Market Review Oct 16 2023 ( broad based market rally, 1% UP day for small, mid cap, major sectors )
If you were to tell anyone that on Monday market open, market will rise even though it is facing close to 90 dollar per barrel for Brent crude oil, 10-year yield at 4.71%, possibility of Israel-Hamas war expanding, US speaker uncertainty, chances are people will ask you what are you smoking ?
Yet this is what happen on Monday, in fact there isn’t any selling at all, it’s 80% UP day based on NYSE volume by the market close. And virtually every market and sector recorded a 1% rally.
Market seem to hold even when 10-year yield was rising on 16.10.2023 to 4.71%
S&P 500
Price seems to be holding above 20days MA, but still beneath 100days MA and the breakaway gap.
As long as price can hold above 4320, we will likely close the gap in the coming week(s).
When market rally even though 10year yield is increasing to 4.71%, it likely mean 2 things,
1) EPS growth / revision upwards is being priced in, and market shrug off 4 to 5% yield as if it’s a nothing burger**
2) 4.7 ish 10-year yield is the last retest of 10-year yield high and will start to rollover soon
** while 4-5% yield may seem high, Historical data shows that biggest PE Multiple happen around 4-5% yield level.
80% up volume day
The most recent 3 80% UP or DOWN volume day are as follows,
Oct 10 2023, 80% UP day
Oct 12 2023,80% DOWN day ( negate Oct 10 80% UP day somewhat )
Oct 16 2023, 80% UP day
NDX
There isn’t much changes to Nasdaq 100 from previous week development, apart from maybe waiting for the breakout in bullish flag format ion
Is there any market breadth ?
The naysayers has been complaining that the gain in S&P this year has been concentrated in Magnificient 7, market breadth is bad, and other sectors, small, mid cap are still anguishing in the depth of bear market.
They say when market breadth is so “narrowly concentrated” to Megacap leaders, there can only be 2 outcome subsequently,
Outcome 1) the general finally fall after all the soldiers has fallen down ( which is what the naysayers has been repeating ad nauseum)
Outcome 2) the laggard finally catch up with the leaders
Based on Oct 16th Market close, We are seeing green shoots, and some evidence that suggest Outcome 2 will begin to materialize.
Let’s look at the following charts,
S&P 500 all 11 sectors,
Major US index
charts show that transportation, small, mid cap are all having >1% up day., infact, Small and mid cap are outperforming the Megacap today ( 1.6 - 1.8% respectively )
If we zoom in on transportation and industrial,
Transportation
Transportation is trying to make a stand in 200-day MA and uptrend line support, as long as it can stay above 200D Ma and above the uptrend line, it’s further confirmation of the market underlying strength
XLI ( SPDR industrial sector )
Industrial is trying to defend 200-day MA after retest and bouncing from previous congestion zone.
Overall , today broad based market rally is a very welcome signal. Market might not go straight up , it could progress in a 2 step forward , 1 step backwards fashion.
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.
My next upcoming articles could be ,
1) Bond market explainer series part 2 – why the much-anticipated 2023 recession did not happen ? ( in spite of yield-curve inversion )
2) US stock market review
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/