Daily market review Jan 23rd, 2024 (Cap-weighted outperform Small & mid cap, equal-weighted counterpart)
Broad market overview
In the past few sessions, Technology and Semi leadership has been masking the weakness of overall market. So Jan 22nd session is a welcome sight for the market where Transportation rose by 2.2%, Mid&small cap rose by 1.1% and 1.9% respectively, outperforming the overall market. But on Jan 23th Session, Cap weighted indices again outperform Mid&small cap, and equal weighted counter part. So participation from broader sector is sorely needed, otherwise market may consolidate / retrace in the near term when Technologies and Semi run out of steam.
Nevertheless, near term trend is still very strong after it broke out to the upside from Jan 19th Op-Ex session. The Low of Last Wednesday ( Jan 17th session ) is around 4720 for SPX and 16600 for NDX, as long as the low is not breached,, then it’s still timely to hold on to long without needing to pare back the long position. ( as for Long term holding, it’s still not the time yet to initiate downside protection Procedure )
But, it’s a good time to look into Upside target, which I will be investigating and publishing by this week as long as market does not have second mind and retrace all of a sudden.
Earnings Report for Q4 2023
Also worth noting, Upcoming earning session are important in determining the overall market direction going forward. This week we have Netflix, Intuit surgical, Tesla, Lam research, ASML, KLA reporting their Q4 earnings, which are all important name in Communications, Discretionary, Semis and Healthcare. So far Netflix and Intuit surgical results are good and well received by investors, price jump after market close, so far so good. We will have to see if the remaining companies can keep up the earnings upside momentum to carry the market higher.
S&P 500 11 sectors
Staples and Communication is the top 2 ranking sector, while real estate are at the bottom.
MOVE index
MOVE index give us one of the lenses to look at private sectors collateral pool utilization. MOVE index close at 107.70 , below 50days MA and broke out of symmetrical triangle. Follow through action after breaking out is needed.
( 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. )
Factors to lookout for in the future
At present, the correlation between Indices-10year yield ( as well as DXY ) is weakening, but it worth keeping an eye on this evolution of the relationship, as I suspect they might possibly be dominant factor again in the future.
NYSE market internals
Monday Jan 22nd, 3.19 to 1 NYSE Advancer to Decliner ratio ( 2164/678 )
Tuesday Jan 23rd, 1.06 to 1 NYSE Decliner to Advancer ratio ( 1434/1355 )
Bitcoin section
I have decided to include a section to analyze Bitcoin daily charts, after Bitcoin ETF is approved.
=> Mainstream and institutional acceptance of cryptocurrency as a asset/instrument with store of value function and it will continue to receive institutional flow in future
=> BIS allowed Central bank to store 2% reserve in cryptocurrencies as of 17 Dec 2023
=> In terms of bond jargon, Cryptocurrency has larger “duration risk” than Technology stock, therefore Crypto possess far higher sensitivities to liquidity & interest rate fluctuation than other financial instrument, offering one extra lenses to look at ( outcome of ) liquidity and risk appetite.
Now let dive into Bitcoin daily charts
A few technical characteristics worth noting,
1) 20D MA delineate the shorter-term uptrend and downtrend phases very well.
2) Price stay above 20D MA after 20D MA cross above 50D MA (Green Phase)
3) Price stay below 20D MA after 20D MA cross below 50D MA (Red Phase)
Technically speaking, Fail breakout (upside breakout ) indicates professional selling pressure and is bearish near-term, the following is happening currently
1)20D MA at risk of breaking below 50D MA, cementing near-term downtrend phase
2)breach sub 40K support ( previous low )
I will watch for bounce from 38.5K low, if it does not exceed previous week high of 43.5K, then market is still mired at short-term downtrend. Will it morph into mid term down trend or will it be a retracement in longer term Uptrend, only time will tell.
A bitcoin market chatter I heard,
1) There are many redemption from Greyscale GBTC.
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.
Asian Market
Hang Seng index
Recent action and news for china and hong kong stock market has been absolutely brutal ( a stark contrast to their neighbour, Japan stock market who has been on a tear )
I have decided to add a small section to Asian market section, starting with Hong kong stock market. Recently, there was some washout as well ( asia genesis shutting down after their losing bet on China and Japan ). So I am covering and examining the market to see if 14795 is the lasting bottom or a local low for Hang Seng index.
Stock market is a barometer of economy, if China/Hong Kong stock market rebound, it will lead to a global growth synchronization , which can lead to a stronger US bull market, because US company has significant presence there and take home a notable portion of China revenue.
Just to add on, I have no exposure to Chinese stock, it remain extremely un-investable until proven otherwise.
So let look at Hang Seng Index,
Nothing fancy, just a simple analysis, I am only looking to see if market can retrace 50% and 61.8% of their downswing from 17135 to 14695.
If market made it back to both 50% ( 15960 ) and especially 61.8% (16250), then market had a high chance of making it back to 17135.
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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