Daily market review Dec 19, 2023 ( winning streak continues, made possible by year-end performance chasing Institutions)
Apologies to all the readers who has been waiting for my market update review, I have been seriously busy with all the family commitments and celebrations last week, and in the upcoming week. Anyhow, I will do a short review of the market today and try my best to get 1 long market review before Christmas holidays.
Broad market overview
S&P 500 11 sectors charts
Nasdaq 100 reach an all time high of 16811, exceeding Dec 2021 high of 16765 by Dec 19, 2023 market close.
Market has been unusually bullish and has extended the winning streaks to 8 weeks and counting. Previous longest winning streaks was 13 weeks, could we come close to challenging it, it’s entirely possible if there’s no pullback by January. So congrats to those who has got in the market. If one still haven’t got in the market, then risk-rewards ratio are poor to those who only has 2-3 months timeframe.
The current bullish turn in situation since Oct 27 reinforce my belief that market timing is totally worth pursuing and is a learnable-skill that require continuous improvement as an investor/trader ( or we can call it the decision science of long term/short term optional capital allocation ). After all, the best players in this business ( hedge fund/institutions/investment advisers ) are paying serious attention/resources to perfecting their market timing acumen in their portfolio allocation decision, why shouldn’t you ?
In actual fact, there are lots of big institutional performance chasing till year end and possibly till Jan/Feb 2024, after horrendous 2022 returns and still underperformance against benchmark in 2023 YTD, especially made worse by Aug – Oct market turmoil, every institution is hanging on to this rally for their dear life, hence institutions have left their giant footprint in all the record inflow charts shared in my previous market review entries .
Below is the table of winning streak and return 52 weeks later, from famous quant adviser Wayne Whaley,
Flow data
Record 20 Billion SPY inflow, late-to-the-party retail and institutional inflow.
BofA client net buy for Tech sector the week of Dec 11 – 14, tech is still receiving the largest inflow, courtesy of AI boom, and Fed pivot-induced FOMO.
Mid-Long term bullish fundamental factors
Corporate profit outlook improving
Companies are getting optimistic and expect Profit outlook to improve and has long positive runway to go. ISM new order minus inventory has turn ( lead ISM PMI index by at least 3 months )
Consumer financial health
Credit card delinquencies has increased but still have ample liquid asset to buffer against it
McCllelan Summation index
SPX and McCllelan Summation Index
NDX and McClellan Summation index
By many technical metrics, momentum is “overbought” (momentum divergence after initial bullish impulse/reversal from prior market downturn is totally acceptable ) and breadth is incredibly overbought. But is there a metrics that shows we still have room to run ? it turns there are, SPX and NDX McCllelan Summation Index shows that McCllelan Summation index could reach 1500 before Indices pullback. ( Historical precedence ? 1st half of 2019 and May – Oct 2020 ). So market likely may have some gas in the tank to increase a bit further ( just to emphasize, this is not a guarantee, but merely suggesting a possibility )
Recall that a few weeks ago I have developed the following criteria to assess the bull market rally sustainability, below is the current status
Lets assess each chart in details,
MOVE index
MOVE index is below 50day MA, still waiting for it to close below 100.
Relative chart of Equal-weighted SPX vs Cap-weighted SPX
Equal weighted outperform Cap-weighted counterpart by 2% since Oct 27 Low, relative chart line is gradually rising ( this means participation is broadening, and 493 will take turn to pull up market with the Magnificent 7 )
Relative chart of Equal weighted Consumer discretionary vs Consumer staples
Consumer discretionary outperform Staples on equal weighted-basis, relative chart line is gradually rising
Dow Transportation
Transportation has achieved several technical bullish milestones,
1) Rise above 16000 & above previous swing high of 15250
2) 20day MA cross above 200day MA
3) 50day MA is closed to crossing above 200day MA
Bottom line
Near term : market may grind higher till January/February, will assess pullback conditions & things to lookout for next month.
Mid term : bullish
Long term : bullish
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.
Disclaimer : The information presented here are for research and education purpose only, and does not constitute investment advice, trading recommendation, author shall not liable for any action taken by any individual/company with regards to the information presented here or any part of the website - https://marketcycleedge.substack.com/