Technical Stock Market Briefing for Day & Swing Traders

| By Harry Boxer, Technical Market Analyst

Generally, most stocks posted strong first-half gains, helped by positive economic readings and the prospects of a Fed rate cut materializing later this year.

The stock market, as measured by the S&P 500, scored a 15% return at the halfway mark this year. This is among the top-seven best starts in the last 35 years, with the S&P 500 setting more than 30 new record highs thus far year-to-date.

Strong first halves have typically been indicative of markets that ended with strong overall years. In fact, in the 11 years in which stocks were up 10% or more at the end of June, the average full-year return went on to be 29%.

Enthusiasm around AI continued in full force in the first half, with the mega-cap technology names delivering the largest gains. The Magnificent 7 (NVIDIA, Microsoft, Apple, Google, Tesla, Meta, Amazon) were in the leadership position again, with an average gain of 39% (despite a double-digit decline for Tesla). NVIDIA continued in its role as the driver for the AI mania in the markets, with shares rising around 150% as the company ascended to the top spot as the world’s largest by market cap.

Overall, the technology and communication services sectors led the way, posting first-half returns north of 25%. AI excitement and demand is showing up in both earnings growth and rising valuations. Mega-cap tech names are now trading north of 30 times consensus earnings estimates Moretraditionally defensive segments like utilities and gold, also saw strong performances in the first half of 2024, as well

What didn’t fare as well in the first half were things like small-cap equities and interest-rate predictions, which required major revisions due to less than expected inflation and economic readings.

2024 has not been a year of big swings or sharp sell-offs in the market. A loss of volatility is generally a win for investors. The VIX index (an index measuring market volatility, often referred to as the “Fear Index”) recently fell to its lowest daily reading since 2019. Looking at a broader annual average for the VIX index, 2024’s average level of 13.8 is the lowest since 2017 and would be the second-lowest yearly average in more than two decades.

The largest stock-market pullback in the first half was just a bit over 5%, benign in size and frequency when compared with historical yearly market declines. If you like big swings or sharp sell-offs in the market, 2024 has not been your year. However, a loss of volatility has generally been a positive for investors.

We’ve seen entire calendar years recently – 2013, 2017, 2021 – in which stocks never saw anything more than a 6% pullback for the full year. While that’s not inconceivable for 2024, my sense is that investors should anticipate a possible choppier path in the second half.

In any case, closely monitor the technicals and “Trade What You See, Not What You Think”