Daily market review Mar 13 2024 ( Inside day pending for Quarterly Op-Ex expiration, Macro charts in focus )
Broad market overview
Market is displaying inside candles across the board, with Semi and Nasdaq suffering the most. Losing close to 2% and 0.8% respectively.
In case you haven’t notice, Nasdaq fail to make new high since March, DJIA, DJIA Transportation, small cap fail to make new high since Feb, in contrast, SPX has been making new high, suggesting rotation into other sectors of the market.
While Semi had a large Bearish engulfing bar with high volume ( courtesy of Nvidia ), will it be the local top or will Generative AI enthusiasm overwhelms the technical ? Upcoming Quarterly Option Expiry week will make call on that, we will have to wait and see.
S&P 500 11 sectors
Energy, Materials and financials are the top ranking sectors while Technologies and real estates are the bottom ranking sectors.
Historical odds of Market movement for Op-ex week and post Op-ex week
According to Quant advisor Wayne Whaley, when the trailing 21day market return % is positive, March quarterly Op-Ex week tends to end up being a positive week with higher than average winning %. But the week after that, tend to be negative with higher than average losing %.
Same historical data tendency & conclusion from the original seasonality creator. ( Stock Trader Almanac )
S&P 500 March quarterly Op-Ex historical data since 1983
Nasdaq March quarterly Op-Ex historical data since 1983
MOVE index
MOVE index closed below 100 ( bond price implied volatility is expected to be slightly less than 10% per annum ). We will be monitoring closely to see how many session it close below 100 level, follow through is important here.
Bond volatility moving lower translates into lesser haircut to bond, and more liquidity can be juiced from the collateral pool.
NYSE & Nasdaq market internals
Volume is lacklustre , not much of a signal here.
Just one interesting observation, NYSE advancer has been leading decliner consistently in recent sporadic market “sell-off” day, further suggesting market rotation at work
On March 13th 2024,
1.47 to 1 NYSE Advancer to Decliner ratio (1678/1138 )
1.05 to 1 Nasdaq Decliner to Advancer ratio (2161/2047 )
Macro Charts section
Momentum stock as a % of Market weighting & market cap
In this chart, Momentum stock as a % of Total US equity market cap has exceeded 30%, approaching historical high level seen in previous market peak.
Momentum factor (top20%) as a % of S&P 500 market cap
Momentum stock ( top 20% ) has approached 50% of S&P 500 market cap, a level last seen in previous 2000 bubble area.
To clarify, I am not calling a market peak here, but an impending sideway consolidation/pullback wouldn’t be a surprise to me.
Labour productivity
Per BofA data, Labour productivity ( rev/worker, adjusted for CPI ) has set a record high, exceeding previous peak made in 2008 GFC. Suggesting the start of a booming productivity cycle, courtesy of generative-AI, big data, IoT, Robotics age.
Global Semiconductors inventory % Y/Y
Semiconductors inventory level is high, might see some further destocking activities, putting pressure on price margin.
leading player Nvidia, AMD, AVGO may be spared, but how about other semi’s player ? and will we see some pullback/consolidation ?
Morgan Stanley - Mike Wilson 4500 S&P 500
Mike Wilson is still sticking to his 4500 level call, a level that is impossible to reach based on technical signal in Oct-Dec 2023 and current broadening in participation from all other sectors. And per BofA labour productivity chart, this has room to run.
Or Maybe he’s just a smoke screen deployed by Morgan Stanley ?
But the stock picker part in the text below picture, that does seem to have a ring of truth in it, because days of quick & easy gain in buying Index at the bottom is over. Going forward, larger gain in your account equity curve will have to come from sector rotation, e.g picking stock with momentum in other sectors or factors.
Mike Wilson social media meme
Anyway Mike Wilson sticking to 4500 SPX level has inspired a social media meme as follows,
Beta/Growth rotation chart
Per JP Morgan data, Beta/Growth rotation chart at 99.7 percentile, ( currently beta far outperform growth ). Time for Growth to shine soon ? we will be getting a resolution to this pretty soon.
Small cap growth base breakout
Small cap growth seems to have woken up from winter slumber. Stealthily breaking out of 2 year base. An interesting space to monitor going forward, how far will they go in the Gen-AI era and relatively high interest rate environment ? We are about the get an answer by next 1 – 2 quarters.
Technically speaking, recent price candles seems to be coiling up, it may either retest previous support or breakout higher without waiting for anyone.
Bitcoin
Bitcoin recent trading range has been contracting, up or down for the next move ?
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 on all time frame ( short, mid & long term )
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