Stocks continue to trade up, a bit more than we have expected, but accumulation models are still in strong formations. We have been early on Biotech, but it looks as if our patience will be rewarded. Unless FXY can start closing above 67 soon this is set up to continue the downtrend. Our current opinion is the dollar is a range, but with an upward bias.
We ran Accumulation models on the stock indexes and SPY and QQQ models are still close to new highs. This means that there is no danger of a major correction in stock prices. As we have mentioned on various calls, the risk here is that rates go higher. This would imply a break of 90 on TLT.
Small Cap looks stronger than we expected, in terms of Accumulation. There could be some interesting action here over the next few months. The chart patterns of QABA and PSCF suggests that NYCB is probably an isolated incident and not a symptom of a larger problem.
We remain intermediate-term bullish and expect strength after a market pullback. XLV is a high-level consolidation that has lasted for two years. This has big potential as we have said.
Stocks as measured by the S&P 500 are trading up into the end of January, and while there is some broadening of the market, it has been less than we would have liked. Is this the ultimate bottom for China? We are not sure, and we do not like the Chinese fundamentals, but these ETFs have become a fairly low risk opportunity.
TYX has resumed the yield rally attempt, but the 44 area is resistance and it has failed in that area once in the last week. It looks like this resistance should hold this.
Is the market continuing to broaden out? If you looked at last week, you’d have to say no – but remember this is going to happen in fits and starts, not day in and day out. One thing that was a bit of a surprise in last week’s trading was the strength in TNX – it actually traded stronger than TYX, although we did not have a signal on it.
Stocks have closed in an interesting fashion, as we have some “big move” signals. One of the concerns that we have for this year is that rates do not fall as quickly as the market believes they will.
Stocks are acting about as expected – choppy, up and down, which is one way to resolve the overbought condition. We have an interesting situation with XLV, a sector that I think has a lot of potential.
January could be a bit dicey – as the November/December rally has discounted strong fundamental developments. It is interesting that the stock market is suggesting that inflation is dead, when some of the technical indicators are suggesting resurgence in commodity prices in 2024.
We continue to see evidence that the market is broadening out – RSP had a great week relative to SPY, and Small and Mid-Cap names also performed well. We expect TLT to have some choppy pullback this week, but the data suggests a major pullback is unlikely – hold fixed income positions.