Stock Market Outlook

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The News Buzz

• The U.S. economy grew slower in the first quarter than previously estimated, as gross domestic product grew at a 1.3% annualized rate from January through March, lower than the advance estimate of 1.6% and significantly slower than the 3.4% in the final three months of 2023.

• Federal Reserve policymakers have cooled down expectations regarding interest rate cuts, bringing Friday's PCE index, the Federal Reserve’s preferred inflation gauge, firmly into focus. 

• Biden’s re-election campaign, likely to counter Trump’s Bitcoin agenda, starts to engage the Bitcoin industry, marking a notable shift in their approach toward digital assets and policy.

• Microsoft’s Open AI concerns—Satya Nadella recently met with Sam Altman to discuss a new OpenAI deal. OpenAI recently sealed a major deal with Apple. Microsoft is reportedly concerned about how the deal could affect its product ambitions. 

• Amazon.com Inc.’s Prime Air drone program has been cleared by US regulators to fly devices beyond the visual line of sight of pilots, increasing range and giving more customers access to the service. 

EUR – iShares MSCI Europe ETF

• The iShares Core MSCI Europe UCITS ETF EUR seeks to track the MSCI Europe index, which tracks the leading stocks from 15 European industrial countries.

• The weekly cycle composite, including Nominal 20W (N20W), N80W and the dominant 2.7Y cycles is shown below. One can expect a down bias into early 2025.

• A common theme from reviewing cycles for the US and several major international markets is to expect a multi-month correction, if not something worse, likely into early 2025.

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Large Cap Techs Bubble

• I posted before that the 10 largest capitalization stocks represent about 70% of the total capitalization of the US stock market, which happened only in 1929 and 2000, before the two most significant bear markets in 100 years.

• The chart below shows that 4 of Magnificent 7, NVDA, MSFT, AAPL, and GOOG, represent 33% of S&P500 capitalization. Amazing.

Market Summary

As of close on 30 May 2024.

What Has Been

• The major US stock indexes/averages continued with the expected correction. DJI, the weakest in the last several days, lost nearly 0.9%, or more than 350 points, after losing over 400 on Wednesday. The S&P 500 fell 0.6%, while the tech-heavy Nasdaq Composite was about 1% down. 

• The weakness in the Nasdaq Composite was partly caused by the biggest 1-day loss in 20 years by Salesforce (CRM), which slid almost 20%. With many popular tech stocks extremely overvalued, this kind of bombshell will occur repeatedly.

• Contrast the weakness in large caps with a 1% rise in Rusell 2000. But do not expect much from the small caps. They were just due for a bounce after five micro waves down. They likely topped in March when we identified the completion of an ending diagonal in real time.

• Remember that the beginning of the month has a positive bias due to the inflows of pension funds so that a bounce can be in the making. But a slide should continue in June.

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• SPX, NDX, and DJI may slide slightly . . .

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