Daily market review Mar 14 2024 (Cap weighted outperform Mid&Small cap , equal weighted counterpart, Macro charts in focus )
Broad market overview
It might be hard to believe at first sight that market was actually selling across the board on March 14th, if your focus is only on the Cap weighted indices. How could the market be in bad shape when Cap weighted indices are only dropping a measly 0.3%. But when you look at other market, the picture is quite awful, with Semis faring the worst at 1.8% ( thanks to Nvidia 3.4% drop ), Small and mid cap suffer a drop of 1.6% and 1.3% respectively, Transportation drop 1.34% and equal weighted lose between 0.8 – 0.9%.
In case you haven’t notice, Nasdaq 100 fail to make new high since march, DJIA & Transportation, small cap fail to make new high since Feb, in contrast, only SPX has been making new high, suggesting rotation into other sectors of the market.
Semi had a large Bearish engulfing bar with high volume ( courtesy of Nvidia again), 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, Technology are the top ranking sectors while real estates, Utilities/Financial, staples and are the bottom ranking sectors.
This a mix signal, contrary to what you would expect in sell-off day ( perhaps a saving grace )
MOVE index
MOVE index ticked up slightly to 98.6, closed below 100 for 2 consecutive day ( bond price implied volatility is expected to be around less than 10% per annum ). We will be monitoring closely to see how many session it close below 100 level, consistent follow through is important here.
Bond volatility moving lower translates into lesser haircut to bond, and more liquidity can be extracted from the collateral pool.
NYSE & Nasdaq market internals
Volume pick up , and sell off across the board can be seen in the ratio ( sell-off has not reached serious level yet ). New low has increased slightly.
Will it be one off event or will it bring about more sell off on Option-Expiry day and the subsequent post Op-Ex week.
On March 14th 2024,
3.75 to 1 NYSE Decliner to Advancer ratio (2246/599 )
3.08 to 1 Nasdaq Decliner to Advancer ratio (3217/1045 )
NAAIM index
The National association active investment managers index has breached above 100 level again @ 104.75, signifying that Investment managers are beyond fully invested.
Based on previous record, it could possibly go as high as 110 before consolidation/pullback sets in.
Will this high NAAIM herald the arrival of consolidation? we shall wait and see.
Macro charts section
GS Prime book leverage
Per Goldman Sachs(GS) Prime brokerage data, Hedge fund has reduced their gross leverage slightly but increase the net leverage. ( meaning reduce their short position , simultaneously adding more to their long position )
Record Semi daily Inflow (SMH)
Per GS data, we just witness the highest daily inflow to SMH - Semi ETF in 7 years at 1.6 billion, likely institutional flow. Will they be trapped at a high level or be the fuel for further rally ?
Nvidia Volatility
Market leading stock - Nvidia volatility has been rising in the previous months, a precursor to consolidation or further upside rally ? we will monitor closely in the coming weeks.
Small cap growth base breakout
Price retest previous base breakout support. Will it retrace deeper or bounce from there ?
Bitcoin
Bitcoin retested previous 69K support level, but struggle to go above 72K at the moment.
Bitcoin-Equity correlation
In short, weak in bull market , strong in bear market. How about Bull market consolidation phase , we will find out soon when we encounter one. My initial guess is if every asset class ( equity , commodity, cryptocurrency ) is responding to liquidity conditions, then IF equity market enter consolidation phases, they will face the same fate and move together.
Studies like these are contrary to crypto passionate enthusiast claim of crypto being a hedge. Obviously, Cryptocurrency are no different from other asset classes in terms of correlation ). During bull market, every asset classes will move according to their own micro factors. During bear market, trading book will be derisk for all asset classes, causing everything to fall and creating high correlation conditions across all asset classes.
Feedback loop of Spot ETF inflow – BTC rally (post BTC ETF approval)
Anyhow, currently Crypto currency is still in the dynamic feedback loop of Spot BTC ETF inflow fuel BTC rise, and BTC rise fuel spot BTC ETF inflow, things can cut both ways and there’s no telling WHEN or IF it will end.
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 in all time frame ( short, mid & long term )
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 Financial advisors before making any trading /investment decision.