THE WEEK AHEAD: Starting 6/5/23
"When you are the underdog you just lay low and work" -Russell 2000 Does Size Really Matter? A theme in this WEEK AHEAD Note will be if participation is starting to expand. Here we will [...]
THE WEEK AHEAD: Starting 5/30/23
"Do not confuse brains with a bull market." Good Habits: We know it is a bit premature with 2 sessions, as the debt ceiling debate comes to a conclusion, left in May but below we take a look at the MONTHLY chart of the Nasdaq and if it CLOSES in this 13000 area, it will make it 4 of the last 5 months CLOSING at highs for the MONTHLY range. Good habits are hard to break and perhaps this will be a good sign as we head into the solid seasonality period, and remember we spoke a few weeks back about how April having the tightest MONTHLY range in the last 4 years was a very bullish development. If it can climb above the 13000 number which was a speed bump last May and August that would in my opinion really put some FOMO into this rally. Over the last month's period, the semiconductors rose more than 26%, not a typo, and software is also higher by more than double digits. MRVL during that period has jumped 72% and peer PLAB has added more than 50% falling just 5 sessions during the time frame. In software AI and PLTR have advanced 86 and 76% respectively. And plenty still do not believe in this potent, overall move.
THE WEEK AHEAD: Starting 5/22/23
How do you know when you are in a bull market? "Because whenever you get out, you must pay up to get back in" Peter Brandt Yield Unease: After 9 weeks of spooning a now sideways moving 50 WEEK SMA the ten-year yield recorded a potent advance of more than 6%. This could be a damper of equities if this sees follow-through in the near term. It seems to be carving out a double bottom pattern on the WEEKLY chart and for those not concerned notice the 6-week winning streak, which added a combined 14% before reversing with a WEEKLY doji candle, between weeks ending 1/27-3/3. That saw the Nasdaq give back a good chunk of the gains from January with WEEKLY losses of 2.4, 3.3, and 4.7% in the weeks ending 2/10, 2/24, and 3/10 before regaining its composure. On the WEEKLY RSI below notice, momentum has been waning with lower highs since early 2021 and again in mid and late 2022. The signal line on the MACD looks like it is curling higher right at the zero number and could see a bullish crossover soon, but that did not respond very bullishly in PRICE last time it did that. I think this has legs toward 4 again, and if that occurs it will be interesting to see how equities respond. The 12-week win streak for the ten year between last August and October gave the Nasdaq fits seeing it move from roughly 13000 to 10000.
THE WEEK AHEAD: Starting 5/15/23
Unpopular Opinion: One of the more crowded trades, and there seem to be many of them at the moment, is being short the US Dollar. Druckenmiller has been vocal about it being one of his highest conviction ideas. Could the boat be too crowded on one side, and a tactical move to the upside imminent? FALSE moves tend to inspire fast moves in the opposite direction as traders have to admit they were wrong and unwind positions. Last week produced a bullish WEEKLY engulfing candle and the greenback may want to break ABOVE the bearish head and shoulders formation. Nine of the prior ten weeks were lower, and peering back at the top near 115 last September with a strong 3% gain the week ending 9/23/22, which was immediately followed the next 2 weeks by a bearish shooting star and hanging man candles. Last week's move of well more than 1% could witness a move into the 1.05 area.
Technology Sector Review: 5/8/23
Earnings Branching: Unless you were a technology mega-cap play, earnings reactions have been on the wobbly side. Perhaps AMZN was an exception there even though it did have a very robust initial after-hours reaction. AAPL Friday was a good example rising by 5%, but one can include MSFT up more than 7% on 4/26. Or a META which recorded its second straight double-digit advance after reporting on 4/27 rising 14%. On the flip side "smaller" names such as NET PINS or SNAP each cratered lower after reporting numbers during the last couple of weeks by 21, 16, and 17% respectively. Give some names credit though that were not giants like a DDOG which added almost 15% Thursday but that name is still almost 40% off most recent 52-week highs and even more since a reversal at the very round 200 number in November 2021. Compare this to SHOP which trades at 52-week highs and jumped 29% this week and is above both of its key moving averages. This is a name to keep a close eye on going forward in the near term.
THE WEEK AHEAD: Starting 5/1/23
MONTHLY Greenshoots: As in life as in markets, the saying goes "It's not where you start but where you finish." If one was to look at the MONTHLY chart below of the Nasdaq there are some encouraging signs. It is making the positive habit of CLOSING near highs, a hallmark bullish trait, not only on the MONTHLY but the daily chart would show a combined 3% move on Thursday and Friday to conclude the week in above average volume. I was a bit skeptical that the MONTHLY chart was clinging too long to its 50-MONTH SMA, and I would still like to see it put some distance from that line. The bounce off the very round 10000 number that we spoke of in January continues and I was in the minority with my sanguine view in the last WEEK AHEAD note about the ongoing consolidation in April, but it looks like it may be ready to resolve to the upside. There is a potential bullish MONTHLY MACD crossover to monitor and for all the volatility April was the smallest range with 445 handles top to bottom in almost 4 years. That is a welcome sign. Of course, risks always remain and we are seeing concentrated gains in the mega caps, but respect the PRICE action until it is no longer warranted.