Weekly market preview Apr 15 - 19, 2024 (market sell off and is still in whipsaw phase , Bitcoin bearing full brunt of geopolitical risk off move )
Broad market overview on Apr 12, 2024
Market had an plenty of “scare” last week, from higher than expected CPI to Biden warning of Iran impending attack on Israel.
Semis and Nasdaq 100 sell off the most on Friday on Geopolitical tension, losing close to 3% and 1.7% respectively.
Overall, Mid and small cap, Equal weighted indices perform as bad as their cap weighted counterpart in the sell off everything Friday.
Market leader Nasdaq, and semi has not made new high and in sideway consolidation since early March.
While the other 2 benchmark, DJIA and S&P500 has not made new high since mid to end march.
Therefore, Market is still indecisive and not willing to commit to a move either way, market next directional move could possibly be resolved by upcoming earnings season.
Geopolitical tension market sell off history
If history is any guide, it’s pretty much sell the rumor, buys the news( event happening point ). And ultimately Geopolitical tension and War is a subset/blip in market cycles, market was higher 1 month later and 1 year out in almost all instances , except for Afghan War, which rose initially to prior flushdown point, and then resume it’s original bearish trend again because market was in dotcom bust cycle.
The only thing that would possibly violate this thesis would be Iran throwing a nuclear bomb at Israel, which would be pretty far fetched and deem not possible.
What about Netanyahu/war cabinet reneging their no retaliation promise earlier , in this scenario, market will likely retest the local low or consolidate at range low before bouncing higher.
Earnings calendar for the week 15 - 19
In the upcoming week, we have ASML, Netflix and Intuit Surgical, Amex reporting. This kickstart the 2nd week of earnings season before heavier reporting over the next 3 weeks.
If anything could determine the next directional move, the pricing in of earnings over next 3 week + earnings surprise + better/worse guidance could decide next directional move of the market.
S&P 500 11 sectors overview on Apr 12, 2024
There’s nothing much separating the different sectors, with only utilities losing less than 1% and the rest of the sectors losing more than 1%.
MOVE index
MOVE index closed at 112.82 level, ( bond price implied volatility is expected to be around 11.28% per annum. ) Consistent close above 100 level is in general not a bullish sign for market.
Bond volatility moving higher translates into more haircut to bond, in which less liquidity can be extracted from the collateral pool.
NYSE & Nasdaq market internals
D-A ratio was relatively high indicating a sell off across the board fashion on April 12. NYSE TRIN is relatively high at 2.38, pointing to potential sell off exhaustion
On April 12th 2024,
5.32 to 1 NYSE Decliner to Advancer ratio (2388/449 )
3.17 to 1 Nasdaq Decliner to Advancer ratio (3235/1019 )
% of stock above 20Day, 50Day, 200Day
Shorter-term breadth has fallen quite significantly, which explain why SPX has breached 20D MA and close to touching 50D MA.
We will only see deeper retracement if % of SPX stock above 200Day MA drop to around sub 60%.
McCllelan oscillator and Summation index
SPX McCllelan oscillator has been trending down and Summation index is decreasing to sub 700 level and still not showing signs of bottoming yet
As for NDX, momentum as represented by NDX McCllelan oscillator has been trending down significantly. Summation index has drop to sub 100 level and still not showing any signs of bottoming yet.
Small cap growth base breakout
Price retest previous base breakout support.
Will it retrace deeper or bounce from there ?
Currently, price is likely to retest 100D MA.
price can regain momentum and accelerate higher if it can stay above 270 level.
Flow data per previous week
Per BofA flow data,
Largest weekly outflow out of large cap growth, and money is also flowing out pf Japanese stock and utilities.
More flow going into IG grade bond.
Hardly the kind of things that screams weak market, but rotation expected into other areas and market retracement likely ( which is currently ongoing for cap weighted indices)
Expected earnings related data
According to BofA, earnings will be supported by Real sales volume growth from cycle bottom, that’s as solid an earning as you can get.
According to both Bloomberg data and LPL financial research, Margin is estimated to grow in the upcoming quarters
Economic data
Per BofA data
End of bond bull market, more people is expecting no landing scenario and CPI path leading to presidential election.
Implications ? Pretty much a long everything but bond scenario. This is the most likely scenario whether fed is cutting 1 or 2 to 3 quarter point in interest rate this year.
Gold and energy play in the face of never-ending/escalating geopolitical crisis ?
Per GS primebook data, Hedge fund has been selling energy stock at oil price high point. Hardly the kind of data you want to see if your thesis is long the energy sector.
And are you perhaps thinking of buying lots of gold or diversifying into gold ?
The volatility of gold is hardly worth the return.
But different situation calls for different strategy.
For longer term holdings,
If you have extremely low/next to nothing, perhaps you could allocate a few % of your asset allocation to gold.
If you already have 4 -7% allocation in gold, then just sit tight and do nothing.
For Short-medium term trading
The majority of the move is over in the short term and may be due for some consolidation.
Maybe wait for a retracement before entering long. ( look at the chart to determine the risk -reward ratio )
Bitcoin
Bitcoin hourly chart
It would appear that only crypto market is bearing the brunt of geopolitical tension over the weekend as it drop from 70K to a low of 61K before recovering to 65K. It can only arrest the falling momentum if it can recapture 68K prior swing high/resistance.
Bitcoin daily chart
We are approaching halving, and market is still consolidating between 61k to 70K
Bitcoin is currently displaying the following technical sign,
Below 20D and 50D MA
Barely staying above uptrend line connecting 60.8K and 64.5K low
RSI below 50
if RSI is consistently below 50, BTC may have further to fall and possibly breach below 60K support.
As always, we will continue to monitor the charts, assess the bullish/bearish evidence day-by-day to make appropriate capital allocation and investment decisions on all time frame ( short, mid & long term )
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