Daily market review Dec 28, 2023 (latest NAAIM index102.71, new SPX all time high likely within reach before profit taking ensues )
Broad market overview
Market tempo is undoubtedly slowing, apart from market grinding higher , slowing momentum and overbought breadth, there isn’t much to talk about. And oh yes, since Dow jones industrial average and Nasdaq 100 has made new all time high, S&P 500 will likely make new all time high as well in the next few working days, and subsequently profit taking likely ensues. After that, will we continue to grind higher again or morph into larger trading range without making significant new high ? That is a question that I am still exploring and pondering, we will tackle this question later when we come to that juncture, market conditions assessment during those period is required to ascertain further.
During this festive period, apart from helping my wife in taking care of my 1 YO baby, I have been doing some reading/podcast listening, and high-level thinking ( 10000ft overview) on fund allocation strategizing ( sectors to rotate into, broad market trend/range movement, pathway…etc ), new info to incorporate into investment review process, new interesting take on market model, 2024 outlook etc.. So there’s a lot itch in my brain that I need to scratch by summarizing the info an sharing in my substack blogs in days and weeks to come.
S&P 500 11 sectors
Charts shown above, and recent 1 week performance shown below
From the 11 sectors 1-Week relative performance, defensive sector is ranking top 3, while offensive sectors are ranking dead last, suggesting that recent 1 week grind higher in S&P 500 was carried by the defensive sectors. So some caution is warranted in the very near term ( especially for shorter term trading )
NAAIM index at 102.71
Latest NAAIM index is at 102.71, suggesting that Investment managers are beyond fully invested. ( FYI, this is a lagging survey ). After SPX set a new all time high, profit taking will take place to lock in gain and traders/fund managers will lighten their position and rotate money into different assets/sectors in Q1 2024 ( NAAIM index could possibly go as high as 105 or 110 before consolidation/pullback sets in. )
NYSE market internals
Wednesday Dec 27, 1.546 to 1 NYSE Advancer to Decliner ratio ( 1712/1107 )
Thursday Dec 28, 1.1 to 1 NYSE Decliner to Advancer ratio ( 1486/1346 )
Volume has been lacklustre of late. ( 20% lesser than previous week, which is not unexpected for year end period. )
McCllelan Summation index
Nasdaq 100
S&P 500
I am sure readers are tired of hearing this by now, momentum is “overbought” and breadth is overbought for extended period of time. (note: Momentum “overbought” in the 1st Bullish impulsive wave after market downturn is perfectly fine)
Notably, SPX and NDX McCllelan Summation Index has almost reached 1500, and indices will pull back soon after SPX new ATH.
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 beyond extremely solid ( but getting too solid for % of stock above 50days MA)
percentage of SPX-Stock above 200days-MA, currently at 79% .
percentage of SPX-Stock above 50days-MA, currently at 89.6% . 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 potential 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 3.9% for 2 consecutive days. Tt may retest above 4% or higher in the coming 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 ( Or they may move concurrently )
Bottom line
Near term : market will consolidate/pull back after SPX set new ATH.
Mid term : Market may rally till January/February ( or form a larger trading range after SPX new new ATH ), 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.
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/