls — it now has a clear lead in EVs, automotive software and lithium battery technology, according to Bloomberg Intelligence. China’s LNG shipbuilding and high-speed rail industries are on track to hit targets. It also produces the world’s most efficient and lowest-cost solar panels, and is developing innovative drugs. (…)

Trump has vowed to renew the trade war on China that dominated his first term, threatening tariffs of as high as 60% — a level that would effectively end trade between the two nations, according to Bloomberg Economics.

Tariffs — long decried by economists as market-skewing impediments to productivity — have helped shrink America’s trade deficit with China on paper. But much of that commerce was rerouted through Southeast Asia and other places, and the urgency to find new markets has only bolstered Chinese manufacturing dominance in EVs and other areas.

BYD is a case in point. China’s top-selling automaker expects overseas deliveries to account for almost half of total sales in the future, suggesting it doesn’t see US tariffs — now at 102.5% — as a big impediment. The automaker already has a factory in Thailand and is building similar ones in Hungary, Brazil and Turkey.

“We don’t need to enter the US market,” Stella Li, a BYD executive vice president, told Bloomberg in August from the company’s headquarters in Shenzhen, China’s main tech hub. “We’ve got a lot of opportunities to become a great company with the many markets outside of the US.”

Harris has criticized Trump’s plan for higher tariffs, saying they equate to a tax on the American middle class. On the campaign trail, she’s spoken of the need to prevent China from obtaining advanced chips, indicating she would continue President Joe Biden’s use of export controls. She’s also emphasized the need for investments “to ensure America remains a leader in the industries of the future.” (…)

In areas such as advanced semiconductors and chipmaking gear — the base layer for all future technologies — the country as a whole looks set to remain behind the US for years to come.

The US has banned China from buying the most advanced AI chips from Nvidia Corp. and Advanced Micro Devices Inc. It has also blocked Xi’s government from obtaining ASML’s extreme ultraviolet lithography (EUV) machines, which are essential to producing high-end chips, and is now seeking to hinder China’s ability to use deep ultraviolet lithography (DUV), an older technology that is underpinning the nation’s current production.

Without even ASML’s DUV gear, it will be much harder for Chinese technology champion Huawei Technologies Co. and its partner Semiconductor Manufacturing International Corp. to make breakthroughs in their current capability, which lags several generations — roughly half a decade — behind industry leader TSMC.

Even less clear is Chinese advancements in AI — regarded as one of the key determinants of future economic and geopolitical power. While OpenAI, Microsoft Corp. and Google continue to publicize new AI developments and support a thriving startup ecosystem, Chinese companies like Baidu Inc. labor under chip and data-content restrictions, and have yet to show evidence of significant breakthroughs.

The US export controls announced on Oct. 7, 2022 “made it much more difficult for scaled domestic Chinese production of strategically important chips like the most advanced AI accelerators,” said Jordan Schneider, founder of the ChinaTalk newsletter and adjunct fellow at the Center for a New American Security. Even so, he added, “uneven execution on the stated intentions of the export controls, particularly on the semiconductor equipment manufacturing side, have made the past two years post Oct 7th far easier for Chinese semiconductor firms than they could have been.”

Chinese firms have stockpiled a record amount of semiconductor equipment this year, including high-end Nvidia chips, in anticipation of further restrictions. Bloomberg Intelligence says those stores, along with more efficient computing processes, “should ensure China’s AI development remains on track through 2025 and beyond.”

Huawei, the company at the heart of Beijing’s global tech and semiconductor ambitions, shows China’s resilience. When the company saw its sales plummet after the US first placed it on a trade blacklist in 2019, it poured money into research and development and began working with domestic suppliers. Huawei’s smartphone business has since recovered and is now challenging Apple Inc.

Last year, Huawei introduced a smartphone with a 7-nanometer chip — something the US thought was unrealistic for Chinese firms to manufacture with DUV technology. (…)

Bloomberg Intelligence says Huawei’s latest semiconductors could outperform Nvidia’s H20 AI chip, a less powerful product that the California-based company developed for the Chinese market to comply with US restrictions. Bloomberg reported that Chinese regulators have discouraged local companies from purchasing Nvidia’s H20 chips, a move aimed at bolstering the market share of Huawei and Beijing-based AI chipmaker Cambricon Technologies Corp., which saw its shares surge on the news.

China could lift general chip self-sufficiency to 40% by 2030, nearly double from 2025, Goldman Sachs Group Inc. projected in a recent report, although most of that capacity expansion would be limited to older-generation semiconductors.

US officials have downplayed China’s tech advances, saying the process it’s using to develop chips like the one used in the Huawei phone is inefficient and commercially unviable without ASML’s EUV lithography machines. In an interview during an August trip to Beijing, Sullivan — Biden’s national security advisor — said that China’s efforts to stockpile Nvidia chips has “a clock on it” and the US was striving to “up our game” to stop Xi’s government from obtaining semiconductor manufacturing equipment.

But China also appears to be making notable advancements in that area. Beijing recently advised state-linked organizations to use a new homemade lithography machine with a resolution of 65 nanometers or better. While that’s far from the 8-nanometer resolution of ASML’s best machines, China’s most advanced indigenous equipment previously was only capable of about 90 nanometers.

Bloomberg Economics research shows that China has overtaken the US in international patent applications, which are stretching across a broader range of areas. That’s a positive signal for China’s efforts to commercialize new technologies — even as questions remain over whether its patents are more incremental than innovative.

China recently publicized a patent application from Shanghai Micro Electronics Equipment Group Co., known as SMEE, for an EUV lithography machine. If it gets to market — a big “if” given how complicated they are to make — the Chinese company would be the only one in the world apart from ASML capable of manufacturing such equipment.

The US export controls generated “massive incentives” for Chinese firms to collaborate more among themselves, according to Paul Triolo, partner for China and Technology Policy Lead at Washington-based advisory firm Albright Stonebridge Group. While Huawei’s AI chips aren’t comparable to those from Nvidia and Apple, he said, “they are capable enough for many applications.” (…)

The US’s focus on national security is making it a global outlier, particularly when it comes to EVs. While the European Union, Brazil and Turkey have raised tariffs on Chinese EVs, they have also welcomed companies such as BYD — which now sells more electric cars than Elon Musk’s Tesla Inc. — to set up factories and build locally.

“The efforts to contain China worked in the short term,” said Shen Meng, a director at Beijing-based investment bank Chanson & Co. “But in the long run China will find ways to circumvent this containment.” (…)

China, for its part, is doing more to protect its own tech. Beijing has strongly advised its carmakers to make sure advanced electric vehicle technology stays in the country, with key components produced domestically and then sent for final assembly in other factories around the world.

All of this means it’s becoming harder for global companies to operate in both the US and China, Peter Mandelson, a former European trade commissioner who co-founded the consulting firm Global Counsel, said during an interview in Hong Kong.

“A rupture has emerged,” said Mandelson, now a close adviser to UK leader Keir Starmer. “This is a very strong headwind blowing across the global economy, and international companies need to navigate that.”

This chart says a lot about what’s brewing in China.

Our own research (mostly David’s) suggests that China is quietly but rapidly ramping up its AI capabilities.

• Xiaomi, China’s Apple, has successfully launched its own electric car. Apple had to abandon its similar project.
• Astribot S1 could be the most advanced robot in the world. And it’s Chinese, from a yet little known company.
• Baidu’s Apollo Go robotaxi service has definitely surpassed Waymo in terms of total rides completed. Baidu boasts over 5 million completed rides, whereas Waymo’s figures are estimated to be between 20,000 to 40,000 rides per quarter. This translates to a significant lead for Baidu in terms of total deployments and user experience. Waymo’s robotaxis operate in controlled environments with limitations, while Baidu’s service caters to a wider range of cities in China, which might have different regulatory environments and road complexities.
• What’s this you ask? This is the paper announcing the new leader in LLM coding performance – and the list of engineers who achieved this. It surpasses the big three (Google, OpenAI and Claude) AND it is open source. The company DeepSeek was launched… in 2023 in Hangzhou, China.
• “Gerald Yin Zhiyao, chairman and CEO of Shanghai-listed Advanced Micro-Fabrication Equipment China (AMEC), said during a panel discussion last August that China’s semiconductor supply chain can achieve self-sufficiency despite gaps in “quality” and “reliability”, providing fresh evidence that US restrictions may have accelerated China’s chip industry development. “I had thought we need at least 10 years to find a solution, but with joint efforts from hundreds of companies over the past two years, we can reach basic self-sufficiency by this summer,” he said.”
• Lack of evidence of Chinese progress in AI is largely due to lack of visibility. Given that the Chinese have more engineers, and that their state support intelligence dwarfs Biden’s IRA, and that their manufacturing base vastly overcomes that of the West, a bet on Chinese tech is heavily discounted today.

• According to some accounts, China’s AI industry is moving so swiftly it’s already into a third generation of companies. “The rise of these AI apps with Chinese origins should be a wake-up call for US lawmakers that singling out TikTok doesn’t keep the purported risks at bay.”

More continuation signals from insiders and IPOs

Bullish insider activity was everywhere, while the stock market bottomed out in 2022. Since then, insider activity has cooled off as the stock market continues to hit new highs. This is unsurprising as insiders have a long history of “loading up” during significant declines and becoming net sellers as the market advances.

Regarding the 100 constituent stocks comprising the Nasdaq 100 Index (NDX), buying and selling have been on the low side recently. See the charts below.

At first blush, there does not appear to be much valuable information to glean from NDX’s insider activity. Enter our Corporate Insider Velocity – NDX indicator. This indicator shows the velocity of corporate insider buying versus selling in Nasdaq 100 stocks. It takes a 4-week rate of change for insider buys and subtracts a 4-week rate of change for insider sales.

Generally, the more positive the difference, the more that insiders are buying their stock and the more positive it is for the market. The lower the difference, the more intensely they are selling their stock, and the worse it is for the market. However, another helpful iteration looks for reversals in the indicator value from a low level as a somewhat “hidden” signal of a potential shift in insider action.

The chart below highlights the dates when our Corporate Insider Velocity-NDX indicator crossed above -28 for the first time in six months. The most recent signal occurred on 2024-10-28.

(…) There are a few key things to note. On the positive side, it is hard to ignore the 100% Win Rates for six and twelve-month returns and the exceptional Median Returns. On the other hand, the sample size is admittedly small (only nine previous signals), and Z-Scores do not jump off the page. So, one can argue that results are highly influenced by the primarily bullish action of the Nasdaq 100 over the past 15 years.

With all that said, I do not consider this an automatic “buy” signal. However, I place it firmly on the favorable side of the weight of the evidence ledger and interpret it as suggesting that investors continue to give the bullish case the benefit of the doubt. (…)

The recent signals do not guarantee that the stock market will continue to rally, nor that the Nasdaq 100 will automatically be trading higher six to twelve months from now. The signals do, however, add significant weight to the favorable side of the “weight of the evidence” ledger and – in the absence of contrary evidence – strongly suggest that longer-term investors continue to give the bullish case the benefit of the doubt and that shorter-term traders continue to focus on the long side of the market.