Daily market review Jan 24th, 2024 (Cap-weighted outperform Small & mid cap , equal-weighted counterpart)
Broad market overview
Identical scenario today, Technology and Semi leadership has been masking the weakness of overall market. On Jan 24th Session, Cap weighted indices again outperform Mid&small cap, and equal weighted counter part. Participation from broader sector is sorely needed to sustain the rally, 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. While for Long term holding, down side protection is not needed yet. ( but we are getting closer to the day )
Q4 2023 Earnings result
Upcoming earning session are vital in shaping the overall market direction going forward. Netflix, Intuit surgical, Tesla, Lam research, ASML are reporting their Q4 earnings this week, which are all important name in Communications, Discretionary, Semis and Healthcare. So far Netflix, Intuitive surgical, ASML, Lam Research results are good & well received by investors, but the same cannot be said for Tesla.
We will have to see if the remaining companies can keep up the earnings upside momentum to carry the market higher. Jan 30 and Feb 1 are the most crucial day next week, as big 2, Microsoft and Apple will be reporting their earnings respectively, market is pricing in good result, it remains to be seen whether the actual announcement can exceed expectation
S&P 500 11 sectors
Technologies and Communication is the top 2 ranking sector, while real estate, Staples and utilities are at the bottom. a plus point in favour of market advance.
MOVE index
Move index give us one of the lenses to look at private sectors collateral pool utilization. MOVE index close at 105.70, below 50days MA and broke out of symmetrical triangle. Watching closely for follow through action after breaking out.
( 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. )
Upside target for S&P 500 and Nasdaq 100 near term
It’s a good time to look into Upside target in preparation for the incoming weeks ahead.
S&P 500
138.2% Fib Extension ( price swing from march 2023 low 3808 to July 2023 high 4607 ) : +/- 4913
138.2% Fib Extension ( price swing from Oct 2022 low 3491 to July 2023 High 4607 ) : +/- 5033
I seriously doubt market can reach 5033 in Q1 2024, let alone in in the current upswing.
Also it’s edging close to the top of uptrend channel.
could it overshoot ? yes that’s a distant possibility.
Could it overshoot the channel and then form a V top, yes that’s possible as well.
Could it overshoot and then stay above the Uptrend channel ? highly unlikely In the near term
Nasdaq 100
138.2% Fib Extension ( price swing from march 2023 low 11695 to July 2023 high 15932 ) : +/- 17550
138.2% Fib Extension ( price swing from Dec 2022 low 10671 to July 2023 High 15932 ) : +/- 17940
It’s not impossible for market to reach 17940 in Q1 2024 on good earnings reception , but I highly doubt it can sustain and hold above 17940 for more than a few trading session.
Also it’s edging extremely close to the top of uptrend channel.
could it overshoot ? Yes that’s a distant possibility.
Could it overshoot and then form a V top ? yes that’s possible as well.
Could it overshoot and then stay above the Uptrend channel ? highly unlikely In the near term
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 )
Wednesday Jan 24th, 1.06 to 1 NYSE Decliner to Advancer ratio ( 1557/1242 )
Bitcoin section
Bitcoin daily charts is added after Bitcoin ETF is approved for the following reasons,
=> 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 almost certain to below 50D MA, cementing near-term downtrend phase
2)breach sub 40K support ( previous low )
I will monitor the 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.
Crypto asset inflow
Inflow far exceeded previous record high around BTC ETF approval, but has halted ever since. No inflow, no rally, period.
Asian Market
Nikkei 225
The top at 37000 looks toppish, pin bar at the top, and this rally to 37K left several gap on the way up. Will see how deep Market pull back in the weeks ahead.
Hang Seng
Recent action and news for China & Hong Kong stock market has been absolutely brutal ( a stark contrast to their neighbour, Japan stock market who has been on a tear )
And 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.
Stock market is a barometer of economy, if China 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.
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