Daily market review Jan 25th, 2024 (Small & mid cap , equal-weighted outperform cap-weighted counterpart, Tesla plunge 12% )
Broad market overview
On Jan 25th Session, Mid&small cap, and equal-weighted indices outperformed Cap-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 but looks to be heading into consolidation, especially on lower time frame 1H. As long as the PREVIOUS TOP ( NDX 17000, SPX 4800 ) is not breached, then it’s still timely to hold on to long without needing to pare back the long position. ( notice the difference , I emphasized previous top instead of previous bottom ) While for Long term holding, down side protection could be considered.
Hedging of long term holdings
FYI, I have hedged my portfolio with futures for my existing indices ETF positions. But if market prove me wrong & continue to rally, I will either ditch the hedge or continue holding to sacrifice my profit potential.
To quote a famous phrase from famous trader Peter L Brandt, strong opinion, weakly held. If market prove me wrong, I will assess & ditch my hedges ( not necessarily in that order )
The difference in tone is because when I look at the chart, my intuition keep screaming something is not adding up. First among which is the gapping up and close lower in the market advance since market broke out of NDX 17000. Gapping up is a welcome sight & bullish sign in market bottom, but in the market top context it could be construed as a warning sign. Not saying market will reverse here, but it could suggest market are about to enter into consolidation zone.
Based on the many breadth thrust signal and the participation of equal weighted indices along with cap weighted indices in the market rally from November to December 2023, this bull market** is very solid and still in the initial phase, but we are likely to enter into Consolidation phases soon.
**Just to refresh your memory, this bull market is born on Oct 2022 for SPX , & Dec 2022 for NDX , which I have pointed out in my previous blog entries.
Let’s look at NQ (Nasdaq futures ) hourly chart
Market is making higher low, but momentum is making lower high. The emergence of this cautious sign warrant close monitor and preparation of defensive action.
SPX hourly chart
For SPX, we are still seeing higher low even in hourly timeframe, could market rally and stay above 4903 ? it is what I will be watching closely.
Also worth noting on the following observation,
1) Hourly RSI is making lower high, pointing to divergence.
2) SPX could possibly stall and rally up again
3) Range is contracting
So I will be watching the resolution of Range contraction and RSI divergence ( either further rally or goes into consolidation ).
S&P 500 11 sectors
Energy, Utility and Communications are the top 3 ranking sector, while discretionary and healthcare are at the bottom. A mix signal.
Tesla plunge 12%
Tesla plunge 12% , gap down at heavy volume, underperforming benchmark indices, Discretionary sectors, and automobiles sectors, absolutely untouchables in the next 1 month. Luckily I have cleared it out from my portfolio completely in October.
Although market holding up well when Tesla is dropping 12% in a single day is a resilient bullish sign. Could SPX and NDX rally further with tesla plunging ? We will monitor this evolution closely.
MOVE index
Move index give is 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. Seems hesitant in following through 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.
SPX
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 closer 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
NDX
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 )
Thursday Jan 25th, 3.49 to 1 NYSE Advancer to Decliner ratio ( 2205/632 )
Bitcoin section
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.
Currently market broke below 36000 support and RSI divergence on hourly time frame warrant further caution.
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 )
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.
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.
market is getting closer to 61.8% (16250), Hang Seng likely will have a decent 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.
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/
The views expressed on this website represent the current, good faith views of the authors at the time of publication. Please be aware that these views are subject to change at any time and without notice of any kind. Marketcycleedge.substack.com and its author assumes no duty and does not undertake to update these views or any forward-looking statements, which are subject to numerous assumptions, risks, and uncertainties, which change over time. All material presented herein is believed to be reliable, but we cannot attest to its accuracy. The information contained herein (including historical prices or values) has been obtained from sources that marketcycleedge.substack.com and its author considers to be reliable; however, marketcycleedge.substack.com and its author makes no representation as to, or accepts any responsibility or liability for, the accuracy or completeness of the information contained herein, or any decision or action taken by you or any third party in reliance upon the data. All traders and investors are urged to check with tax advisors before making any trading /investment decision.