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"You can also commit injustice by doing nothing." -Marcus Aurelius Playing Defense: The quote above certainly has a multitude of ways to discern it, but in a market sense, it can be viewed as holding onto losers longer than we should. The current environment we see ourselves in is a difficult one, and for that reason, one should remain small with a hefty cash position. Markets seemed to say last week that we have been wounded and the best thing would be for some well-deserved rest. The moves off the October lows have been substantial and we are in the process now of giving some of that back which is prudent. The S&P 500 is now on a 6-day losing streak with all 6 of those sessions CLOSING at or very near lows for the daily range, a bearish trait. Technology is now UNCH in 2024 if one can believe that and AAPL, the second-largest company in the world has been in a tailspin since the doji candle on 12/14/23. It fell every day last week, losing 6.5% its worst WEEKLY decline in exactly one year. MSFT the biggest stock on the planet is back to the very round 400 number, the fourth time it has done so since late January and my belief is the more times a line is touched the less likely it is to be supportive. Perhaps it will bounce near the very round 400 number and go on to form a bearish head and shoulders with a bounce toward the 420 level. Large levels of cash is a prudent position at the moment.

"Victory is reserved for those who are willing to pay its price." -Sun Tzu Weary Nasdaq? Technology has been in the shadows recently with the exception of the semis, and last week it was the worst-performing major S&P sector out of 11 and only one of two in the red with the XLK dropping .75%. On a YTD basis, the group has been floundering, albeit higher by more than 8%, but making it just the 7th best actor overall. We will talk about software later in this note but the semis are coming into a soft seasonality period in April with the SMH CLOSING lower 3 of the last 4 years with a pedestrian average loss of 1.7%, but notice it is followed up by powerful months of May and July finishing up almost 8% and CLOSING higher 100 % of the time dating back to 2020. The daily chart of the Nasdaq below does feel stretched, now 2000 handles above its upward-sloping 200-day SMA, but peering at the MONTHLY chart Thursday broke above a 29-month cup base pivot of 16212, negating the bearish gravestone doji candle from November 2021. It is now on a 5-month win streak and 2 of the last 3 times that occurred, it fell 2 months in a row in September-October 2020, and then fell 3 months straight in August-October 2023. It feels like a continuing rotation is going on out of tech and into energy, industrials, and materials.  

Biotech Line in the Sand: The XBI has been tricky in 2024, and I have been chopped up somewhat. The robust move above the very round par number the week ending 3/1, which jumped more than 7% in the strongest WEEKLY volume since the week ending 5/13/22, I felt was a very good signal. All of those gains and more have been evaporated and the fund now sits 8% off most recent 52-week highs, but this week recorded a bullish engulfing candle, with the tightest range in more than 4 months (and the week before was a spinning top which often indicates at least a pause in selling or better yet a change in the prevailing direction). On the WEEKLY chart below we can see how since the start of 2023 the very round 90 number was resistance, before a bull flag breakout above the level which carries a measured move to the 115 area. I think this area offers good risk/reward here. One caveat continues to be the MONTHLY chart with the very round par number being resistance at the 50 MONTH SMA, a secular moving average it has traded above in both February and March but CLOSED below each time. A break, and CLOSE, above 100 in April would be a very bullish development for the space. On the bright side, it is still trading ABOVE the break higher from the bearish head and shoulders formation, and we know from FALSE moves come fast ones in the opposite direction.

"He will win who knows when to fight and when not to fight" - Sun Tzu Dodgy Dow? As the hype with technology reigns, more specifically the semiconductors meteoric rise, the Dow that was gaining some of the spotlight in the latter part of 2023 has subsided. And its chart is displaying that melancholy. Perhaps one would say the Dow is meaningless but on this chart, one can see it has had the propensity to lead in years past as seen here. Truth be told since the start of the year the Dow has been lagging and could this be a canary in the coal mine if it breaks below this recent digestion and its 50-day SMA? On a YTD basis, the Dow has advanced by 3%, while the Nasdaq and S&P 500 have risen by 6 and 7% respectively. This is a PRICE-weighted index (and the higher-priced names are more influential) so particular attention should be paid to UNH, which is below its 200-day SMA and 12% off its most recent 52-week highs. MSFT, the second largest component which we spoke about in our Friday Tech Note is the one to watch as it may have recorded a failed breakout Friday. It registered a spinning top candle the day after a CLOSE above a cup base pivot of 420.14, but give it the benefit of the doubt and remain bullish as triple witching may have skewed the technical picture Friday. One can see that UNH has done the damage and the Dow has held up but if Microsoft buckles that could be a shot across the bow.

"Indecision is the Thief of Opportunity." - Cicero Small Caps Stand Tall: The Russell 2000 looks ready to join the rally parade with the IWM jumping 3% last week, CLOSING at highs for the WEEKLY range and respect that it is now making it a habit finishing in the upper half of the WEEKLY range, doing so for the last 4 weeks. I will not disagree with anyone calling this a "rolling" bull market, as now the small caps take their turn showing some real strength. My opinion is that the area of former resistance just below the very round 200 number should now be support, or at least a very good risk/reward stance going forward. To me this chart looks similar to the XBI with both being sensitive to interest rate fluctunations and notice Q4 2023 the correlation between the two was almost perfect at a value of 1. The MONTHLY chart shows nice digestion of the November-December surge and is now well rested for a possible powerful move upward (notice the low of this budding cup base found support at a prior double bottom breakout from November 2020. Since the start of February it has kept pace with technology as seen here, and perhaps another sign of "risk on" is the stalling nature of the old stodgy Dow Jones, even as they attempt to spice it up with the recent addition of AMZN (the index now has just five true industrials).