If you haven’t noticed, I’ve been using the same headline for this blog entry and the last two entries—essentially, the same headline for the past two weeks. Crazy, isn’t it? Is it euphoria? I’m not quite sure what to make of it, as the market has been incredibly bifurcated over the past ten trading days. The breadth deterioration is glaringly obvious. Something has got to give: either there will be a rotation into non-tech sectors, or the market breadth flu will start infecting the tech sector.
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Scenarios:
1. Nasdaq consolidates while the rest of the market catches up (rotation trade).
2. Nasdaq falls along with other sectors.
3. Entire market retraces post-Fed meeting or post-Op-Ex, suffers a few days of swoon before recovering on Boxing Day (26 Dec).
As I draft my year-end review, I’m overwhelmed by the sheer volume of things to assess. My focus will be more on execution (offensive and defensive) and less on growth percentages, because analysis and execution are what ultimately determine the outcome. Focusing too much on growth percentages breeds complacency and arrogance—the sworn enemies of investment and trading.
Homebuilding: A Closer Look
· Beginning of 2023:
o SF units under construction: ~750k
o MF units under construction: ~900k
o Residential construction workers: ~930k
· Today:
o SF units under construction: ~640k
o MF units under construction: ~800k
o Residential construction workers: 957k
if the weakness continue, it might curtail the growth story down the road.
This is why I’ve switched to a 12-candle glance chart in my broad market overview, incorporating the homebuilder ETF.
NDX Trendline ( the Steepness, a sight to behold )
The NDX trendline is extremely steep, but the RSI has just broken out of overbought territory. It’s as bullish as it gets. When will we see the top? If not post-Fed/post-Op-Ex, possibly in January 2025.
Now, let’s dive into the market review section.
Broad Market Overview
Since the Nasdaq 100 broke above 21,000 on December 2nd, it has been on a relentless upward trend. Large-cap weighted indices are outperforming their small and mid-cap counterparts. The equal-weighted, small, and mid-cap indices are the obvious laggards—they need to pick up the pace soon or else...
S&P 500 11 Sectors Overview
Discretionary sectors continue to show impressive gains recently, while tech and communications are consolidating at range highs. These are the only three sectors left carrying the market. We need other sectors, particularly financials and industrials, to pick up the baton and start showing gains to sustain the bull market, especially amidst the collapse in breadth over the past ten days.
MOVE index
Move index is currently at 90.88, bond price implied volatility is expected to be around 9.08% per annum.
Lower MOVE points to (implied) lower bond market volatility going forward. Bond volatility moving lower translates into less haircut to bond, in which more liquidity can be extracted from the collateral pool.
Summary of Market situation
Trend and Momentum Section
SPX
NDX
Just an FYI note, why did I choose 63 Days for Bollinger band, because institutions balance their portfolio every quarter ( 1 quarter = +/- 63 trading days )
Market breadth section
% of SPX stocks above 20D 50D 200D moving average
SPX stall near ATH, while breadth has continued to deteriorate significantly
% of SPX stock above 20D MA : 28.8%
% of SPX stock above 50Day MA : 45.2%
% of SPX stock above 200Day MA : 63.6%
NYSE & Nasdaq market internals
Different fate befall NYSE and Nasdaq. There’s decent amount of volume at NYSE , but significantly higher volume on Nasdaq
On Dec 16 2024 trading session,
1.49 to 1 NYSE Decliner to Advancer ratio (1670/1118 )
1.04 to 1 Nasdaq Advancer to Decliner ratio (2231/2129 )
Sentiment
Additional special addition on retail , pigs could fly and tree will grow to the sky story
As for institutional side, the sentiment is extremely bullish as well, per goldman sachs
What is up with MSTR
Ever since saylor and MSTR/BTC fanboy has been evangelizing the power of bitcoin as treasury, I have been wondering what exactly is it about ?
below link here is a good write up on what MSTR are doing with their convertible bond, and comic strip for TLDR version,
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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