Daily market review Nov 30th, 2023 (Dow jones breakout, equal-weighted outperform cap-weighted, Consolidation/pullback likely in the near term)
Broad market overview
A day After market displayed “toppish” pattern across the board, we have big breakout from Dow jones industrial average and bullish outperformance of equal-weighted relative to Cap-weighted counterpart. This is a very welcome sign as it points to breadth expansion in industrial, finance and healthcare sectors, perhaps hinting that incoming pullback/consolidation will be shallow. How far will we pull back if it happens? will assess again in the weekly market review.
We will skip the SPX and NDX charts since it’s very similar to yesterday chart chart and nothing much has changed.
Dow Jones industrial 30
Let’s look at Dow jones industrial since it had such an impressive breakout bar
Breakout bar look impressive and significant, but facing multiple resistance line and zone going back to Dec 2021 high
=>occur at higher than average volume
=>represent broadening of breadth industrial, healthcare and finance sector
I don't expect upside in immediate term, back and fill/consolidate in the next 5 - 10 trading days before pushing up further ( normally Down jones breakout are faded initially before resumption of subsequent Up swing or otherwise completely fall apart subsequently, but given that bull market just started, I am inclined to believe that Up Swing will resume again in the future )
Dow breadth analysis
let’s look the breadth to see if there are enough stock to push up DJIA ($INDU) further
Both % of stock above 50Day MA and 200Day MA are at 80%, which are closed to oversold level, therefore there is not much upside ahead
MOVE index
MOVE index closed at around 115.3, may go up to 120 level if 10Y yield retest 4.5 – 4.6 level, index will likely fall if it happens. In the mid – long term, would like to see it moving closer to 100 in the coming month. ( 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. )
Dollar index (DXY) & 10Y yield (TNX) negative correlation with Stock indices
Negative correlation between TNX-US indices, DXY-US indices still exist & are strong.
We will need to see how far 10Y yield & DXY will rise in 1st half of December to determine the pullback/consolidation % in the index.
NYSE market internals
Tuesday Nov 28, 1.03 to 1 NYSE Advancer to Decliner ratio
Wednesday Nov 29, 1.91 to 1 NYSE Advancer to Decliner ratio ( 1887/987 )
Thursday Nov 30, 1.72 to 1 NYSE Advancer to Decliner ratio ( 1786/1038 )
NYSE also had a much higher volume than previous week, so this is a positive & significant development
Sector performance on 1 week basis
On 1 week basis, offensive sector (Technologies, Consumer discretionary) are underperforming of Defensive sectors ( Consumer staples and utilities ). Finance and industrial are outperforming defensive sectors, which is a plus point
Charts that suggest possibilities of imminent pull back
10Year Yield (TNX)
10Y yield close at 4.35%, near support level, high chance of SPX pulling back in the near term
Junk bond had pin bar (shooting star& hanging man candlestick) near the top, , indicating imminent pullback for junk bond as well.
% of SPX stock above 50days MA
Market breadth is very solid ( but too solid for % of stock above 50days MA)
percentage of SPX-Stock above 200days-MA, currently at 61% .
percentage of SPX-Stock above 50days-MA, currently at 80.2% . getting close to oversold level, conditions are ripe for market pullback. If pullback/consolidation doesn’t happen immediately, then market likely will run up to high 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 is less good underneath the surface. We will observe a few more days for the pull back occurrence
Bottom line
Short term : pullback likely 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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