Daily market review Mar 20 2024 ( Risk asset rally across the board Dot plot to the market expectation, dovish tone Fed )
Broad market overview
Been busy with work lately, but it’s significant day when everyone is watching and waiting anxiously for fed meeting, so will post a short update here.
Market rally across the board post fed meeting. With Transportation gaining the most at 1.8%, while Semi, Mid&small cap are also close between 1.36 – 1.65%. While Equal-weighted indices perform almost as good as Cap weighted counterpart.
Only DJIA , equal weighted and cap weighted large cap made new high. While the rest are either around recent range high or resting at 20Day MA.
Mechanically speaking, everyone has been hedging for the fed meeting with short dated options, 0DTE, 1DTE Put contributing to the phenomena of market falling before fed meeting ( pre-event, market fall when participant buy 0DTE, 1DTE put ), and market rising during/after fed meeting ( event/post-event, market rise when participant square the 0DTE, 1DTE put )
Also Investment managers has been hedging ( net short 240K ES, S&P 500 futures ) , as shown by CFTC S&P 500 speculative net positioning, so it’s difficult to get big sell off when they are positioning for it.
All these demonstrate the Market adage, hedge pot never boils.
Dovish signal from dotplot and fed press conference.
Fed dot plot conclusion : Fed is forecasting higher real growth, higher core inflation with lower unemployment but still maintain 3 fed cut , therefore dovish.
Lower unemployment will not deter Fed from cutting rate.
Fed chair Powell mentioned that recent Jan Feb higher CPI could be down to Seasonality factor. And dominant downtrend in inflation is a healthy sign.
S&P 500 11 sectors
Discretionary, Industrials and financial are the top ranking sectors while health care, energy, Utilities, are the bottom ranking sectors.
When you have broad based participation in so many sectors, in addition to Financial joining the rally, this should put the sustainability and strength of the rally beyond any doubt.
MOVE index
MOVE index closed significantly lower at 92.2 level ( was 99.99 on 19 March ), bond price implied volatility is expected to be around 9.2% per annum. Consistent close below 100 level is in general bullish for market.
Bond volatility moving lower translates into lesser haircut to bond, and more liquidity can be extracted from the collateral pool.
NYSE & Nasdaq market internals
Healthy internals accompany the rally, good mix overall.
On March 20th 2024,
3.5 to 1 NYSE Advancer to Decliner ratio (2207/630 )
2.9 to 1 Nasdaq Advancer to Decliner ratio (3168/1094 )
Small cap growth base breakout
Price retest previous base breakout support. Will it retrace deeper or bounce from there ? likely to bounce higher if price can stay and hold above 270.
Bitcoin
Bitcoin traded as low as sub 61000 ( high 60K ), but still higher than recent low ( sub 60K ), higher high and higher low remains, and that’s the textbook definition of uptrend ( as long as 60K support holds )
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 )
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.