The S&P 500 is building on its upward momentum from January, gaining 3% in the first two weeks of February on solid fourth-quarter earnings and optimism on inflation.
The gain in February has the S&P 500 off to a strong start in 2024. Six weeks into the year the S&P 500 (SPY) is already up 5.75% and the tech-heavy NASDAQ 100 (QQQ) is up 7%. Take a look at the chart below with gains on the year for the two indexes.
However, despite the strong start to the year I wouldn’t be surprised to see some minor volatility in the next few weeks for two reasons.
1.) S&P 500 has history of weakness in second half of February: According to a great study below from analyst Ryan Detrick and Carson Research, since 1950, the S&P 500 has a trend of being kind of weak in the second half of February.
History is not a perfect indicator of future behavior. But it does provide valuable context. I’m not expecting a big sell off, but I wouldn’t be surprised to see a small pullback in the next few weeks.
2.) The S&P 500 looks overbought in the short run: The S&P 500 has been on a roll since early November. That has been great but the index does look a little overbought in the short run. When stocks are overbought it is common to see a small correction and I wouldn’t be surprised to see that here.
Two Best Reasons to be Bullish on Stocks in 2024
Beyond some potential short-term weakness in the second half of February I remain optimistic on the S&P 500 in 2024.
1.) The S&P 500 delivered a winning month in January: This is an important signal for potential gains. Here is a direct quote from Business Insider citing data from CFN.
“Since 1957, when January returns over 1.5%, which occurred 33 times excluding 2024, there’s an over 80% probability of positive market returns for the remaining 11 months, boasting a median return of 13.51%.”
2.) S&P 500 Up Almost 20% in 3 Months is another Bullish Signal: Here’s another bullish signal on stocks from one of my favorite analysts Ryan Detrick @CarsonResearch.
I am Looking to Deploy Cash on Any Weakness
As you can see, despite potential weakness in the second half of February, the longer term outlook for the S&P 500 is still bullish. That’s why if the S&P 500 is weak in February I will be using this as an opportunity to deploy client cash. I will definitely be looking to buy dips in the market.
Palantir up 45% on Strong Q4 Earnings & Forecast
Palantir (PLTR) is a widely held stock among my growth clients. Palantir is a big tech leader, it develops software applications to collect, analyze and distribute large amounts of data. One of its biggest clients is the US military – think CIA and the Army. In recent years Palantir has been expanding into commercial markets while also ramping up its AI offerings. Palantir is a well known company and widely held stock for investors looking for growth in tech and AI.
AI stocks have been hot in 2024 and that includes Palantir. Shares are up 45% on the year after the company reported Q4 results that beat expectations and raised revenue guidance. Check out the link below for more details.
Palantir Shares Rocket 30% after Revenue Beat, Strong Demand for AI
Palantir Chart Analysis: Palantir went public in late 2020. Shares initially surged but crashed in 2021 and 2022 when the entire tech sector fell sharply. In 2023 shares finally capitulated and created a long-term bottom. I started getting active in Palantir in the second half of 2023 between $15 and $18. After the recent surge on earnings this looks like a solid entry point that gives us an opportunity for a long-term hold and more potential upside. Looking forward the plan is to keep holding Palantir and look for more gains.
I’ll be back with another update next week – have a great day!
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
