Weekly market preview Mar 11-15 2024 ( market inflection point : Mar 12 CPI release )
Broad market overview
Most of the indices are forming bearish engulfing pattern at the top on Friday,
Nasdaq and Semis perform the worst . Losing more than 1.5% daily.
While small cap, equal weight SPX & DJIA perform the best, losing a mere 0.15 – 0.19%
Overall , Mid & Small cap, Equal weighted indices outperformed Cap weighted counterpart.
Will there be follow through, it will depends on the crucial CPI data release on March 12 , where everyone will be scrutinizing the data component to see if there are any elements showing signs of stickiness/sustainable increase.
Just one interesting observation though, there’s some “stealth outperformance” from Equal-weighted, mid and small cap when there was selloff day in Cap weighted index quite consistently in the past. And if you look at various other sectors, industries ( Finance, Homebuilder, industrials, healthcare…etc ) , they were all making new 52-week high, this mean there are broadening participation in the market rally.
S&P 500 11 sectors
Real estate, Energy and utilities are the top ranking sectors while Technologies, staples and materials are the bottom ranking sectors.
Mix signal.
S&P 500
The sell off on Friday March 8, fail to breach the recent low, so there’s no trend deterioration yet. RSI and Price action are coiling to move up/down, March 12 will be the crucial day to get an initial inkling of the next directional move.
Nasdaq 100
The sell off on Friday March 8, fail to breach the recent low, so there’s no trend deterioration yet.
RSI and Price action are coiling to move up/down, March 12 will be the crucial day to get an initial inkling of the next directional move.
Would like to point an interesting phenomena, as market gets jittery over the important data release or fed decision, there will be some pullback/sell off before the “event” date, but ultimately it all fail to have any follow through in the “event day” or “post event” day. Which led to market chatter about the use of cheap hedges, 0Dte options before event date to hedge against event date, and square the hedges on the event date. Contributing to Fall before event, rise in the event or post event date phenomena.
Also, there’s not much deterioration in Inflation data yet even though it look “sticky” at high 2 or sub 3% in the past few months. Hence, the no follow through in sell-off day.
March 12 CPI release will be a crucial milestone test for the market, because it directly informs the dot plot projection and fed communication tone.
FYI, per past info from Fed chair Powell, FOMC members are given up to 24 hours before start of meeting to submit their updated dotplot, so period between March 12 to march 19-20 meeting are quite an ample time for them to assess their economic projection point.
Mag 7 year to date performance
If someone were to tell you in the 2024 early Jan that Apple, Tesla and Alphabet would be -12%, -29% & -6% by March. That would be a recipe for flat to down benchmark market indices performance. But instead the other 493 companies in S&P 500 and 93 companies in Nasdaq 100 in are combining to give 1 hell of market rally to power the benchmark index high.
Macro consideration
Inflation expectation
Per Apollo Global management charts, Breakeven inflation has been moving higher as a result of TIPS pricing in higher inflation expectation. Will stock market take note if they are correct and how will stock market price it going forward ? ( Caveat here, bond market are not always correct though )
Flow and volume data
Hedge Fund Semi exposure
HF exposure to Semis are high, but not historically high.
Signs of retail euphoria ( I am not suggesting things are bubbly currently though )
Nvidia Call volume
Humongous rise and historical high, has the cart gotten to an imbalance tipping point ? March 12 CPI will decide everything.
Retail Popular traded stock ranking
Share of Total retail turnover, as usual no surprise here, Nvidia, Tesla, SMCI, AMD. But the “surprising” thing here is that Tesla is still ranking no. 2, one can only hope they are trading it actively with profits rather than holding the bag at lossess / breakeven ( not to mention the opportunity cost of stagnant account / underperforming the market )
NYSE & Nasdaq market internals
The selling seems rather “meek”, there’s no high Decliner to Advancer ratio and no expansion of new lows.
On March 16th 2024,
1.25 to 1 NYSE Advancer to Decliner ratio (1549/1244 )
1.01 to 1 Nasdaq Decliner to Advancer ratio (2137/2108 )
Bitcoin
Bitcoin is approaching 70K level, which is a respectable resistance at the moment, as attempts to break above it is not successful. When will it break above, the approaching Halving or CPI undershoot ? will it pull back if stock market is spooked by CPI on March 12 ?
70K level is a respectable resistance, as attempts to break above it is not successful. When will it break above, the approaching Halving or CPI undershoot ? will it pull back if stock market is spooked by CPI on March 12 ?
Will the consolidation be done in price or in time ? Only time will tell.
An interesting place to watch in the next few week.
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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