Daily market review Nov 27th, 2023 ( market gains likely limited in the near term)

Broad market overview

Market is still consolidating at the upper range, if price climbs again, likely will have some consolidation/stalling/pullback in 1^st half of December.  

After reviewing various data with a fresh pair of eyes after Thanksgiving holiday, further market gains maybe limited. Can market go up again in the next few, absolutely, can market pullback in the first half of December and possible fill CPI gap ? We cannot rule it out either.

JPM retail equities order data

Finally retail investors are waking up and rushing to the bull party after seeing a huge 3 weeks rally, equities order are spiking. This is where I am likely to be wary, because Retail investors are getting too confident and that means there’s some weak hand to be shaken out by Institutions. While I am still bullish mid to long term, short term I am a bit hesitated too press long again or aggressively ramp-up risk exposure.

SPX

Market form a ascending triangle going back to Pandemic Low, and Dec 2021 high. So long term it’s still bullish, but will market have enough to power on and breakout to further new high, I doubt it. RSI is turning down from overbought level, suggesting waning momentum in the near term.

So 2 scenarios going forward,

Scenario 1 Pull back before breaking out (60% chance)

Scenario 2 Breakout and retest subsequently the downtrend line connecting market peaks of December 2021 and July 2022. (40% chance )

NDX

Price stop at 161.8% retracement fib level of Market October down swing to oct 27 bottom. We need to observe a few more days for further clue.

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.

For NDX, there are some small pin bar touching the 2SD upper Bollinger band.

Probability of retracing for both SPX and NDX cannot be rule out

MOVE index

MOVE index closed at around 109, would like to see it moving closer to 100 in the coming days. ( Lower MOVE index decrease bond haircut, causing an increase in collateral value of bond, leading to more fund available for big institutions, thereby increasing market liquidity. )

10Year Yield (TNX)

10Y yield still is below 50day-MA and below2^nd Uptrend line, cannot rule out retest of 50day MA in the days ahead. Indices will likely fall if 10Y yield go up and retest 50Day Ma in the near term.

NYSE market internals

Friday Nov 24, 2.79 to 1 NYSE Advancer to Decliner ratio ( 2040/730 )

Monday Nov 27, 1.37 to 1 NYSE Decliner to Advancer ratio ( 1654/1202 )

Charts that suggest possibilities of imminent pull back

% of SPX stock above 50days MA

Market breadth is very solid ( but getting nearer to too solid for % of stock above 50days MA)

percentage of SPX-Stock above 200days-MA, currently at 57.2% .

percentage of SPX-Stock above 50days-MA, currently at 75% . market has pulled back from 70%++ in the past, otherwise market likely will run up to 80% or even 90% before consolidation/pulling back sets in.

NYSE McClellan Oscillator

SPX made a higher high, but NYSE&Nasdaq McClellan Oscillator is still making a lower high, potential divergence in development, signalling that breadth deterioration is less good underneath the surface. We will oberve a few more days for the pull back occurrence

Sector performance on 1 week basis

On 1 week basis, Defensive sector ( utilities & consumer staples ) is leading offensive sector (Technologies, Consumer discretionary, Communications ). This is not the right leadership if market need to continue higher. So it suggest short term pull back may be incoming.

Although on 1 month basis, we still have the right leadership, offensive sectors outperforming defensive sectors

Bottom line

Short term : pullback maybe due

Mid term : bullish

Long term : bullish

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.

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