Daily Market review Nov 14 (Dollar plunge, Face-ripper Rally post CPI, Mid&Small cap, Equal-weighted outperform Cap-weighted Indices )
Broad market Overview
CPI release caused an insane rally in the Indices futures, by market opening, SPX had gap up to 4460 and NDX had gap up to 15730 ish. DJIA rose by 1.43% , SPX rose by 1.91%, NDX rose by 2.13% Equal-weighted outperformed Cap-weighted, Mid & small cap rally was by far the most impressive, surged by 3.86% & 5.47% respectively. As the old saying goes, when the Train leaves the station, it doesn’t back up to let latecomers get on board. So count yourself lucky if you ever get in some/all of your position in this rally.
Actually I chose this particular front cover image for this blog entry for a specific reason. To those watch CNBC or mainstream financial media, Fed meeting & CPI was the catalyst behind this monster rally. But to those insiders, it’s Yellen ( Treasury ) who first planted the seed and started the whole rally before fed meeting. This is metamorphic info which I have come to comprehend deeply in a regretfully late manner, I will reveal more about this in the blog entry tomorrow if I manage to get more likes, shares and subscriptions. Otherwise, maybe I will keep it on hold and reveal at a later date.
Market expected the CPI to trend down gradually, but the reception was rip roaringly good even though there were signs of pricing in the CPI drop beforehand. Market had even priced in extra rate cut for Fed in 2024. ( per below chart )
I believe that taking out 2023 July high is entirely possible and taking out 2021 Dec high ( all time high ) is not such a far fetch idea. As such, I have prepared upside target after taking out all time high. ( market won’t go there in 1 straight line, but will likely have a few retracement before reaching there, so take whatever retracement you can get from now on if you have not participated in the rally yet )
138.2% Fibonacci extension of March low to July high
SPX : 4910
NDX : 17550
Trend following process
On the trend following model , all the slow tempo model such as daily ichimoku cloud and 21Day EMA crossover to 63Day SMA model has given the “signal” for NDX. But for SPX, we are only pending for 21Day EMA to cross over to 63 Day SMA.
For newer reader, this is not a trading signal per se, but more of a process/weight of the evidence approach to approximate the Commodity trading adviser (CTA) Trend following model signal occurrence speed. Because CTA usually employ a range of trend following model to long/short the market.
Bollinger band 63Day-MA + 2SD
Rationale for this model are explained in previous blog entry (Weekly market review Oct 31 - Nov 3 part 2) if new readers would like to know more.
SPX still have some room before touching the 2 standard deviation upper Bollinger band.
NDX has touched the 2SD upper Bollinger band
Probability of retracing in any meaningful manner for both SPX and NDX is very low in the near term, so count yourself lucky if you ever get some. ( I need to get deeper pullback as well, but realistically speaking, hard-pressed to come by )
MOVE index
MOVE index closed at around 124, would like to see it closing below 120 consistently and move closer to 100 in the coming days.
10Year Yield (TNX)
10Y yield broke below 50day-MA and 2nd Uptrend line decisively. Junk bond is gaining ground on previous swing high around 91 level.
Some interesting stats on 10Y yield movement after last fed rate hike.
8M – 12M post rate hike, 10Y yield drop by 108 to 132 basis point. If history were to hold true again, we could be looking at high 3% 10Y yield.
Dollar index (DXY)
Dollar plunge, and is getting very close to 200Day MA.
Interestingly, Dollar daily Ichimoku cloud is also turning red.
NYSE market internals
Monday Nov 14, 1.03 to 1 NYSE Decliner to Advancer ratio ( 1456/1403)
Tuesday Nov 15, 10.5 to 1 NYSE Advancer to Decliner ratio ( 2667/254 )
90% Up volume day (967633152/1059342538)
Tuesday UP day occur at higher volume compared to previous weeks
% of SPX stock above 50days and 200 days MA
Market breadth is looking stronger by the day,
percentage of SPX-Stock above 50days-MA, currently at 66.4% .
percentage of SPX-Stock above 200days-MA, currently at 51% .
Sector performance over 1 week basis
Offensive sector ( Technologies, Communications , Consumer discretionary), financials, industrials are outperforming Defensive sector (Utilities, consumer staples) on a 1-week basis, from Nov 6 – 10.
Transportation
Transports rose above 200Day MA for the first time in a long while. The longer it stays above the more significant it becomes.
Homebuilder
Homebuilder ETF gapped up and close above 82, blowing past 78 swing high emphatically. We will see when it can close above 85 All time high level in the coming days.
Industrials
Gap up and took out previous swing high of 103.92.
Financials
Financials Gap up and is inching closer to 35 level
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/