There was a very nice kick-save by equity bulls on Thursday, as the bears looked emboldened early but failed despite Meta's meltdown and a tick up in rates. And then there was good EPS news after the close, with GOOGL soaring and MSFT popping.

While the major indices paused Wednesday in advance of important quarterly reports from mega Technology names, we will look at the technical condition of the largest holdings in the Nasdaq 100 (QQQ). Of note, after the close, META reported and is down over13% ahead of the open today.

This is an important and high-anxiety week for investors, as many very large companies report much-anticipated EPS -- including Tesla (which popped on results after the close on Tuesday), Meta on Wednesday, and Microsoft and Alphabet on Thursday. On Friday morning, the Federal Reserve's favored inflation metric, the PCE report, hits the tape with March data.

While the stock market made a decent recovery on Monday after getting trounced since April 11, we certainly do not have enough evidence that the pullback is over. There has been some minor technical damage from an intermediate-term perspective, with the major indices undercutting their 50-day moving averages and the 21-day exponential average crossing below the 50-day simple late last week. This is the first moving-average crossover since August 2023. So after any oversold rally runs its course, we think there is an even chance that the indices have another leg lower that will undercut Friday's low.

The stock market is in a rough patch for the first time since the July to October period of last year. After the major indices hit their secondary highs on April 11 (the Nasdaq hit its all-time high that day), is has pretty much been "down periscope." Out of those trading six days, the S&P 500 (SPX), Nasdaq, and Nasdaq 100 (QQQ) have fallen between 0.9% and 2.1% on three (SPX) or four of those days. Despite the very steep downside slope of the Big 3, NYSE breadth actually bottomed on April 12 and 15, illustrating that the selling has been concentrated in Big Tech and the many stocks that were overly extended on a momentum basis.

Overnight events in the Middle East notwithstanding, WTI closed yesterday at $82.05/barrel, down slightly and below its recent high on April 5 and April 12 near $88. Crude oil traced out a bearish throwback, as its breakout over the top of the bullish channel that has been in place for about four months failed miserably. Generally, failed breakouts and failed breakdowns lead to decent-sized moves in the other direction. Almost the entire rally from the high $60s was labored and failed to generate much enthusiasm among market participants.

Semiconductors, the leading industry in the market since the AI boom started, soared 63% from October 30 until March 7, or in a little over four months. The group hung tough until finally cracking on Monday. The iShares Semiconductor ETF (SOXX) sliced through its 50-day this week for the first time since last August and has given back 11% in 28 days since its last all-time closing high. The three-month August to October 2023 decline was 17%, and that was after the 80% surge from October 2022 until August 2023. At its peak on March 7, the SOXX was up 24% year-to-date, but is now up 10%. Nvidia has yet to touch its 50-day, but the stock got close on Wednesday.

The consistent trend of higher yields across the entire curve starting on April 1 (with the S&P 500 closing high on March 28) has kept pressure on the stock market. On Tuesday, the two-year, five-year, and 10-year Treasury yields all hit recovery highs off their lows since late 2023/early 2024 and are not far from major highs hit in October 2023.

It was bad enough that Monday was tax day! The major indices gapped higher to start the week, but gave up their gains by lunchtime and then saw some strong downside acceleration before stabilizing in the final hour. The S&P 500 (SPX) lost 1.2% and is down 2.6% in the past two days, booking the largest drop since late in October of 2023. Since its all-time high (ATH) close on March 28, the SPX is off 3.7%, its largest 11-day drop since October. The Nasdaq 100 (QQQ) fell 1.7% for a two-day decline of 3.2%. The index has given back 3.4% since its March 22 all-time high.

After many months of a strong market, but many bearish momentum divergences, the S&P 500 (SPX) finally cracked (a bit) and is currently testing its 50-day average. This is the first time the SPX has touched its 50-day since early November. It is also the first time since the pullback last summer that the 50-day relative strength index (RSI) has fallen below 50, a sign of at least some short-term trouble. A sustained break below the 50-day average would most likely open the door to the 4,800 region -- where the bottom of the bullish channel comes in, as does a 38.2% retracement of the rally since October.

When the stock market is in a strong uptrend, pauses, and then finally threatens to pull back, what happens? When there has been institutional selling, better known as "distribution" in the Nasdaq 100, Technology often comes to the rescue after a short break and destroys the bears -- as well as a good number of technicians (hand raised) who expected more giveback.

With all the price gyrations since the end of March as well as a few outright nasty days, it sure feels like the major indices already should be in pullback territory of 5% or more. But since its peak on March 28, the S&P 500 has given up 1.8% in eight trading days, the Nasdaq is down 1.6% in 12 days from its March 22 close, and the Nasdaq 100 is off 1.8% since its March 22 all-time high. Almost half of the losses came on Wednesday.

The seemingly most-loved industry on the planet, semiconductors, is taking a bit of a break. Yet we say that tongue-in-cheek, as most of the true semi leaders remain very close to their all-time highs (ATHs), while the major indices continue to hold close to their recent ATHs. When a stock doubles in four months and then works off extreme overbought daily and weekly conditions by going sideways, that is truly impressive. Working off overbought conditions in time rather than price is quite bullish. It's still possible these monster stocks pull back or correct - but, so far, their price action has been astounding, with very little evidence of topping formations on the charts.

This could be an important week for the stock market as the major indices, especially the Nasdaq and the Nasdaq 100 (QQQ), look like they are starting to roll over. In addition, we have seen four distribution days on the QQQ since early March. According to Investor's Business Daily, four or five distribution days within a 25-day period suggest institutional selling and, many times, a sign of at least an intermediate-term top.

Was Thursday's large downside reversal yet another one-day wonder? Strength was seen immediately on Friday, cutting into the weekly losses. The daily chart for the major indices all have a "rolling-over" look, with the Nasdaq and Nasdaq 100 (QQQ) appearing to be ahead of the S&P 500 (SPX) for a break lower. As well, the news from the Middle East seems to be getting worse by the day -- but, so far, the U.S stock market and economy seem to be turning a blind eye to the potential implications. Crude oil prices, both WTI and Brent, aren't exploding, but have seen pretty good rallies. WTI hit $87.60/barrel at the end of last week from the low $70s just two months ago, while Brent almost reached $92 last week from $77 in early February.

The major stock indices opened the day on Thursday with a nice gap higher, paused for a bit, and then ran to new intraday highs around noon. After that, we saw the proverbial "rug pull," with the S&P 500 (SPX) falling over 100 points and finishing at its lows for the day. While for only one day (and we have seen this before), it was an ugly reversal and did a bit more technical damage then prior one-day losses since mid-January.

We hate to use overly complicated technical terms to describe the recent price action, but the stock market is acting a little -- squirrely. Or nervous. Or fidgety. Who is going to put up the big money to take prices higher? Are investors still in profit-taking mode for the massive gainers but then rotating to other areas of the market? In the big picture, there hasn't been a negative technical mark on the current uptrend. But there certainly does seem to be some short-term indecision among market participants.

Ever so quietly, commodity prices are starting to percolate and, impressively, this action is occurring with a rising U.S. Dollar Index (USD). What would be happening if the USD was in a downtrend or reversing lower? We might be back in the 1970s, which was not a pretty time for the stock market, inflation, and interest rates.

No matter how you slice the price action from the last two quarters or past five months, the market may well have more upside ahead -- possibly in double digits. This is, of course, not a certainty, as there is always the possibility that something odd (say a pandemic) comes out of left field. But it is not rare for the S&P 500 (SPX) to be up for two consecutive quarters (at least during certain market periods), nor is it that uncommon for the index to be up for five straight months. Let's just hope that the solar eclipse next week is the only "odd" event we have for the rest of the year.

That was one heck of a quarter -- and now we've had two consecutive quarters of strong gains. As well, there have been five months with gains and 18 out 22 weeks in which the S&P 500 (SPX) has moved higher. And that happened with barely a speck of price volatility. The S&P 500 rose 10.2% in Q1, the S&P 100 (OEX) was up 10.9%, the Nasdaq (IXIC) was up 9.1%, the Nasdaq 100 (NDX) was up 8.5%, the S&P MidCap 400 (MDY) was up 9.9%, and the Russell 2000 (IWM) was up 5%. Bonds sold off a bit, the 10-year was up 34 basis points, gold (GLD) was up 7.6%, WTI was up 16%, the U.S. Dollar Index was up 2.4%, and Bitcoin soared 65%.

Was that a case of quarter-end buying by institutions? Over the last 50 minutes of the trading session on Wednesday, the S&P 500 (SPX) took off like a rocket, surging 30 points and finishing 0.9% higher on the day and at another all-time high. But the biggest winners on the day were small-caps, with the Russell 2000 (IWM) surging 2.2% and the S&P 600 (SML) spiking 2.4%. The IWM is breaking out of a more-than two-year base and closed at its highest level since December 2021.

We have talked about the weekly winning streaks of the major indices. As of Friday, most were 17 for 21 -- or winners 81% of the time. During that same time, the S&P 500 (SPX) jumped 27% and the Nasdaq and the Nasdaq 100 popped 30%. In sports, going 17/21 is about as good as it gets (although field goal kickers are sometimes better). One might expect a pullback (certainly possible), a correction, or something more dramatic after a run like this. But history is on the side of the bulls.

Market trends often persist longer than most expect. That is why it can be a good idea for an investor to allocate capital toward the highest relative-strength opportunities. Over the long-term, this has made it very difficult to be a value investor. Back in the late 1970s, there were very few momentum investors, very few market technicians, and a whole lot of people in the financial world searching for value. Socks trading below book value, stocks trading for less than the cash on their balance sheet, and stocks trading for single-digit price/earnings ratios. It was a very different investment world.

It was another week of all-time highs, with the weekly winning streak for the S&P 500 (SPX) continuing. The SPX has moved higher in 17 out of 21 weeks, with a 27% gain during that period. The Nasdaq 100 (QQQ) and the Nasdaq are also 17 out of 21, soaring 30%. The S&P 400 prints the same story, with a 29% pop. Index price volatility is almost undetectable, although there has been some decent volatility, both up and down, among individual stocks. We saw one day of strong breadth on Wednesday and one weak day on Friday.

We don't want to get too excited about the Russell 2000 (IWM $208), but the index is pushing up against key chart resistance once again. IWM is poking its head above prior highs seen in 12/2023, 3/2022, and the January 2022 breakdown level near $207. Since that breakdown over two years ago, IWM has traded in a volatile range, with the bottom down at $160.

The FOMC maintained the target range for the fed funds rate at 5.25 to 5.50%. The FOMC does not expect it will be appropriate to reduce the range until it has gained greater confidence that inflation is moving sustainably toward 2%. The FOMC will continue reducing its holdings of Treasury securities and agency debt and agency MBS, but said that the central bank will begin to slow its balance sheet runoff soon. Recent indicators suggest that the economy has been expanding solidly. Job gains have remained strong and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.

The S&P 500 (SPX) and S&P 100 (OEX) closed at minor all-time highs (ATHs) on Tuesday, while the rest of the major indices were near that mark as the relentless push higher continues. The leadership over the past month has shifted from AI and Technology to cyclical sectors -- which is what happens in a strong bull market. Rotation is really starting to gain some footing in 2024 and is critical to a long and enduring uptrend. We have seen addditional cyclical sectors join the party over the past month, as Energy (XLE +8.6%), Materials (XLB +6.8%), and Industrials (XLI +4.5%) have taken some of the load off the Technology gains.

The Federal Open Market Committee meets today and will release their interest-rate decision on Wednesday. That will be followed by Fed Chairman Powell's press conference, always a "can't miss" event for everyone involved in the financial markets. According to the CME FedWatch Tool, the highest probability (subject to massive change) for the first 25-basis-point fed funds cut is at the June 12 meeting -- but that is not a slam-dunk event. By the last meeting of 2024 on December 18, the most-likely scenario for the fed funds rate currently is sitting at three 25-basis-point cuts.

After the heavy-volume, bearish reversal on March 8 for the Nasdaq, Nasdasq 100 (QQQ), semiconductors, and most of the Technology sector, we had some downside follow-through for the first time since this monster rally started in October 2023. The QQQs and the iShares Semiconductor ETF (SOXX) have lost their 21-day exponential moving averages (EMAs) by a minor amount. Still, for more than four months, the 21-day EMA has been quickly recaptured whenever this happened.

In the past week, we have had little economic and EPS data, but we have had some interesting price action across the stock, bond, commodity, and currency markets. That caught us, as well as others, by surprise. But it is a big world out there and we try to avoid missing the forest for the trees!

West Texas Intermediate (WTI) crude oil closed at $79.60/barrel on Wednesday, as attempts to break to new rally highs above the $79/$80 region continue to be thwarted. However, the price action has been very tight over the past couple of weeks and crude looks like it is percolating under the surface. Oil is still working on a few higher highs and higher lows, but the rally since December 12 has been labored and, to our eye, does not look like an impulsive rally (which would imply a large move higher). This is the same type of action WTI saw back in May and June of 2023 before it took off, rallying from below $70 in early July to $95 by late September. To be confident in a big rally, any move over $80 should be somewhat steep and not just a slow crawl higher.

We are raising our long-term technical outlook to Bullish and most likely will raise the intermediate-term outlook to bullish if we ever get a pullback. With the benefit of hindsight, both timeframes should have been changed to bullish either in the middle of 2023 or late 2023. Yet for the most part, the daily commentary in parts of 2023 and 2024 conveyed bull-market action in market breadth, as well as breadth and price thrusts typically seen in early bull markets. Things got tricky in October 2023, when the S&P 500 broke many key averages as well as its bull-market trendline off the October 2022 lows. In addition, market breadth fell back to bear-market territory. At the same time, the entire yield curve was in a strong uptrend, hitting and exceeding 5%.

After Friday's bearish intraday reversal and heavy downside volume, especially in the Nasdaq, Nasdaq 100 (QQQ), semiconductors, and most of the Technology sector, we did see some downside follow-through on Monday. But it certainly wasn't convincing. Once again, the market bounced off its lows as algorithmic trading seemingly took over. The Nasdaq and the QQQs fell 0.4%, while the S&P 500 (SPX) clawed its way back, dropping a mere 0.1%.

The stock market finally saw a little reversion to the mean on Friday, as the most-loved stock and industry was whacked. Nvidia (NVDA) fell 5.5%, its worst day since May 2023. This followed huge advances of 95% since January 3 and 130% since October 2023. Over six days (ending March 7), the shares rose more than 19%. At Friday's intraday high, NVDA hit $974 and then was slammed down to $865 by 1:35 pm.

We are one session away from making it 17 out of 19 weeks in which stocks have moved to the upside. We've been throwing grenades at this move for a while, based on overbought and divergent momentum readings and excessive sentiment readings -- and it just does not matter. Yes, price is the final arbiter!

As if the stock market needed more help, now we have declining Treasury yields across the entire yield curve. Treasury yields fell consistently from October 19, 2023, until their most-recent bottom on December 27. That move certainly helped stocks rally off their October 27 low. Yields popped from 12/27/23 until 2/22/24 and stocks ignored the increase. Since their closing peaks of 4.33% a few weeks ago, both the 5- and 10-year yields have dropped to 4.1% while the 2-year has declined to 4.56% from 4.7%.

The stock market had a rough day on Tuesday, but it could have been worse if not for a burst of late-day buying. In the current market, after only six hours of weakness, buyers step in. Once again, the major indices held support from the typical short-term moving averages such as the 10- and 21-day exponential averages. The S&P 500 (SPX) gave back 1%, while the Nasdaq and Nasdaq 100 (NDX) fell 1.7%.

Gold and silver have blasted off over the past two days, which just happens to coincide with a decent slide in Treasury yields. What is a bit strange is that the rally was not due to a big break in the U.S. Dollar Index (USD), which has been going sideways over the past few weeks. It is possible that the USD uptrend since late December is over, but we would like to see more technical evidence.

Make it 16 out of 18 weeks to the upside, as the S&P 500 (SPX), Nasdaq, and Nasdaq 100 (QQQ) continue to witness relentless buying. Stocks were flat until the final two days of last week, when inflation worries were squashed by the January PCE report. It wasn't just stocks that reacted, as metals, oil, and bonds all popped on Friday. Bitcoin surged 21% last week and is closing in on its November 2021 all-time high near $69,000.

Depending on today's close, the three major indices might achieve 16 positive weeks out of 18 on their northern glide path. So far, this surely is a "leap" year. The Nasdaq finally made an all-time high (ATH), jumping above the last ATH from November 19, 2021. Yes, that took a long time (about 27.5 months). But after the 2000 high, it took the index more than 15 years to recover -- so just a couple years isn't so bad. Is this a significant breakout? As we have said, great breakouts to ATHs occur after multi-year bases, not after vicious rallies.

The stock market has been on hold this week, as investors await the Federal Reserve's preferred inflation measure, the Personal Consumption Expenditures Price Index (PCE). The report tends to show inflation trends that are less affected by short-term price changes. Stocks threw a bit of a tantrum when the January CPI and PPI were released a few weeks ago, but the market has since shaken off these single data points. There are at least four Fed governor/president speeches as well today -- and more on Friday.

Tuesday was a solid day for biotechnology stocks -- and not the large-cap names that dominate some ETFs, but rather smaller issues, some of which are unknown to many. First off, we have talked about how important ETF selection is -- as even names in the same industry can be vastly different. The two main biotech ETFs, the iShares Biotech (IBB) and the SPDR S&P Biotech (XBI), are about the same size, with over $7 billion in net assets. But that is where the similarities end.

While the Nasdaq continues to flirt with (finally) printing an all-time high (ATH), the last of which was in November 2021 at 16,057.44, the Nasdaq 100 (QQQ) has been in ATH territory since December 2023. And yes, the ETF has cycled into overbought (OB) territory on a daily and weekly basis and is close to cycling into OB territory on a monthly basis.

Another week has flown by in early 2024, while stocks have seen more recovery highs and the major indices have seen more all-time highs. The S&P 500 (SPX) rose 1.7%, the S&P 100 popped 1.9%, the Nasdaq and the Nasdaq 100 added 1.4%, the S&P 400 tacked on 1%, and the Russell 2000 lost 0.9%. For the SPX, the "100," and both Nasdaq indices, last week was the fifteenth of 17 on the upside; it is 14 of 17 for the "400." During the 17 weeks, the SPX has gained 23.6%, while both Nasdaq indices are up over 26%. Those are great returns for a full year!

Apparently, what goes up can keep going up! Thursday was a monumental day for AI, the Technology sector, Nvidia, and the entire semiconductor space. NVDA's blowout quarter, again, sent the shares further into space, rising 111 points or 16.4% to another all-time high of $785. At the beginning of 2024, the stock was under $500, and in October 2022, it was trading down near $100. NVDA lifted the Nasdaq and the Nasdaq 100 (NDX) by 3% and the S&P 500 by 2.1%. It was the largest daily gain for the NDX and Nasdaq since February 2023 and the largest for the SPX since January 2023.

Well, that's out of the way for another three months. Nvidia reported much better-than-expected results after the close yesterday, and the stock is up 14% in pre-market action. What a surprise! Can the mega-caps continue to pull the stock market higher, even with stocks already so extended (in particular, the AI names)?

Tuesday was another risk-off day. Losses for the small-, mid-, and mega-cap indices were between 0.6% to 1.4%. The 11 S&P 500 (SPX) sectors reflected the risk-off mood, with Consumer Staples (XLP +1.1%) the only sector to rise, while Utilities (XLU) and Real Estate (XLRE) booked tiny losses. The biggest losses were from Technology (XLK -1%), with Consumer Discretionary (XLY) and Energy (XLE) both off 0.9%. The market is probably in wait-and-see mode ahead of some monster quarterly reports this week.

While everyone in the investment world will be waiting (nervously or confidently) for Nvidia's quarterly numbers after the close on Wednesday, there certainly are other important Q4 EPS reports this week -- like those from WMT, HD, PANW, ADI, SNPS, VRSK, INTU, BKNG, MELI, EOG, BRK.B, among others. In addition to NVDA, stocks that are quite extended after large-to-massive moves since late October (about four months ago) include PANW, INTU, BKNG, MELI, and BRK.B. Betting on more near-term upside from these stocks, no matter what they report, is a tough technical game as they all have extreme 14-day and 14-week Relative Strength Index (RSI) readings in the high 70s to mid-80s. Needless to say, this should be another interesting week.

Stocks rose again on Thursday, with more evidence of rotation away from mega-cap tech. That's of particular interest knowing that Nvidia reports after the close next Wednesday. There are extremely high expectations for another blowout quarter from the company. But after a rise of more than 80% since late October (16 weeks), even a textbook "impressive" beat could lead to a "sell the news" reaction. Or the shares might surge higher and all will be good. The stocks of great companies sometimes go down, no matter the news.

We are increasingly frustrated with one-day wipeouts, as single-day disasters continue to be used as buying opportunities. But that is what we've termed a "lockout rally," so we need to get over it! The stock market has witnessed three nasty days in less than two months, with the first on December 20 -- when the S&P 500 (SPX) gave back 1.5%. The second occurred on January 31, with the SPX losing 1.6%. The third was on Tuesday, knocking 1.4% off the index. The first was followed by a small five-day rally and then a minor pullback low. The second one was followed by a decent seven-day rally to all-time highs. We'll see what happens after the third.

What goes up in a straight line sometimes comes down in a straight line. Tuesday was a nasty day for stocks, but it could have been much worse if not for a late-day rip higher. The S&P 500 (SPX) was down 102 points or 2% at 3:20 pm, but rallied over 30 points to finish down 1.4%. The Nasdaq fell 1.8%, the Nasdaq 100 dropped 1.6%, the S&P MidCap 400 gave back 2.4%, and the Russell 2000 collapsed 4%.

Returns can get a bit dicey for the stock market from February into mid-March, especially in a presidential election year. Yet Monday saw a massive reversal in relative strength, one that could be described as "Revenge of the Small Caps." That also can be said about the past three trading days. The Russell 2000 (IWM) rose 1.8% on Monday and has popped 5% in the past three days. The iShares Micro-Cap ETF (EWC) gained 2.8% yesterday and has surged over 6% in the past three days. The IWM is quickly approaching a key technical level at 205, which was the recent high in late December as well as the key breakdown level from January 2022.

The S&P 500 (SPX) has closed above 5,000. Now what? While forecasting is never easy, it is particularly difficult at this juncture as the major indices continue to ignore overbought momentum and breadth signals, bearish momentum and breadth divergences, and market sentiment that is scorchingly hot. But we will get that pullback, as we always do. And that brings up another question. Will the decline be shallow (a few percentage points) and then morph into more of the crawl-higher lockout rally? Or will the retracement be in the 7%-10% area, shake the confidence of some, and bring bears out of hiding?

The iShares 20+ Year Treasury Bond (TLT) is approaching its recent low near $93 after a nice bounce to near $99 on February 1. It is possible that TLT is tracing out a three-wave, ABC pullback; if C equals A, that would equate to a decline to the $91 area. That would also represent a 50% retracement of the rally from late October until late December. The COT data remains bullish for the 10-year Treasury and semi-bullish for the 30-year Treasury. Sentiment on TLT, the Vanguard Total Bond Market ETF (BND), and the 10-year Treasury has fallen sharply since the beginning of the month, a positive sign (eventually). We still think TLT (eventually) will take out the century mark.

Perhaps Sir Isaac Newton was thinking about the price action of a stock or commodity in 1687 when he wrote his famous first law of motion, which states that a body at rest tends to stay at rest, while a body in motion tends to stay in motion. Indeed, maybe he was thinking of the tulip mania from 1634 to 1637, when a single tulip bulb sold for more than 10 times the annual income of a skilled artisan. In any event, the roaring stock market today certainly seems to have that feeling. But there is one important question about the stock market's current phase. Are we in the second inning or the seventh inning?

The stock market broadened on Tuesday, as some money rotated from mega-Tech and other highflyers into Basic Materials (XLB +1.8%), Real Estate (XLRE +1.5%), Healthcare (XLV +1.1%), and Industrials (XLI +0.9%). More importantly, two of those important S&P 500 sectors, XLI and XLV, have broken out of massive bases to all-time highs. The S&P 500 (SPX) rose 0.2%, the Nasdaq was flat, and the Nasdaq 100 (QQQ) fell 0.2%, all while the NYSE tacked on 0.8%, the S&P 400 was up 0.5%, and the Russell 2000 popped 0.9%.

Early last year, the consensus belief had the economy headed toward a recession and the Federal Reserve needing to be aggressive with interest-rate cuts to prevent significant weakness in GDP. As 2023 progressed, the recession callers backed off as the economy kept its footing after the huge hike in the fed funds rate as well as the entire Treasury curve. And while inflation came down a lot faster than may thought, it did so without a concurrent weakening in the economy.

Last week was one to remember for financial markets. After Tuesday's close, some Technology results disappointed investors, with GOOGL plunging 8% and MSFT off 2.5%. While expectations for a March FOMC rate cut already had mostly disappeared, the market didn't like hearing it from Jerome Powell, which knocked the market even lower. The S&P 500 (SPX) lost 1.6%, the S&P 100 (OEX) gave up 1.8%, the Nasdaq fell 2.2%, and the Nasdaq 100 (QQQ) dropped 2%.

Panic on Wednesday turned into euphoria on Thursday, as the major indices dismissed the musings of Fed Chairman Powell and recovered a big part of their prior-day losses. Immediately after the close yesterday, Meta and Amazon reported and were sharply higher -- which suggests there will be more "high-fiving" among bulls today. On the flipside, Apple was off over 2% after reporting. On top of all that, the January employment report hits the tape at 8:30am today.

Wednesday was the first really tough day for stocks in 2024, as shares of some Technology companies were creamed after earnings were reported. Then, the Federal Reserve piled on and investors threw a temper tantrum at the thought the Fed isn't going to cut rates at the March 20 meeting. A month ago, the market saw a high probability of a March cut, but recently that belief (hope) has dissipated. Anecdotally, it was hard to find anyone (there were a few) that thought the Fed would start its rate-cutting campaign early this year.

The long-term laggards in the S&P 500 (SPX) finally rose on Tuesday, while many of the major Technology sector stocks finally took a breather. Some of the low-relative-strength stocks got a lift from Q4 earnings and forward guidance, while others gained from analyst upgrades.

The "Energizer Bunny" stock market seems to have a lot of juice left, as the major indices powered to new all-time highs on Monday while smaller-cap stocks also joined in. The S&P 500 (SPX) and the S&P 100 rose 0.8%, the Nasdaq and Nasdaq 100 rallied a bit more than 1%, the S&P 400 tacked on 0.9%, and the Russell 2000 led the day, popping 1.7%. Ten of the 11 SPX sectors rose, with Consumer Discretionary, Technology, Communication Services, Real Estate, Healthcare, Industrials, Utilities, and Staples all rising 0.6% to 1.5%.

This could be the greatest week for "event risk" in many years -- or perhaps we could call it "event reward." To begin, MSFT and GOOGL report after Tuesday's close, while AAPL, AMZN, and META report after Thursday's close. These five mega-caps represent almost 23% of the S&P 500 (SPX) and 32% of the Nasdaq 100 (QQQ). As well, the Fed concludes its two-day meeting on Wednesday -- with a slight edge in probability that they will leave fed funds alone through their March 20 meeting and make a first rate cut on May 1. The market is looking for five or six 25-basis-point cuts this year. Finally, on Friday, the January employment report is released.

Last week, we discussed some obscure sentiment indicators, all of which suggested stocks are overheating. Things got even hotter this week. We found another type of index option indicator that has done well at forecasting trouble for the stock market, yet we rarely hear anyone talk about it. The following data comes from www.sentimentrader.com.

The S&P 500 (SPX) hit its recent an all-time high (ATH) after more than two years and in a bull market that has been running for almost 15 months. Indeed, the full recovery from the 2022 bear market took a long time (over 500 trading days) when viewed historically. We reviewed data going back to the 1950s, looking at times when it took at least a year to make new ATHs after a bear market. The results have been quite bullish when projecting out nine months to a year.

Tuesday was another day of all-time highs (ATHs) for the S&P 500 (SPX), Nasdaq 100 (QQQ), and S&P 100 (OEX). It was an interesting day for SPX sector leadership and industry strength, with Consumer Staples (XLP) rising 1.1% and Communication Services (XLC) gaining 1%. Within Staples, Nondurable Household Products popped 3.3%, led by Kimberly-Clark (KMB +2%), Church & Dwight (CHD +1.9%), and Clorox (CLX +1.4%). Personal Products rose 2.1%, led by Procter & Gamble (PG +4%). XLC was powered by Mobile Telecommunications, which surged 4.3%, and Fixed Line Telecom, which was powered by Verizon (VZ +6.7%), the largest gainer in the SPX. Yes, real household names led the market. How strange is that?

While many Technology sector stocks made all-time highs (ATHs) on Monday, the almost-three-month move off the late-October lows is looking tired. Most of the Big Tech world traced out doji candlesticks on Monday, a sign of indecision. Daily momentum, after cycling into an extreme overbought condition in mid-December, is working on its second bearish divergence. Meanwhile, weekly momentum is working on its third and fourth bearish divergence since June 2023.

The stock market blasted off late last week, propelling the S&P 500 to an all-time high (ATH) of 4,840. It has been a long recovery (over two years) for the index, as its last ATH was on January 3, 2022. The Nasdaq 100 and the S&P 100 beat the "500" to new highs, while the S&P 400 is close. The Nasdaq and the NYSE still have work to do to puncture their ATHs from late 2021 and early 2022. The Russell 2000 and S&P 600 are nowhere near all-time highs.

The SPDR Gold Shares (GLD) fund remains near the top of its longer-term range going back to 2020, but is stalling out once again. Perhaps the yellow metal is refueling before it finally blasts above the $2,000/oz. region. As we have been saying, some worries have cropped up in the form of weekly momentum divergences.

The major stock indices remain stuck in fairly narrow ranges, while the rest of the market has been pretty weak in 2024. That weakness actually started in mid-December, and the daily NYSE advance/decline line has been in a downtrend channel for a month. However, we have not seen nearly enough price weakness from the S&P 500 (SPX), Nasdaq, or Nasdaq 100 (QQQ) to call for at least some short-term caution, although it sure looks like it is coming.

On Tuesday, Treasury yields continued to move higher and the U.S. Dollar Index had a big day, rising almost 1%. The combination knocked the stock market down. The biggest stock losses were in the NYSE Composite (-1%), the S&P MidCap 400 (-.7%), and the Russell 2000 (-1.3%). Once again, market breadth was horrible, with NYSE advances-declines at -1.960, and NYSE advancers/issues and NYSE up volume/total volume both below 20%. The mega-cap indices saw only minor losses with the help of Technology, and more specifically, semiconductor stocks.

As we move into the second half of January, the major indices are at, near, or closing in on all-time highs. Yet technical evidence continues to mount for some type of pullback or correction. We have talked recently about poor market breadth, but there are plenty of other and more-obscure indicators that also do not line up well for the bulls.

Earnings season has arrived, with some of the major financials kicking off what is always a period of anticipation, excitement, and fear (depending on what's in your portfolio). While technicals take a back seat during this period, there is one constant: the reaction to the quarterly reports and company guidance is more important than the actual earnings. In addition, perspective is needed. Did a stock run up or was it hit before the numbers printed? This can make the reactions a little more difficult to read.

It seems like there is some hesitancy among investors, this after the S&P 500 (SPX) approached that 4,800 level again. The SPX, Nasdaq, and Nasdaq 100 (QQQ) all closed higher on Wednesday -- but gave up some of their gains late in the session. With the December CPI and PPI reports due on Thursday and Friday, perhaps there is a valid reason for some hesitation. The market went back to the 2023 stalwarts on Wednesday, with Communication Services, Technology, and Consumer Discretionary leading the 11 S&P 500 sectors.

Major indices made nice intraday recoveries on Tuesday -- but for a second day in a row, market breadth disappointed. In early trading, the S&P 500 was down about 30 points, but finished down only seven. The Nasdaq and Nasdaq 100 were off almost 1% early on, but closed with minor gains. Small- and mid-cap indices were a bit soft, with the Russell 2000 off 0.9% and the S&P 400 down 0.7%. NYSE breadth (advances-declines) was -1,535 while NYSE up issues/total issues was weak at 28% and NYSE up volume/total volume was only 25%.

It seems that a new week means a new stock market. The major indices bolted higher on Monday after last week's scare. The S&P 500 rose 1.4%, the Nasdaq and Nasdaq 100 both popped a bit over 2%, the S&P 400 added 1.3%, and the Russell 2000 jumped 1.8%. Market breadth did not match the strength of the indices, with NYSE advances-declines at 1,576, NYSE advancing issues/total issues at 74%, and NYSE up volume/total volume at only 64%. There were a number of smaller stocks on the NYSE that fell on huge volume (40-50 million shares), so the volume stats may have been skewed by issues that simply don't matter to the broader market.

With the Santa Claus rally having fallen flat, attention turns to the first five trading sessions of January. And so far, three out of four weren't good. After that, the performance of stocks in all of January will be examined as key to 2024's performance.

The iShares 20+ Year Treasury Bond (TLT) hit a recovery high of $100.53 on December 27, entering an area of thick chart resistance at $100+. So far, we have seen a minor pullback to $97, which is a key technical point as it was former chart support and also is where the 21-day exponential (EMA) sits. Daily momentum cycled into overbought territory in December and has traced out two bearish divergences, while the momentum uptrend has broken. Trendline support off the secondary low on November 13 also has been taken out. To get things going on the downside, $95.50, or the location of more chart support and the 200-day, has to be broken. That would open the door for a possible decline to the $89-$93 area, which is a 61.8%-38.2% retracement of the recent rally. The U.S. Commodity Futures Trading Commission's COT data has improved and is bullish, while sentiment for the two-, five-, and 10-year Treasurys remains bearish.

The Santa Claus rally blew up, which many believe does not portend well for stocks in January and 2024. The next great “tell” (LOL) will be the first five trading days of January -- and the first two stunk. And then, of course, we have the entire month of January to guide us for the entire year. Yet maybe this is all about delayed capital-gains selling after a very good 2023, especially at the end of the year.

The largest stock on earth, Apple, fell 3.6% on the first trading day of 2024, dragging the S&P 500 (SPX), NASDAQ, and NASDAQ 100 (QQQ) lower. While it looked ugly until about 3:00, stocks rallied in the final hour, cutting into their intraday losses. The SPX ended 0.6% lower and the seven-day Santa Claus rally (ends January 3 close) is suddenly in jeopardy, but by only a few points.

After a rough 2022, 2023 was a pleasant event, with all the indices posting gains and seven out of 11 S&P 500 (SPX) sectors posting nice to extraordinary gains. At the end of 2022, about 50% of SPX holdings were above their 50- and 200-day averages. At the end of 2023, 90% were over their 50-day and 78% were above their 200-day. The Nasdaq 100 (QQQ) finished 2023 with 93% of issues above their 50-day and 85% over the 200-day, versus 40% and 43%, respectively, in 2022.

As 2023 ends, there are a number of markets that are sitting at either potentially strong chart support or tough chart resistance. For a chartist and technician, this is like the best of all worlds. We generally look for these times to call for a reversal in a number of strong trends, at least for the short to intermediate term.

The S&P 100 (OEX 2,242) printed a closing all-time high (ATH) on December 18, breaking slightly above the prior high from January 3, 2022, of 2,219.44. The OEX suffered a decline of 27% during its 2022 bear market that ended on October 12, 2022. Since the bear market low, the index has leaped almost 39%. The OEX is rebalanced four times a year and consists of the 100 largest stocks within the S&P 500 universe.

The "Energizer Bunny" stock market has been on autopilot for the past three months, with the major indices riding their very short-term 10-day exponential average higher. Pullbacks have been absent, or have been only a day or two affair, and price pauses have been sideways and very tight. This type of crawl-higher price action historically is quite bullish, and very frustrating for investors who are light with their equity allocation and waiting for a drawdown that never comes.

The stock market entered one of its historically most-bullish times of the year on Friday -- specially, the last five days of the old year and the first two days of the new year. When there is not a "Santa Clause rally" over those days, it is deemed to be bearish for the new year. We find it odd that these very short periods of time are thought to have substantive predictive value for an entire year. Yet these periods always grab headlines, as data crunchers love to see their names in lights.

Stocks rebounded nicely on Thursday after the Wednesday thrashing. This potentially classifies Wednesday's thumping as a one-day wonder, which implies the current rally off the October lows isn't quite done yet. The problem is that a rally to new recovery/all-time highs is likely to incur a daily bearish momentum divergence. While one such event is just a warning, it raises the possibility that a reset is needed. As we have said of late, both daily momentum and breadth have reached extreme overbought conditions, while sentiment is scorching hot. So a pause/pullback might be in the cards.

Wednesday was an ugly day for the stock market, as a downdraft came out of seemingly nowhere. Yes, price momentum and market breadth were extremely overbought, as we wrote about on Monday. But the major indices had yet to trace out any bearish momentum divergences, while breadth remained strong. Sentiment certainly needed a reset, and rapid declines will take care of that in a hurry. Anecdotally, most investors appear to be bullish going into next year, and even a few "perma bears" threw in the towel this week. One bear explained his actions by saying he was "forced to buy." This is a brutal business at times! And when the bears or bulls capitulate, they usually get smacked in the face.

As 2023 comes to a close, we are reminded of John Bogle, the founder of The Vanguard Group, who was credited with popularizing the index fund. A man of many quotes and the author of a number of books, Bogle offered the following. "Intelligent investors will use low-cost index funds to build a diversified portfolio of stocks and bonds, and they will stay the course. And they won't be foolish enough to think they can consistently outsmart the market."

The U.S. Dollar Index (USD) started trading in January 1973 and, believe it or not, has not gone anywhere for the past five decades. After moving sideways until the beginning of 1981, the greenback spiked higher until early 1985, rising to $165 from $100. As quickly as it soared, it then came crashing down, tracing out a very narrow Christmas tree and ultimately bottoming in 1992 at $79. Since early 1986, the greenback has been trapped in a fairly wide range between $71, hit in 2008, and $120, reached in early 2002. Since a secondary low was hit in 2011, the USD has been in a fairly consistent but wide bullish channel. A major part of the USD is the euro (about 60%), so it's not surprising that since that currency began in 1999, it has been (very) negatively correlated with the greenback.

Price momentum on the major indices is pushing historical overbought levels, while breadth for the S&P 500 (SPX) and the Nasdaq 100 (QQQ) also is getting close to overbought levels. As well, certain sentiment indicators are at rarefied levels. Fortunately, these characteristics are much more common during the early to mid-phases of a bull market and are not seen together in a bear market.

On Thursday, oil (WTI) closed at $71.65/barrel, up 3% on the day. Crude had dropped to $67.70 on Wednesday, its lowest level since late June, and has done a round trip for more than five months, rising from $67 to $95 in late September and then falling back again. The COT data has improved as prices have come down, and it's possible oil has completed a five-wave correction. WTI needs to break the bearish trendline (off the peaks since September) that comes in around $74.50 when projecting out a week. That would create a false breakdown, which is generally bullish. In addition, we'd like to see a series of higher highs and higher lows to confirm a trend change.

The bearish mantra espoused by the Federal Reserve and all its governors and ex-governors, and often reiterated by most economists in the U.S., just blew up. The Fed finally admitted that the fed funds rate will come down in 2024, with three rate cuts indicated in the revised dot-plot forecast. Fed Chair Powell said that the central bank did not want to make the mistake of keeping rates restrictive for too long. Meanwhile, the CME FedWatch Tool is showing a 68% probability of the first cut at the Fed's meeting on March 20, 2024; a 74% chance of two to three cuts by the June 12 meeting; and an 81% chance that fed funds will be between 3.5% and 4.25% by the end of 2024.

Perspective is very important when analyzing the stock market. We know that a few stocks have accounted for most of the 21% year-to-date gain in the S&P 500 (SPX). And after another nice day on Tuesday, the index is only 3.2% from its January 3, 2022, all-time closing high (ATH) of 4,796.56. That's a long comeback from the 2022 bear market (-25%).

After taking a much-needed breather since November 20, the stock market got back into crawl-higher/lockout-rally mode on Monday. The S&P 500 (SPX) and the Nasdaq Composite broke slightly above their closing July levels, while the Nasdaq 100 (QQQ) is within a few points of taking out its prior all-time high from late 2021. What a very long round trip!

Major stock indices squeaked out a gain last week, making it six straight winning weeks. The S&P 500 (SPX) made a minor new recovery high, landing above the July 31 closing high on both December 1 and December 8. While we still do not consider this an official breakout (as price has exceeded the July high by only 15 points), the chart formation looks bullish. The SPX has traced out a large "V" bottom for more than four months, as well as a smaller inverse head-and-shoulders (H&S).

With the S&P 500 and the Nasdaq challenging their July highs, and the Nasdaq 100 close to its all-time highs from late 2021, sentiment data is reflecting extreme readings of optimism. If this is the next leg of the bull market, it doesn't matter. But if we are entering another bear market or are still in one from an individual stock perspective, then it does matter. Confusing? Yes. Hard to interpret? Not so much. We been watching sentiment for a very long time, and it can takes years to figure out and, more importantly, to accept.

The major stock indices saw minor losses on Wednesday (between 0.4% and 0.6%), generally not a cause for worry. That said, they all posted fairly ugly daily candlesticks. The indices spiked at the opening, posting their intraday highs in the first couple of minutes, but then sold off the rest of the day. While only one day, this represents a bit of a change in character for the S&P 500 (SPX), Nasdaq, and Nasdaq 100 (QQQ). While the unloved and under-owned small- and mid-caps also sold off intraday, they held in better than the mega-caps.

Treasury yields continue to provide an impetus for further equity strength, as the 10-year yield fell to 4.17% on Tuesday from 5% in late October, the five-year dropped to 4.14% from 5%, and the two-year hit 4.57% from 5.24% in mid-October. Key technical levels for the five- and 10-year start at 4.2% and run down to 4%; for the two-year, the next key level is at 4.25%.

WTI fell another 1% on Monday, closing at $73.27/barrel and near its November 16 closing low of $73.09. Crude oil is back near its lowest level since early July and has done a round trip from $70 to $95 and back again over the past five months. Oil just can't seem to get going in either direction, as it has traded between $64 and $95 since August 2022.

The Russell 2000 (IWM) offers a fascinating and challenging-to-read chart (long-term neutral). IWM peaked near the $160 level in September 2018 and in early 2020. Then, after the pandemic, small-caps ripped higher, with IWM peaking just below $240 in November of 2021. The index then crashed into mid-2022, right at the prior highs from 2018 and 2020 near $160. After a rally to near a prior breakout level around $200, IWM fell right back to its prior peak at $160 in October 2022. Another trip to the top of the range near $200 failed, as did an attempt to break out of the range in July 2023, which led to another successful test of the bottom of the range near $160 in October 2023.