Consumer Sentiment & Stocks MarketsStock Markets Track Consumer Sentiment Closely
The relationship between consumer sentiment and the stock market is evident in this observation. Historically, consumer sentiment tends to lead stock market movements, providing valuable insights into potential trends.
Personally, I consider the Russell 2000 Index as a reflection of mass consumer sentiment, given that it tracks the 2,000 smallest publicly traded companies in the U.S. market. Looking at the E-Mini Russell futures, consumer sentiment peaked in December 2024, and since then, I have been monitoring the Russell and other indices along their well-supported trendlines. When the Russell started testing its trendline in January, I became cautious about its uptrend.
The clean break on February 21 signaled a shift: Russell transitioned from an uptrend to a downtrend on the daily chart. Consequently, my trading strategy has shifted from buying on dips to selling on strength whenever opportunities arise.
Russell is Leading Dow Jones, Nasdaq and S&P???
Indices tend to influence each other, and leadership often rotates. While the Nasdaq has previously led market moves, this case study suggests Russell is currently taking the lead.
Technically, the overall U.S. market remains bullish as long as it holds above the primary uptrend line. A bear market is typically confirmed when the market drops 30%, and by then, it should break below all primary uptrend lines. However, waiting for that confirmation is too late—by then, the damage will be significant.
The key observation is that Russell has already broken its secondary uptrend line. Will the Dow Jones, S&P 500, and Nasdaq follow? If so, we need to make fundamental projections. Factors like escalating tariff conflicts could worsen inflation, directly impacting the broader stock market and indices.
Consumer Sentiment Still Below 80 Despite Pandemic Being Long Over
Given the current macro environment, consumer sentiment is likely to remain below 80 for an extended period. Additionally, there is a downside risk if geopolitical tensions escalate.
From past case studies, a consumer sentiment reading below 80 has often preceded a stock market decline. This historical pattern raises concerns about future market stability.
My Trading Strategy: Cautiously Bullish
• Technical Perspective: Apart from Russell, I remain bullish on other indices.
• Fundamental Perspective: Market sentiment leans toward pessimism.
• Conclusion: This dual outlook leads me to a cautiously bullish stance.
For Russell 2000, my preferred strategy is to sell into strength, guided by a downtrend channel. Another alternative is trading Micro E-Mini Russell futures (M2K) for precision and risk management.
📈 Happy trading!
Please see the following disclaimer and additional information that may be useful.
E-mini Russell Futures
Ticker: RTY
Minimum fluctuation:
0.10 index points = $5.00
Micro E-mini Russell Futures
Ticker: M2K
Minimum fluctuation:
0.10 index points = $0.50
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• My mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
Trading the Micro: www.cmegroup.com
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
