CURRENT MARKET PERSPECTIVE | |
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$1 TRILLION YTD MARKET CAP GAINS
MARKET CLOSES DOWN FOR ONLY THE THIRD WEEK IN 17 WEEKS
Click All Charts to Enlarge - Gord's Subscriber Chart Deck (CLICK HERE)
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YOUR DESK TOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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1 - SITUATIONAL ANALYSIS
RECAPPING THIS WEEK:
EQUITIES
- Small Caps outperformed, The Dow lagged and the S&P 500 desperately tried to close green on the week (but failed).
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If the S&P 500 had closed green, that would have been the 17th positive week in the last 19 - the greatest streak in stocks since 1964.
- Though yields were lower on the week (a tailwind for stocks), equities were more mixed with Nasdaq down on the week, as a red-end to the week for mega-cap tech spoiled the party.
- Mag7 stocks ended the week lower after fading from earlier gains.
- US macro data serially disappointed this week.
- 'Bad' news was good news for the doves and the market's expectations for rate-cuts in 2024 ticked back up to 4 rate-cuts (from 3).
- A trillion dollars in market cap has been added YTD.
BONDS
- Bonds were bid on the week with the belly outperforming the wings.
- The 10Y Yield dropped down to almost 4.0%, (closing below its 50DMA), at its lowest in almost six weeks.
CURRENCIES & EQUIVALENTS
- The dollar is down for the sixth straight day, ending the worst week in three months for the greenback.
- Dollar weakness helped spur gains in gold, which soared to a new record high just shy of $2200 today. Gold is up for 8 straight days - the longest winning streak since July 2020.
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Gold gains continued despite outflows from Gold ETFs, (as Bitcoin ETF inflows soared).
- And in the meantime, cryptos roared higher this week with Bitcoin topping $70,000 (a new record high) for the first time.
- Ethereum outperformed Bitcoin on the week (+14% vs +10%), hitting $4000.
- Oil prices ended the week lower (at the low end of its recent range).
THE VIX IS SENDING A SIGNAL WE HAVEN'T SEEN IN AWHILE
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US Stocks are now +25% in 5 months. This has happened only 10 times since 1930s. | We could get slightly more extreme. AAII bulls close to taking out the most recent highs. Ideally, we need the bears to throw in the towel a bit more. | This has been a rather spectacular period for VIX, although few understand what has been going on. | |
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You ALWAYS watch a rising SPX AND a rising VIX carefully!
(Larger view reflecting chart above right)
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Last time VIX (shown inverted) was here, SPX traded over 100 points lower.(Closer view) | | |
Asset Managers and Leveraged Funds have begun "Getting Out of Dodge!". These are typically smart, well informed, and knowledgeable investors. When they start taking risk off the table you need to pay attention. | |
THE DOTCOM BUBBLE'S "CISCO" v THE CURRENT 'IRRATIONAL EXUBERANCE' & "NVIDIA". | |
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2 - FUNDAMENTAL ANALYSIS
CORPORATE STOCK BUYBACKS
I have written that the problem is when markets are this elevated the question is where will new buyers come from? When everyone is in, who is left to buy and keep stocks rising?
The unique answer to this dilemma is something the markets have historically never seen. That is corporate buyback rates within extremely narrow breadth.
What we have witnessed is the MAG-7 stocks being heavily bought back by the MAG-7 themselves!
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Though the MAG-7 slowed their purchases in 2023 (see chart above), their 4Q filings show the group is currently authorized to repurchase $215 billion in stock, 30% higher than the level authorized at the same time last year ($166 billion). This is led by META (+$30 bn yr/yr), NVDA (+$15 bn), and AAPL (+$12 bn).
TO KEEP THIS MARKET RISING FURTHER THE MAG-7 MUST CONTINUE TO FILL THE AUTHORIZED REPURCHASE BUDGETS
.... ALONG WITH FOREIGN MARKETS (CHART RIGHT)
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As Peter Tchir of Academy Securities recently observed (and it indirectly relates to MAG-7 Buyback volumes above):
One thing that I think we have been seeing of late is that anecdotally it looks like relatively small net flows are having a larger than normal price impact on the markets. I’m not sure what caused the Nasdaq 100 to spike from 2:30pm until 2:45pm yesterday, only to see two heavy selling “pencils” (a line that goes straight down on the chart) into the close. Across the board I wonder if the “faux liquidity” we have created with so much electronic and algorithmic trading is obscuring an unnervingly low level of true liquidity – in both directions.
While I suspect that “this time is different,” I can’t help but drag out When Price Becomes “Just” a Number. My experience is that there are times when price “becomes just a number.” And whatever that number is supposed to mean gets lost in the shuffle of short squeezes, chart watchers, gamma squeezes, and the like. I’m not sure we are seeing that in this market, but it is in the back of my mind and certainly seems relevant to the next “trillion dollar” mistake!
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3 - TECHNICAL ANALYSIS
THE DOLLAR & GOLD
In our Mid-Week "Gord's Desk Top" we highlighted a potential move lower in the dollar which we expected would take gold higher. This is in fact what we subsequently witnessed. There is more to go if our sub-degree Head & Shoulders chart highlighted below is correct.
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YOUR DESK TOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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Gold continued higher from its breakout. The Elliott Wave count suggests that the first 5 Wave Impulse wave may be in.
A consolidation in the form of a Wave 2 corrective pattern is likely to soon occur.
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YOUR DESK TOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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THE MAGNIFICENT 7
The pull back in the Mag-7 stocks this week was quite pronounced. The market appears exhausted!
CHART BELOW
- We have reached the vertical lift part of the parabolic (geometric) lift shown by the dashed red line.
- We have Divergence with momentum (bottom pane).
- Momentum appears to be rolling over (bottom pane).
MATASII CROSS: WEEKLY - CONTINUES TO SIGNAL A MAG-7 BUY
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YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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US EQUITY MARKETS
CONTROL PACKAGE
There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a "control set".
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The S&P 500 (CHART LINK)
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The DJIA (CHART LINK)
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The Russell 2000 through the IWM ETF (CHART LINK),
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The MAGNIFICENT SEVEN (CHART ABOVE WITH MATASII CROSS - LINK)
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Nvidia (NVDA) (CHART LINK)
S&P 500 - Daily - Our Thought Experiment
Our Though Experiment suggests we have likely put in a near term top. Our relative confidence comes from the fact we hit our 5186 (see Parabolic lift chart at top of the Market Perspective page) and immediately pull backed to close at 5124. Additionally the pull back occurred as we touched the mid-channel mark of our rising trend channel.
We are likely to now consolidate before possibly completing one final small impulse higher (black impulse wave).
NOTE: To reiterate what I previously wrote - "the black labeled activity shown below, between now and July, looks like a "Killing Field" where the algos take Day Traders, "Dip Buyers", "Gamma Guys" and FOMO's all out on stretchers!"
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YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART
Macro Analytics Chart Above: SUBSCRIBER LINK
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STOCK MONITOR: What We Spotted
FRIDAY
- Broadcom (AVGO) -6.5%: Semiconductor solutions revenue was light. Looking ahead, maintained FY24 revenue outlook and sees around USD 7bln of AI chip revenue in 2024. Note, EPS and revenue beat expectations.
- Marvell Technology (MRVL) -11%: Q1 guidance was light. In Q4 numbers, EPS was in line and revenue marginally topped alongside a USD 3bln stock repurchase authorization.
- Eli Lilly (LLY) -2.5%: US FDA has delayed the decision on the approval of its Alzheimer drug. Biogen (BIIB) +2%.
- Costco (COST) -7.5%: Weak Revenue & comp sales for February.
- MongoDB (MDB) -6.5%: Disappointing Q1 and FY outlook.
- Amazon (AMZN) -1%: FTC is reportedly probing Amazon’s new controversial fees in its USD 140bln seller business, via Fortune.
THURSDAY
- Victoria's Secret (VSCO) -29.5%: Sees next quarter sales falling more than forecasted with FY outlook also light.
- Infinera (INFN) -12%: Disappointing next quarter guidance; forecasts a surprise loss per share with revenue also light.
- Ciena (CIEN) -14.5%: Cut FY24 revenue view with next quarter light.
- Verizon Communications (VZ) -1%: Transfers pension liabilities.
- Apple (AAPL) flat: EU antitrust regulators requested further explanation from Apple after it blocked Epic Games in the EU. Following this, Apple snapped back saying it exercised its right.
WEDNESDAY
- Ross Stores (ROST) -0.5%: FY24 profit view disappointed Wall St. consensus. Although, in Q4, top and bottom line and comp. sales beat alongside raising quarterly dividend 10%.
- Thor Industries (THO) -15%: EPS, revenue, and gross margin light of expected; also cut FY guidance.
- Foot Locker (FL) -30%: Reported a holiday-quarter loss, issued weak guidance and said it’s behind on meeting its profitability goals. Note, EPS, revenue, and SSS were much better-than-feared
TUESDAY
- Apple (AAPL) -3%: iPhone sales in China plunged 24% Y/Y in the first six weeks of 2024, according to Counterpoint Research cited by Bloomberg. Huawei Sales were +64%, while total China smartphone sales were -7%. Separately, according to Ming Chi Kuo, the market consensus for iPhone shipments in 2024 has started to ease to closer to 200mln units from 220-225mln units initially.
- Tesla (TSLA) -4%: Had a fire at a Berlin plant, and the boss expects power to be down for several days and do not expect production to resume this week.
- MicroStrategy (MSTR) -21%: Plans a USD 600mln convertible senior notes offering.
- Albemarle (ALB) -19.5%: Has begun a USD 1.75bln depositary shares offering.
- GitLab (GTLB) -21%: Forecasts a surprise next quarter loss per share, with FY25 outlook also weak.
- Disney (DIS) -0.5%: CEO Iger is "extremely confident" DTC (streaming) will be profitable by Q4 2024 (as previously guided); sees exceeding prior FCF guidance for FY24 of USD 8bln (exp. 8.27bln).
MONDAY
- Apple (AAPL) -2.5%: Is to face an EU fine in excess of EUR 1.8bln regarding the Spotify (SPOT) complaint. In other news, Evercore removed Apple from its 'Tactical Outperform' list. Lastly, Apple (AAPL) unveiled the new 13- and 15-inch MacBook Air with the powerful M3 chip.
- Applied Materials (AMAT) -0.4%: Exec stated it benefitted from being allowed to ship some technologies to China from DRAM customers in current quarters that weren't allowed in 2023.
- American Airlines (AAL) -5.5%: Ordered 85 Airbus (AIR FP) A321NEO jets, 85 Boeing (BA) 737 MAX 10 and 90 Embraer (ERJ) E175 aircrafts. Expects to remain within previous guidance for capacity and CapEx inclusive of aircraft orders. Orders also include options and purchase rights for further 193 aircrafts. Forecasts 2024 FCF of roughly USD 2bln; 2024 adj. EBITDAR margin of about 14%; 2025 adj. EBITDAR margin about 14-16%.
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