Hello friends,
Once again no big changes have occurred across the global board, and the same sleepy markets are found almost anywhere with the possible exception of China/Hong Kong. Let’s look at them in broad groups.
US indices at all-time Highs
The US large- (or rather, mega-)cap indices NASDAQ Composite and S&P500 have once again rushed into new all-time High territory, while mid-, small- and microcaps have not confirmed that move yet. In the case of small- and microcaps, the whole rally in the popular indices starting early 2023 was never confirmed, which reflects the lack of risk-on sentiment and opportunities in growth stocks in this market.
On the other hand, the NYSE Composite has been tracing out the moves of the S&P500, reflecting the heavy focus of the rally on cyclicals and industrial stocks. There are tons of such laggards drifting upwards after years of slumber, another sign of the tired nature of this market.
See below respective charts of the NASDAQ Composite (COMP), S&P500 (SPX), NYSE Composite (NYA), and longer-term weekly charts of the Russell 2000 Small-/MidCaps (RUT) and the -MicroCaps (IWC):
Specifically surprising are the tremendous volume spikes visible on the NASDAQ May 14-23, which I was not able to explain with any irregular exchange events. These are reflected to minor but appreciable magnitude on NYSE and SP500 but not particularly on their highest cap-weighted holdings, bringing me to believe we might be looking at another instance of systematic distribution across the market – but I might be completely off here.
Be that as it may, there’s been no substantial betterment of the recent dynamics (please read the last 2-3 weekly reports for details). RXST has been held back and not moved more than 7% in 16 sessions, dip-buyin in the collapsed FSLR and NXT has returned, and Utilities (e.g. VST, CEG, NRG) are one of the strongest groups, next to capital goods stocks.
Figures.
Though there are stocks holding up and displaying strength, trading is overall erratic, low-risk entry points do not form, bearish divergences are found in advancing vs declining issues, mega-cap indices vs. the broad market, stocks making new 52w Highs, all while the VIX is near a 5-year Low and the advisor bull/bear ratio was recently at a 6-year High, even outpacing the meme stock top in 2021.
No opportunities present themselves right at this point.
European leaders keep falling apart
While most European indices (e.g. Stoxx 600, AEX, N100, DAX, CAC, OMXC20, OMXS30) are mirroring the move into new Highs by US mega-cap indices, it’s the leading stocks we should be looking at.
Very briefly – many of them are still trading erratic and some are outright falling apart. Take a glance at the collossal failure of GUBRA to move out, and ZEAL making lower Lows:
Meanwhile, the smal Polish SNT and defense giant RHM are holding up stronger, the latter offering somewhat of an entry point should it start moving to the upside on volume. Though I am inclined to put a probe on this one should it move (as it is part of a large group move), the recent failures have once again thrown a cloud of doubt over the viability of speculating in individual stocks, not the least because RHM does not typically fit my criteria of a strong stock. I am willing to give it a probe though with a severely reduced stop.
UK stocks are not even worth mentioning right now – chop’n’slop.
Boredom in the orient
The situation in Japan has not improved whatsoever (please read the last few market profiles for details) – the Nikkei 300 and TOPIX are still stuck in a secondary reaction which is yet to decide which direction it will roll, while yet more of the few left ‘leading’ stocks are behaving weakly (e.g. JP.3498, JP. 6016, JP. 9343). The best leaders have collapsed a while ago, and the market appears to be on its last legs, should no new leadership step up in the next months.
Chinese (e.g. Shanghai Composite; SHCOMP) and especially Hong Kong (e.g. Hang Seng; HSI) equities have put in a breathtaking rally since early Feb which I’ve been writing about the last few weeks:
Trouble is, my screeners do not bring up a whole lot of stocks, and those that appear fall victim to the erratic trading character typical of Chinese equities. Look out for CN.688506, CN.603556, HK.2145 – but you will likely have to take an increased risk even if a good entry point forms.
Since the market advance is not very broad so far, the viability of the rally remains to be seen.
Control your risk, curb your impulses, be a Pro.
So long,
TGS