| ○ Sentiment turned negative in premarket trading after the Bureau of Labor Statistics’ employment cost index came in at 1.2% in the first quarter, above the 0.9% consensus estimate. | |
|---|---|
| ○ The Dow Jones Industrial Average fell 1.5% in Tuesday’s stock market trading. The S&P 500 index retreated 1.6% and the Nasdaq 2%, tumbling back from near their 50-day lines and undercutting their 21-day lines. The small-cap Russell 2000 sank 2.1%, also retreating below the 21-day. | |
| ○ Markets finished at the bottom of their range. | |
| ○ The Naz chart shows higher down vol today than up vol yesterday or Friday. This is an expectation breaker for me. After Friday, I expected there would be a rally that kept going, but it looks like that may not happen. The Fed speak will tell us for sure Wed. | |
| ○ After five straight monthly gains, the Nasdaq fell 4.4% in April. Both the S&P 500 and Nasdaq had their worst monthly performance since September 2023 | |
| ○ A decisive move above the 16,000 level and the Nasdaq’s 50-day moving average around 16,054 would be positive steps. But that could be a tough nut to crack in the near term. | |
| ○ It doesn’t make sense having aggressive exposure to stocks at this point, especially with the major stock indexes below their 50-day moving averages. The indexes are on downtrends until proven otherwise. | |
| ○ SMCI down additional 10% after hours. |
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Summary, market gave us great hope during fed-speak, made me (and others) fell like it was going to be a FTD, but then all hopes were dashed as it faded to session lows, a huge downside reversal. Very bad. There is no reason to be positive or to buy at this time. Need to get above 50dma.
The Fed giveth and the Fed taketh away: Small caps made a small push higher after the Federal Reserve decided to unwind the debt securities on its balance sheet at a slower pace. But overall stocks’ late-hour drop disappointed.
○ Fed: not seeing progress towards 2% inflation target. Policymakers will reduce the runoff from the Federal Reserve’s balance sheet to $60 billion a month from $95 billion, starting in June. This slowdown in quantitative tightening is a de facto easing. . talked down any concerns of stagflation. Unlikely to pivot to rate increases.
○ In the final hour of trade, the Nasdaq composite backtracked to a modest loss of 0.3% from a daily high of +1.7%. The S&P 500, which closed lower by the same amount, had let a 1.2% gain slip right through its fingers. (Not a sign of strength)
○ Crude oil futures got whacked
○ The stock market rally had a dispiriting day. In the final hour, the market went from a likely follow-through day to a mixed-to-negative session.
This is day 8 of a rally attempt. IBD indicates that if you don’t get and FTD by day 10, something is very wrong.
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Markets were up nice, but volume was lower than yesterday, so IBD cannot declare a follow-through-day. It was also an inside day on the Naz, boring.
It makes me feel good that we at least regained the sell-off from yesterday after that rollercoaster ride. We could have continued down.
Cloudflare was down 14% after hours tonight, which points out the danger of going into earnings holding a stock with slim profits. There have been plenty of big gainers too, but if I knew which way they were going I would not be here 
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Feels like a FTD, so I added some. We will see if the price and vol of indexes justify it after the market closes.
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Notes for Friday 5/3/24:
Another day that feels like a FTD, but volume was lower than day before. Mike Webster says “it is in the spirit of a FTD” and he is treating it as one.
• IBD exposure 40-60%, but still not a confirmed uptrend,
○ The Nasdaq composite surged 2% Friday, but its weekly lift was a more modest 1.4%. It rose for the second week in a row and has now reclaimed its key 50-day moving average. The tech-heavy index is now up 7.6% so far in 2024.
○ The S&P 500 also did well, rallying 1.8% for the day. Its 0.6% gain for the week saw it close dead on its 50-day line, though it has pulled clear of its short-term moving averages. The benchmark index is now up 7.5% for the year.
○ Small caps also rose, with the Russell 2000 turning in a 1% lift. It closed a hair below the 50-day line
○ The strong gains Friday justify raising exposure to the 40% to 60% range. Buying opportunities were relatively limited, however, which makes holding closer to the lower end of this range a prudent approach. Remember to increase exposure in a measured, disciplined fashion. Lower volume on the Nasdaq’s upward thrust means Friday’s action failed to qualify as a follow-through day.
○ Nvidia (NVDA) regained a key level, flashing an early buy signal Friday, recovering from a midweek slide.
○ There were opportunities to make some new buys on Friday. Investors could keep adding exposure to modest levels if the market rally continues to act well.
• IBD Stock Market Today Video with Mike Webster
Nasdaq Retakes 16,000 With Gusto; CEG, Skechers, Apple In Focus | Stock Market Today (youtube.com)
○ This was recorded before the final volume and Mike said it feels like a follow through day. The Naz is above the 50dma and it feels like it wants to go to new highs. The S&P stopped in no-man’s land, right below the 50, but at least its low was above the 21dma.
○ When you get a big stock like Apple (and Amgen) have a huge day, it pulls the markets with it and things snowball a bit.
○ But not seeing breadth in RSP or IWM.
○ At 10:15 mark, they discuss constellation energy and the importance of the blue dot (go watch). “should be at the top of your watch list”. But, earnings are in 6 days.
○ 12:01 talking about CPNG
○ 15:00 APPL has been in a long base and it has a long way to go before we want to trade it.
○ 15:55 GOOGL. This is what you want to see. It had a gap up, but closed it in a constructive manner. (Did not close the entire gap). Today was a setup and gives us the expectation that on Monday it moves up.
○ 17:30 Sketchers (just added to their swing trader service) Study this earnings gap. Today was a setup day with the expectation of up on Monday.
○ Around 22:00 starts analyzing market charts. Old trend is broken, looking for a new trend.
○ Still getting some mixed signals with the market action.
○ 21:24: analyzing charts relative to the 21dma. At the simplest chart reading level, you want to use the 21dma. For the SPY, this is the first time in a while that the low is above the 21dma, so that is a character change. Naz low is well above it. Looked at VTI (total market index), VXUS, ARGT, MELI,
○ 33:34 looking at ATR (Average True Range he uses 21 day averages) on SPY and Naz.
○ 36:26 - “Webby” RSI.
○ Mike notes that he does not use volume, so the fact that we have not had the volume to declare an FTD does not matter to him. We have had to FTDs “in spirit”. But when he puts his IBD orthodox hat on, he has to look at volume, that is very important from and IBD standpoint. Bill would say “no excuses, no alibis, the volume was either there or it was not.”
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5/6/24 Markets had another good day, but lacked volume. The S&P finally closed above the 50dma and the Naz had its second consecutive close above. Small and Midcaps did even better in percentage terms and breadth is improving.
From and IBD approach, the last 2 Fridays felt like Follow-Through-Days, but the increased volume as missing, so they can make it official. However, the good market action, and good quality stock action has their investment level at 40%-60%, so you are not sitting on the sidelines waiting for this last technical confirmation.
It does make me wonder how strong this rally can be without a traditional FTD. Time will tell.
5/7/24: Quiet, boring day. Some decent growth breakouts.
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5/9/24: another low volume up day. Labor numbers this morning showed a softening labor market, which people know the Fed wants, so that inspired some buying. Indexes are about 1% below all time highs. The Dow Jones Industrial Average advanced 0.9% while the S&P 500 climbed 0.5%. The tech-heavy Nasdaq composite moved up 0.3%, and the small-cap Russell 2000 also rallied 0.9%.
IBD says: No official follow through day, but since it is acting like we had one, IBD has added back the distribution day tracker. (2 for Naz, 3 for S&P) Leading stocks continue to act well. In addition to various tech names, a large number of restaurants, financials, medicals, builders and infrastructure plays are showing strength.
When the exposure threshold goes down to 0%-20%, IBD will reset the distribution-day count and then start counting them again when the threshold is increased to 20%-40% or greater. [I have never heard them say this before, sounds like the influence of Mike Webster. The “Exposure Threshold” is relatively new and I like it.]
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Nice Pete I was wondering why the distribution days were blank. Thanks for clearing that up.
Andy
Friday 5/10/24
Indexes mostly flat, Russell 2000 down 0.7%
A promising open on the stock market faded following release of the University of Michigan Survey of Consumers sentiment index for May. It fell nearly 10 points to 67.4, well below economist expectations for 76. And its one-year inflation outlook popped to 3.5%, the highest level since last November.
The stock market rally started the week strong, with the Dow Jones, S&P 500 and Russell 2000 reclaiming their 50-day moving averages on Monday. The Dow and S&P 500 kept moving toward record highs the rest of the week while the Nasdaq and Russell paused.
The Dow Jones Industrial Average jumped 2.2% in last week’s stock market trading, extending a win streak to eight trading sessions. The S&P 500 index popped 1.85%. The Nasdaq composite advanced 1.1%. The small-cap Russell 2000 climbed 1.2%
The market rally advance has been broad, as the sector ETFs’ performance shows. Leading stocks hail from a variety of sectors, with many flashing buy signals last week.
Stock Market Today Video with Mike Webster
Why Now Is The Time To Take A Bullish Stance; Arista, TSM, FICO In Focus | Stock Market Today (youtube.com)
My show notes:
○ Starting to trend above the 21dma, which is the hallmark of a bullish market. We like to see 5 days with the low above the 21dma to indicate a good trend is starting.
○ We were right to be bearish a few weeks, ago, but time to be bullish now.
○ MW: “The close today gives us an expectation of a weak Monday. I prefer weak Mondays over strong Mondays. If you get a gap up on a Monday, it tends to get filled.” If you are light in the market, a weak close Monday is an opportunity to put some money to work. (but not on a big gap down. Probably don’t want to see it go below of a couple days ago.
○ The 21dma going back above the 50dma is an important trended indicator “we are trend followers, not bottom fishers”. (not quite there yet)
○ 09:15 ANET: strong breakout on Friday (2 days after earnings). RS is hitting a new high on this breakout. The base had two big down weeks early on “we don’t like to see that”. But the last 3 weeks in a row closed at the highs, essentially counteracting the down weeks. There was a Stage 6 base that started in Feb, but its breakout did not produce a 20% increase, so this is a new base now and since it undercut that previous base, it is a Stage 1 base (good). Mike says that people are looking at the low of the previous base and have the stops there, so when this new base uncuts it, a lot of people sell out and we get new “strong” buyers. Only in the last 3 days has the ANET chart looked good. This new action (especially today) is say this is a leader you want to get back into. But it is 2% into the buy zone after 3 up days. Mike says it would be normal to see it drift down to the $300, thus forming a handle. Then he would be looking for a bullish reversal as a buy signal. If it continues high “I am just going to wait for it to tighten up to give us an entry”.
○ 12:13 TSM. Classic Double-bottom base where second bottom is below first bottom, thus indicating weak holder got shaken out. One early entry point would be 5% above the first bottom. Currently only 1% above the official buy point and “it is actionable if you need some exposure”. Blue-dot RS.
○ 16:15 : FICO. If you look at the monthly, you can see it has been a leader for years - the RS mostly stayed above the RS moving average. More detail on double bottom early entry: Look at 5-10% range above first bottom and look for a logical place to get in (e.g. breaking a downward trend). If you are looking to get more exposure, get in around the 5% mark, if you are waiting or a little conviction that the stock has moved wait for the 10% area. Since these are early entries, they are smaller than your buys on the ideal breakout point.
○ 19:09: looking at the regression channels on weekly charts. Talks a bit about candles and inside weeks.
○ 25:30. 50% retracement review.
○ 33:xx: Webby RSI (bases on ATRs). Between 1 and 2 is the sweet spot. Coming out of the gate you want to see a strong move to the 2 or 3 range and after that you want it to settle to the 1-2 range. Being at the 3 range indicates overheated (after initial surge out of the gate).
○ So we do want to see a little more power in the Webby RSI over next week or so.
○ 35:30. Looking at ATRs. You want to stop thinking about percentages and think in Average True Range.
○ 38:30: discussion of the lack of an "orthodox FTD". Mike and Justin looked back in history for similar patterns. Looking at times when you are trending above the 21dma for 5 days. So one similar example was March 16 2023, which was a 2.5% price gain on Naz, but volume was not higher than previous day, so not an orthodox FTD. But, following that there were 5 days above 21dma, so you wanted to lean bullish and start getting exposure. By July, it was having a great run. It did test the 50dma along the way, but that is not unexpected (not an expectation breaker).
○ So when you are trending above the 21dma, you have to change your mindset even if there was not FTD.
○ Bill would say there is a 3 year learning curve for this system, but you can speed it up if work really hard at it.
○ Homework of charts when trending above 21dma for 5 days or more…
HOMEWORK
14 instances where we were trending above the 21-day line (5 days of low above it) without a FTD:
10/14/75
1/2/76
10/6/77
2/8/78
3/14/78
3/5/81
11/21/83
10/22/85
10/30/86
9/16/88
3/8/90
10/9/2020
3/23/2023
5/9/2024
Narrowing it down to low above 50-day and 200-day winnows it down to the following:
10/14/75
10/6/77
2/8/78
3/14/78
3/5/81
10/9/2020
3/23/2023
5/9/2024
MarketSurge lets you put in historical dates and see the charts as they were at the time.
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Market Stong like bull. Indexes near all-time high, Naz just barely missed. Inflation numbers scared the futures a bit, but March numbers were revised down and Powell said “blah, blah, blah” and the market went up. Breadth was positive on both exchanges.
"That the key indexes are trading around record highs after a solid advance has been constructive. Leading stocks have looked even better, with some flashing buy signals in recent days and many more setting up.
*
update 5/15/24: ------------------------------
Very strong day, and volume on Naz was higher than yesterday so IBD called an official FTD. This is the 18th day of the rally and the latest I have seen an FTD be called. Now we watch for a Power Trend to occur for further confirmation. (Wait does not mean don’t buy IBD breakouts). the current outlook calls for a boost in stock exposure to an 80%-100% range, up from 40%-60%.
The Dow Jones Industrial Average climbed 0.9% in Wednesday’s stock market trading. The S&P 500 index popped 1.2% and the Nasdaq composite rallied 1.4%. Russell up 1.1%.
IBD research has found that every major stock market bottom featured such a follow-through. Now, follow-through days do not always confirm a guaranteed rally. They can fail. However, the combination of strong technical action among major indexes, good breakouts and more stocks setting up in bases, and a simultaneous cooling in the cost of money appear to suggest these two things:
One, the pullback in March and April gave the stock market a well needed break.
Two, the general bull run, which really kicked into gear with a follow-through day on Jan. 6, 2023, still has legs.
Breadth was good as well, in both advances vs decliners and in the broad number of IBD groups that were up 2.0% or more.
IBD: Investors should be taking advantage of these opportunities. Adding gradually over the past week would let traders re-establish solid or heavy exposure. If you already have heavy exposure, you might consider trimming some laggards or slower movers as the market looks to shift more clearly into a risk-on environment.
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Friday 5/17/24 - Market in fine shape…NVDA will be the crucial turning point this week.
○ While the Nasdaq composite dipped 0.1% Friday, it still turned in a solid weekly gain of 2.1%. It has now risen for four weeks in a row and is now up 11.2% for the year. The tech-heavy index sits above its short-term moving averages as well as the key 50-day line.
○ The S&P 500 ended the session up 0.1%. But its weekly climb came in at 1.5% and it has powered nearly 3% above the 10-week moving average. The benchmark index is also now up more than 11% in 2024.
○ The stock market rally got a lift from cooling inflation and other economic data signaling a slowdown. Key indexes made a big move Wednesday, then paused late in the week, awaiting Nvidia.
○ Homebuilders and related stocks, various financials, medicals, energy plays, aerospace, specialty footwear, restaurants and global e-commerce firms are among the many areas showing strength.
○ NVDA reports Wednesday night. Analysts expect Nvidia earnings to skyrocket 412% to $5.58 a share with sales up 245% to $24.51 billion. Even if Nvidia beats views and raises guidance once again, will that be enough to satisfy investor expectations?
○ After running to record highs, the stock market rally is taking a breather. That’s letting stocks forge handles or move up the right side of bases, flexing relative strength.
New Power trend on the Naz will start Monday if it is an up day for the index.
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5/20/24 - Markets up today, Naz entered an IBD “Power Trend”, which typically portends well for a rally. NVDA reports Wed PM and that will drive the market.
My notes from today.
○ The technology sector led the Nasdaq composite to another record high Monday, while a spate of breakouts among high-quality stocks gave the stock market more ammunition for buyers. S&P up 0.1%, Naz up 0.7%|
○ Breadth was mixed, as advancing stocks had a modest edge over decliners. But what the stock market lacked in breadth, it made up in breakouts. More than a dozen higher-rated stocks climbed past buy points. The longer-term breadth picture continues to improve. For about four weeks, the advance-decline lines of the Nasdaq and New York Stock Exchange have been largely if not entirely above their 10-day moving averages and trending higher.
○ History shows crossing 40,000 is not just a psychological boost for the stock market, but a material one too. When the Dow topped each of its 5,000-point milestones, it climbed an average of 2.6% one month later, 4.3% three months later and 5.2% six months later. Moreover, the Dow has always been higher one month after making a 5,000-point milestone, according to Dow Jones Market Data. The index was also higher 85.7% of the time three months later, and 71.4% six months later. When the Dow makes a 10,000 milestone like it did Friday, it has always been higher one, three and six months later. The average gains in those periods are 4.3%, 6.4% and 8.1%.
||○ Is the stock market getting too complacent? A look at the Cboe Market Volatility Index may have you believing it is. The VIX closed at 12.15, one session after it closed below 12 for the first time since November 2019. The upshot here is that every U.S. equity bull market sees the VIX close below 12.0 hundreds of times: 243 days from 1992-1995, 247 days from 2004-2007, and 308 days from 2013-2019, he wrote in a report. The first sub-12.0 reading is just the beginning; there is never just one. Moreover, every period noted in the chart is a classic mid-cycle market, one where annual stock market returns are almost uniformly positive.
||○ Katie Stockton, a technical analyst I see on CNBC sometimes, says her 3 main indicators are pointing to a little more risk of a weakening in the market. Of course, NVDA is going to drive the market, not those indicators.|
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5/23/24: ugly day for the market and an expectation breaker for me. I expected that if NVDA popped, it would drag the market with it. It did for a while, then around noon, a flash-PMI reading scared investors into thinking there may be no rate cuts. The market had ugly bearish reversals on higher volume.
The Dow Jones Industrial Average sold off 1.5% — its worst day since March 22, 2023. The S&P 500 lost 0.7%. The Nasdaq composite, which had been up as much as 1.2%, reversed lower 0.4%. And the small-cap Russell 2000 declined 1.6%. The Invesco S&P 500 Equal Weight ETF (RSP), which mutes the strength of Nvidia and other big stocks, slid 1.4% The small-cap Russell 2000 tumbled 1.7%, testing the 50-day but closing above that level.
Both Naz and S&P indexes made outside days that saw Thursday’s price range engulf the prior several sessions. That warrants more caution.
IBD reduced its recommended market exposure to a range of 60%-80%. However, the market rally has had a solid run over the past several weeks. Perhaps the major indexes and leading stocks just need another breather. That could let stocks forge handles and let moving averages catch up.
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5/24/24 (Friday). Yesterday was an expectation breaker because we expected the market to continue up and not have a big downside reversal (DR) . Once you have a DR, you expect at least a few more down days, if not more. So Friday’s nice up day was a positive Expectation Breaker, and the rally is back in business. Just take things day by day and adjust for the real-world.
||○ The Nasdaq composite dusted itself off from Thursday’s downside reversal to gain 1.1% Friday. This allowed it to turn in a weekly gain of 1.4% and post a new closing high. It has now risen for five weeks in a row and is up nearly 13% so far in 2024. The tech-heavy index is more than 4% above the 50-day moving average — a bit stretched.|
||○ The S&P 500 ended the session with a 0.7% lift but treaded water for the week. It is clear of its 50-day line and the shorter-term 21-day exponential moving average. While the benchmark index now lags the Nasdaq, it is still up more than 11% for the year.|
||○ Small caps ended the week lower despite the Russell 2000’s Friday lift of 1%. The fact it found support at the 50-day line was encouraging.|
||○ Next week, PCE comes out on Friday.|
||○ Strong stocks CAVA and ANF report next week.|
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Pete how much do you trust the Estimated numbers with Marketsurge? Have you seen any problems with them?
Andy
MarketSurge uses Factset for analysts estimates, they don’t estimate on their own. I don’t have any fuzzy data on how accurate they are in general.
Right they are switching over from Oneill Data to Factset. Not sure if it is a temporary problem or that the data is not all that good.
Andy
It has been FactSet for estimates for as long as I can remember (or have paid attention. It is there on the bottom of the charts)
5/28/24: NVDA had another good day, but it has really been the only thing keeping the markets afloat. If you look at the equal weighted S&P (RSP) and the equal weighted QQQ (QQEW) you will see a different story. Small Caps (IWM) not exactly rocking.
The SPXL and SPXS are showing it is almost time to short the S&P on the two-month SimonSez chart.
the invested percentage in the accompanying Market Pulse stays at 60%-80%
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That is strange Pete. When I talked to one of the IBD coaches he said the Estimates were Factset but the actual Earnings and Revenues were Oneill. That is why he told me the calculations for earnings estimates growth were incorrect.
Andy