Free

AI Footwear Winner? Of course, the above statement is a weak stab at humor, but the chart below shows how closely DECK has been trading to NVDA since the late October lows last year. Each has essentially doubled in PRICE and one should expect these leaders to continue to flex their muscles because we know that stocks once in motion, whether up or down, tend to remain that way, more likely than they are to reverse. In the small footwear niche arena DECK is not surprisingly being held hostage, most likely temporary, to round number theory. A bull flag is now in place and a move above 900 carries a measured move to 1050. CROX is sporting a bull flag formation of its own and a move through 120 could see a target of 145. BIRK is attempting to solidify itself above the very round 50 number and Friday almost precisely retested a double bottom trigger of 50.29 taken out on 2/12 (former resistance at the round 50 figure now looks like support). SHOO is north of its double bottom pivot of 43.68 taken out on 2/15.

"It usually takes more than 3 weeks to prepare a good impromptu speech." Mark Twain Nasdaq Brick Wall? In our last WEEK AHEAD Note we opened with the quote "Whenever you find yourself on the side of the majority, it is time to pause and reflect." To be frank many market participants were very hyper-bullish given the big tech move in November-December last year, however, January failed to deliver on the "Santa Claus rally" and the January barometer as well with the Nasdaq up 1% (much different to January 2023 that jumped almost 10%). It feels like the benchmark is at a stalemate here as sentiment has become negative. With seasonality bearish and the Nasdaq coming into contact with the round 16000 figure (on 2/9-12 both CLOSED below though), last touched with the MONTHLY bearish gravestone candle in late 2021 is a double top on hand? The vast majority of smart investors I communicate with are bearish now, myself included, and the daily chart seems to confirm this belief. We are seeing negative RSI divergence, with PRICE beginning to confirm, with dubious candlesticks too with a shooting star and engulfing candle on Monday and Friday. I think one should be positioned with plenty of cash, but be open to the idea of another leg higher. One can always get back in with a firm break above 16000. Patience here, with no need to be a hero.

"Whenever you find yourself on the side of the majority, it is time to pause and reflect."  Mark Twain Size Matters? It was refreshing to see last week's small caps put up the best showing with the Russell 2000 gaining 2.4%, compared to the Nasdaq up 2.3%, the S&P 500 higher by 1.4%, and the Dow UNCH. They are often thought of as leading indicators and of course, they often can give clues to the direction of interest rates, as most small-cap names need financing to survive in their formative years. Like most of the major averages, the Russell 2000 is dealing with round number theory as it inched above the very round 2000 figure Friday. The WEEKLY chart has the look of a bull flag which also recorded a bullish engulfing candle, but I would love to see a decisive break above 202, which would carry a measured move to the 240 area. Interesting to see here how in 2024, while small caps are in pursuit of the big three major averages, it is catching up first to the Dow which is beginning to flatline. The top holding in the Russell 2000 ETF is SMCI which at just more than 1%, is three times the size of the second-largest component in ELF. Wonder how much that is skewing the performance of the IWM? The bottom line is above the 200 number keep a constructive bullish point of view. The MONTHLY chart shows a cup base possibly taking shape which could travel toward 240 by the end of 2024, which would confirm the measured move of the WEEKLY bull flag.

Biotech Feels Firm:   As with an abundance of big tech firms REPORTING earnings this week, it may be wise to pivot one's attention to some overlooked parts of the market to potentially capitalize. The biotechs did record a powerful run last year in harmony with the overall market and they have since stalled. No one would fault those who are skeptical given their history, and therein may lie the opportunity. The WEEKLY chart below shows just how well the fund has been holding up at the very round 90 number. The prior 3 times it has tested that level witnessed drawdowns to 75, 72, and more recently 64 late last year, and note it started descending almost immediately. This is now the 6th week it is "glued" to 90 and I think that is encouraging for a move toward par in the near term. The period of the summer of 2022 and the present move to 90 was very similar, each taking roughly 9 weeks, and again the fact that it is keeping this altitude near the figure is a good sign. Some of the large names in the IBB are behaving themselves very well too with the AMGN bull flag, which has found support at the very round 300 within the formation. VRTX has broken above a bull flag and there has been plenty of M&A activity in the entire biotech arena. Taking a peek at the annual returns of the XBI over the last several years shows last year was the first single-digit move since 2017. Is it ready for another strong double-digit advance in 2024?

"So Much Has Happened, But Nothing Has Changed" Glen Frey Momentum Building: Those lyrics from the Glen Frey song "You Belong to the City" could very well be describing the PRICE action of the S&P 500 as seen on its MONTHLY chart below. The widely followed benchmark is simply back to levels seen roughly 2 years ago. It is just above the 4819 cup base breakout pivot, meaning we could be on the cusp of another major move higher. What has happened between those 2 years is plenty, with the main thing being the 28% drawdown from the top to the bottom of the range. The Dow and S&P 500 have led the charge recently as seen on this performance chart, and impressive is the DOW leading since the start of Q2 (green line). If it is on the verge of another sizable jump, of course, no one knows this, but if so it has to start somewhere. Notice that each time the index has recorded a 3-month win streak, it has happened 10 times over the last decade, all 10 times saw at least another MONTHLY gain and in many cases more than that. So if the S&P 500 can CLOSE above 4870 next Wednesday could the gravy train be getting ready to pull out of the station again? Keep in mind next week has some of the most influential names REPORTING earnings, so a 2.5% move lower the first 3 days of next week (MSFT AMD, and GOOGL release Tuesday after the CLOSE) is certainly not out of the question and could throw a wrench into the program.