Weekly market review Jan 8-12th, 2024 Part 1 (Market range contracts and stall at resistance high, Bitcoin plunge > 13% over the weekend)
Jan 8th – 12th 2024 Weekly review section will be published in 2 sections,
Section 1: Overview section
Section 2: In-depth market review for paid subscribers
Broad market overview
On Jan 12th 2024 trading session. SPX, NDX , DJIA and Transport close flat and stall at new resistance high heading to the weekend, were it not for Microsoft, Amazon, Meta holding up the indices, market would have fallen further, so there’s market distortion for 2nd day in a row.
Equal weighted, Mid&small cap and transportation range are contracting, which typically happen before occurrence of large range candles in near term future.
S&P 500 11 sectors
It’s mixed and not showing much signal.
Apple downgrade (to 2nd largest holdings in SPY, and likely followed by Inveso QQQ later by next 1 – 2 weeks )
FYI,
=> as of Jan 11th 2024, Apple is the 2nd largest holdings in SPY ETF at 6.76% , 1st largest holdings Microsoft weighting has been increased further at 7.12%
=> InvesCo QQQ largest holdings is apple at 8.89% ( previously at 8.9X% ) , Microsoft at 8.8% ( 8.7X%), Invesco has initiated the weighting as of Jan 11th, 2024
It’s only a matter of time before Apple market Cap is overtaken by and other ETF, Mutual funds start lowering Apple weightings in the fund, Apple performance will likely lag both market & Tech Sector return going forward
The 2 Factor boosting Microsoft outperformance and Apple lagging behind market are illustrated below,
Factor 1 : On the surface, the % changes may not seem much, but 0.3 – 0.4% differences in all these ETF and Mutual funds are equivalent to multi-billions dollar in flow allocation differences, inflow differences of this magnitude widen the return performance chasm between them.
Factor 2: The difference in fate could not be starker, Apple is facing few headwinds( sales slowdown, lawsuits, and possibly weightings changes in ETF/mutual in future ), while Microsoft is having tailwind on its back ( AI deployed across all the divisions )
So, which one is the bigger factor determining the returns between Microsoft and Apple going forward ?
The uninformed investors will often talked about factor 2, the informed investors over at my site will talk about factor 1.
MOVE index
Move index give us one possible lenses to look at private sectors collateral pool utilization. MOVE index close at 103, price has broken out of symmetrical triangle formation.
MOVE has broken to the downside , pointing to bond volatility reduction, but stock is still in consolidation phases, things are getting stranger.
I have turned to relationship between ten year yield and stock for reference.
10Y yield ( TNX ) and S&P 500 correlation.
The negative correlation between 10Y yield and S&P 500 has weaken considerably over the past few session.
NYSE market internals
Wednesday Jan 10th, 1.31 to 1 NYSE Advancer to Decliner ratio ( 1660/704 )
Thursday Jan 11th, 1.39 to 1 NYSE Decliner to Advancer ratio ( 1631/1174 )
Friday Jan 12th, 1.22 to 1 NYSE Advancer to Decliner ratio ( 1543/1262 )
And the volume has reduced considerably compared to previous week , so no meaning signal can be deduced.
Bitcoin charts and market chatter
I have decided to include a section to analyse Bitcoin daily charts, after Bitcoin ETF is approved.
=> It’s becoming mainstream and will continue to receive significant institutional flow in future
=> BIS allowed Central bank to store 2% reserve in cryptocurrencies as of 17 Dec 2023
=> In terms of bond jargon, Cryptocurrency has larger “duration risk” than Technology stock, therefore Crypto possess far higher sensitivities to liquidity & interest rate fluctuation than other financial instrument, offering one extra lenses to look at ( outcome of ) liquidity and risk appetite.
Now let dive into Bitcoin daily charts
Fail breakout (upside breakout ) indicates professional selling pressure and is bearish near-term, will examine over the coming sessions for the following 2 things,
1)20D MA break below 50D MA
2)breach sub 40K support ( previous low )
Technical characteristics of bitcoin to take note,
1)Tight coiling, bottom is higher and keep getting bought
2) 20D MA delineate the shorter-term uptrend and downtrend phases very well.
3) Price stay above 20D MA after 20D MA cross above 50D MA (Green Phase)
4) Price stay below 20D MA after 20D MA cross below 50D MA (Red Phase)
So what’s behind the Bitcoin >14% plunge ?
There’s a few market chatter on this,
1) Spot Bitcoin ETF approval tailwind factor fully price in ( buy the rumor sell the news )
2) Bitcoin basis has turn negative, showing strong selling pressure in Bitcoin futures market. Since this basis/premium has closed, the basis traders (large institutional traders) has proceed to closed their trade by Buying futures bitcoin and selling spot bitcoin ( who previously initiate their position by selling future and buying spot )
Interestingly, IBIT Is doing better than all it’s rivals , drop lesser than Spot Bitcoin. IBIT has largest inflow intraday ( bar GBTC ) and is ranking high up in investor preference.
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.
That’s all for part 1 free weekly market review section.
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