Daily market review Mar 27, 2024 (Mid&small cap, Equal weighted indices outperform Cap weighted counterpart, Economic charts in focus, Bitcoin price loss 70k handle )
Broad market overview
Happy Good Friday holiday to all the readers.
Market is lacklustre if your portfolio is comprised of only mega/large cap stocks, or the wrong mid/small cap stock, seems like rotation / Quarter end rebalancing is required. In case you haven’t notice ( almost slip my mind ), recent stalling/retracement in mega cap/large cap is most likely down to rotation into other sectors due to quarter end rebalancing by the institutions.
Anyhow, Mid and small outperformed and close at 2.36% and 1.64% respectively.
Overall, Equal weighted indices perform better than cap weighted counterpart.
Equal weighted SPX close at 1.57% and made new all time high(ATH), while Cap weighted SPX also close at 1%.
S&P 500 11 sectors
Utilities, Real estate and industrial are the top ranking sectors, while Technologies and communications lag behind the other sectors.
MOVE index
MOVE index closed at 86.28 level, almost reaching level before 2022 bond market angst ( bond price implied volatility is expected to be around 8.6% per annum. ) Consistent close below 100 level is in general bullish for market.
Bond volatility moving lower translates into lesser haircut to bond, in which more liquidity can be extracted from the collateral pool.
NYSE & Nasdaq market internals
Good A-D ratio, less than impressive volume , increase in new high and decrease in new low.
On March 27th 2024,
4.68 to 1 NYSE Advancer to Decliner ratio (2335/499 )
2.68 to 1 Nasdaq Advancer to Decliner ratio (3079/1150 )
% of stock above 20Day, 50Day, 200Day
% of SPX stock above 20day 50day 200day MA have all increased to above 81%
Also notably in the past few weeks, % of stock above 50days Ma drop to mid 50% level, but SPX has not even fall below 20day MA, this is a testament to the strength in US stock market.
McCllelan oscillator and Summation index
SPX McCllelan oscillator is slowly trending up again and summation index is increasing after bottoming at 800 level( indication of other sectors picking up the slack after tech and Semi momentum slowed recently )
As for NDX, momentum as represented by NDX McCllelan oscillator is a bit lacklustre. Summation index has drop and stall at 500+ level, may or may not have show signs of bottoming.
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
Economic data ( has mostly been priced in though )
Trend wage inflation
According to Apollo global management, Wage inflation is trending up. ( though your experience of it may vary depending on which sectors your are working in )
Retail spending amount ATH ( inflation adjusted )
As a result of wage growth (and loosening of financial conditions), Retail spending amount is at all time high after accounting for inflation.
Industrial PMI
Industrial PMI is bottoming and showing early signs of turning up , juxtaposed against Goldman Sachs Financial conditions index( 6 months lag )
Core Capital goods order
Meanwhile core capital goods order are still flatlining, and shipments are still in negative territory
Freight ( signs of abating in the future )
With Red sea – Houthi crisis hoggin the headline previously, Vessel has to change their lane to cape of god hope and containerized freight rate increase by 50% ( Asia – Europe trade lane ). This has been worrying analyst and market participant, and many fear could trigger a new bout of inflation if it’s persistent. According to insiders in the container freight industry, this fear could be overblown for the following reasons,
1) There are still many excess capacities ( courtesy of covid ballooning freight induced ship investment frenzy )
2) Big increase Freight is most contained to asia-europe trade, Asia-american, Asia-latin trade is less affected and may go down in the future
3) Yearly contract renewal negotiation will start around April – May, freight sales will have a hard time maintaining high freight
I was thinking of covering some more consumer side of the story but let’s not ruin the holiday mood. I will cover them again possibly next week. ( why US consumers are still pissed off , while the sentiment is shared by consumers around the world, more consumers are aggravated even though major stock markets are continuously making new all time high )
Bitcoin
According to the foremost Global Liquidity Expert, Bitcoin ( bitcoin only, other cryptocurrency has not been tested, which has lesser datapoint than Bitcoin) track the Global Liquidity relatively closely, lagging only by about 6 weeks, it display the quickest responsiveness to changes in liquidity conditions. No other instruments come close to it in terms of liquidity sensitivities. And this is why I dedicate a section to Bitcoin ( I look at it daily even when I am not writing any new blog entry )
Bitcoin hourly chart
Bitcoin hold the 61K low and has broken out of contracting triangle to the upside, back down to 69K after brief spike to 71K level.
Is Quarterly rebalancing affecting Bitcoin price ? ( possibly if institutions are maintaining 1 – 3% of their portfolio in it, and need to sell to balance it back to original 1 – 3% allocation )
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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