Hello friends,
The US markets remain largely unchanged – a lot of chop and drift along beneficial macro fundamentals. The popular indices have been making new Highs once again, while individual stocks making new Highs are progressively retreating (see below) and the divergence in A/D lines between NYSE (many cyclicals, banking, defensives, industrials) and NASDAQ (growth, tech, younger issues) has been getting worse and worse for years now.
The popular indices NSADAQ Composite (COMP) and SP500 (SPX) are highly correlated due to their extreme overlay in their highest weightings, and largely driven by the Magnificent 7 Big Tech FOMO stocks. Meanwhile, mid-/small-/micro-cap issues (e.g. Russel-2000 (RUT), IWC) have not been following the latest move into new Highs, a recurring divergence in the market and cause for a lot of chop.
Leading stocks overall have been behaving badly, and moves into new Highs from digestions failing or stalling at best (RXST, POWL). However, a lot of names tend to display heavy volatility, only to turn around and chop higher after shaking everybody out. Trends exist, but they are hard to impossible to trade while managing risk properly.
The current king of the hill NVDA has announced an excessive 10:1 split, a typical late-market topping sign along the failure of many leaders such as SMCI, VKTX, JANX, etc (see previous reports). But this market is well beyond “traditional” analysis, and the choppy up-trend could continue for many months or years. In any case, we’re nearing the next FOMC policy meeting this Tue-Wed, let’s see whether this can bring volatility to the markets.
AsiaPac remains unchanged, choppy
Rallies in China & Hong Kong were strong, but have not brought about a whole lot of tradable stocks. In fact, the index rally, though impressive, has been thin altogether, and even the few leaders that do exist trade choppily. I am watching a small subset of interesting equitites (e.g. 688506.CN, 603556.CN), however the indices are in a short-term pullback while some of the better names are again failing moving higher (e.g. 300492.CN).
Japan, though in a very broad uptrend has also descended into a chopfest, with most strong leaders collapsing months ago and only the laggards outperforming. Australia is not even worth mentioning.
Europe chops higher, mirrors US
What effects the ECB’s rate cuts will have on the market remains to be seen. So far, all the important indices have been chopping higher, mirroring moves in the SP500 & NASDAQ – check out the STOXX 600:
The standout leading index has been the OMXC20 (Denmark), while the Polish WIG20 has been the weakest, withdrawing into a short-term pullback.
In any case, the same picture as in the other global markets arises – few strong leaders which trade heavily choppily and remain largely untradable for those managing risk aggressively. The leader GUBRA had succumbed to very high volatility after moving out of a digestion on an earnings report, but the general market drift has now carried it on light volume to wedge into new Highs. It’s sister ZEAL is starting to chop near it’s 50DMA in a pullback, while the Polish SNT is probably the strongest of the bunch but is missing a shakeout in the latest digestion and is still far from actionable.
Leaders exist, but even if digestions form, the recent highly erratic trading character of European equities has led to failing or stalling advances (e.g. ENVI, GUBRA).
There is no reason to dial up exposure – though trends and erratic moves cause FOMO, risk and volatility are high … too high for successful long speculation in the strongest leaders. The only thing we can do is wait for new developments, while perhaps flexibly switching to a more short-term or options-oriented trading approach.
So long,
TGS