Markets reporter Jared Blikre takes a look at the S&P 500's market gains, forecasting notes from Goldman Sachs, volatility, the U.S. dollar, and how the Japanese yen is trading in currency markets.
SEANA SMITH: For more on the markets, let's go to our own Jared Blikre. And Jared, we were just talking about Dave mentioned at the top of the show NASDAQ S&P on quite a winning streak as we look at the gains that we've seen over the last four weeks. Some on the Street are saying that this rally actually has legs. What do you think?
JARED BLIKRE: It has some legs, but these are tenuous legs at best. Let's check out the price action. I think investors will welcome the fact that we are set for a fifth week of gains in the market. Of course, this is very early on in the goings here. S&P 500-- excuse me-- 500 up about 4/10 of a percent. You can see we started out the day in the red there.
But I want to look at a year-to-date chart with some candlesticks. Here, I've been showing this for a couple of months now. Finally, we got that bear market rally liftoff, and we can see we are up 18%. That is from this low to these highs. You take a look at the NASDAQ, we are up nearly 25%, having eclipsed these numbers here, these prior highs right there.
But I want to go back to the S&P 500. 4,200 was a big level. 4,300 is a big level, closing in on this potential resistance area right here. And we were mentioning those potential headwinds while Goldman Sachs has a number of them. And this comes by the market ear.
I just want to go to some of the summaries here. Goldman Sachs estimating $28 billion worth of total systematic demand over the next one week, assuming a flat tape. So that's if the market goes nowhere. That's $5 and 1/2 billion going to come into the market for technical reasons. Don't need to get into the definition of systematic demand.
Also estimating another 5 and 1/2 billion, so that's 11 billion total worth of corporate demand. And that has to do with buybacks and some other factors that's also hitting the tape this week. And then $2.2 billion was what happened last week. Yesterday and last week-- excuse me, not yesterday. Friday was a big up day in the session.
And then another factor-- liquidity is expected to worsen as we head into Jackson Hole. That's a big Fed event at the end of the month. Now lower liquidity means move to the upside and the downside can be exaggerated. So that's both volatility inducing for the upside, as well as the downside. Mutual funds sitting on a large pile of cash-- that's on the sidelines.
Hedge funds are re-grossing. That means they are establishing positions for the first time in several weeks, oftentimes, since the beginning of the summer. And then finally, retail. You only live once re-entering. And that is you only live once. Guess what? We've seen GameStop exploding to the upside, and it's no coincidence that we've seen a lot of these consumers names that have been beaten down. This is over the last month.
Consumer discretionary up 18%, industrials up 15%, tech, materials, financials, energy, all of those outperforming along with real estate. So a pretty big, broad basket of stocks out. However, we do have some potential headwinds, guys.
DAVE BRIGGS: Indeed, and we'll talk about a lot of those sectors later on in the program, Jared, but the NASDAQ up nearly 25% from the June lows, leaving investors wondering, are the lows in, and am I missing out? Or should I be hedging?
JARED BLIKRE: I'll tell you what, Dave. There's a saying in finance. You got to hedge when you can, not when you need it. And let's take a look at what the VIX has been doing lately. If you need protection, now is the time to buy it because it's getting very cheap. So here's the CBOE VIX Volatility Index, a.k.a. the fear index.
Actually, this is the VIX of the VIX. Let's go to the VIX itself. That is now below 2020, kind of one of those big psychological numbers. 15 is also a bigger one. If you take a look at what had happened in the belly of last year, we got all the way down to about 15 and trended in that 15 to 20 VIX range for a number of months. We'll have to see if that continues.
But the risks are to the upside. And I want to get to the strong dollar. That has really been a theme. Now today, the dollar is up versus a broad basket of currencies. But notably, it is not up versus the Japanese yen.
Now, here's a heat heatmap that contains all of our US dollar-based forex crosses. And you can see, over the last month, the dollar has been outperforming versus the Argentine dollar there, Argentine peso. US dollar has been outperforming the ruble, the Turkish lira, also the Chinese yuan. But what it is not outperforming is some of the other haven currencies.
Now here's a very similar chart, a heatmap with the Japanese yen as the numerator. And you can see it has strengthened via some of these same vehicles, some of these same currencies, such as the Argentine peso, such as the Chinese yuan, but also importantly, versus the Swiss Franc, also versus the US dollar.
So my point is, when we have haven flows into the yen, that can be the marking of a big, big turnaround in risk reversal. We have a decade of low interest rates building up that yen carry trade where traders would borrow the yen and buy other assets. If that unwinds, if that unwinds-- and that's a big one-- we could have a storm coming, guys.
DAVE BRIGGS: All right, a big if. Jared Blikre, good stuff. Thank you, my friend.