Daily market review Dec 20, 2023 (High NYSE TRIN 3.69, consolidation likely till end of week before start of Santa Claus Rally next week )
Broad market overview
Immediately after Nasdaq 100 reached an all time high, Market consecutive daily winning streak came to an end , all indices and sectors closed in red, between -1.2 to – 2.5%.
S&P 500 11 sectors
All 11 sectors close around negative 1.5 to 2%. With Staples and utilities most negative among them ( which is a relief )
There are too much at stake for big institutions, their performance chasing will continue till year end and possibly till Jan/Feb 2024. After horrendous 2022 returns and 2023 YTD underperformance against benchmark, especially made worse by Aug – Oct market turmoil, every institutional trader/portfolio manager is too heavily invested this rally to “revive” their career. ( record inflow charts from beginning of Nov - till now are proof of that, which are shown in my previous blog entries ) Therefore, current dip is likely buyable.
NYSE market internals
Tuesday Dec 19, 4.16 to 1 NYSE Advancer to Advancer ratio ( 2316/556 )
85.8% UP volume day (853834901/994334940)
Wednesday Dec 20, 3.34 to 1 NYSE Decliner to Advancer ratio ( 2198/658 )
91.2% DOWN volume day (923960766/1011607104)
The NYSE TRIN reading is extremely high @ 3.69 this is the highest reading in 2 years. High NYSE TRIN readings ( ARMs index ) is short term “bearish”, this suggest that consolidation is likely till next end of this week. Market might possibly have a brief retracement pattern, ABC decline or 3 wave decline pattern.
At the moment, I believe this dip is likely buyable before the continuation of next week Santa claus rally ( The real Santa Claus rally periods are Dec 26 till last trading day + first 3 trading days in the next calendar year. )
McCllelan Summation index
S&P 500
Nasdaq 100
By many technical metrics, momentum is “overbought” and breadth is incredibly overbought. ( momentum overbought in the first bullish impulsive wave after prior market downturn are normal )
But is there a metrics that shows that rally may still have room to run ? It turns out 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 may likely have some gas in the tank to rise a bit further.( note : I am suggesting a possibility )
MOVE index
MOVE index is below 50day MA, and closed around 112, still waiting for it to close below 100. ( Lower MOVE index decrease bond haircut, causing an increase in collateral value of bond, leading to more fund available for big institutions, thereby increasing market liquidity. )
% of SPX stock above 50days MA
Market breadth is extremely solid ( but getting too solid for % of stock above 50days MA)
percentage of SPX-Stock above 200days-MA, currently at 72.2% .
percentage of SPX-Stock above 50days-MA, currently at 85.6% . getting past oversold level, suggesting near term consolidation. Reading did run up to 90% oversold level as of Market close by Dec 19, this is a short term trigger for consolidation/pullback. But long term, it’s a bullish breadth thrust signal. ( 10% -> 90% )
10Year Yield (TNX)
10Y yield closed below 4% for 5 consecutive days.
Junk bond press higher after gapping up a few days ago, Junk bond movement could offer clue to Stock indices very near term movement
Bottom line
Near term : market may consolidate till end of this week, before resumption of Santa Claus rally next week.
Mid term : Market may rally till January/February, follow by tricky March – May period
Long term : 2H 2024 - 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.
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