A Market of Hot and Cold, Charting Google, a Quantum Leap Ahead
Look at the action on the Nasdaq as Apple, Tesla and Broadcom power ahead; also, a whole bunch of jobs go poof.
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The disparity is almost shocking. On Monday, the Nasdaq Composite gained 1.24%, as its more elite cousin, the Nasdaq 100, tacked on 1.45%. Both closed at all-time record high closes, supported by strength in such household names as Apple AAPL, Tesla TSLA, Broadcom AVGO and Alphabet GOOGL. Broadcom, by the way, is up a stunning 38% from Thursday's closing bell as Wall Street cheers the potential of the company's custom AI-capable chips.
For that matter, AI champ Nvidia NVDA has posted seven red daily candles in the past eight sessions and lost contact with both its 21-day exponential moving average & 50-day simple moving average on Monday. As I said that I would, I took my pound of flesh and reduced my exposure to that stock. For the first time in as long as I can remember, Nvidia is no longer a top 20 holding of mine.
Nvidia's recent beating does nothing to diminish the recent enthusiasm around tech and growth vs. everything else. While the Nasdaq siblings reach for the sky, though the Dow Jones Industrials are no longer looked at as a major equity index due to its narrow scope, that narrow scope is supposed to comprise 30 elite level blue-chip stocks. Well, the "blue-chip" index has put together a string of eight consecutive red candle days and appears headed for a test of its 50-day simple moving average, which is where it found support both in mid-September and late October / early November.
Then there is the S&P 500, which is a little bit country and a little bit rock & roll. There is enough "old economy" or value and tech or "growth" in the S&P 500. That broadest of large cap indexes gained a pedestrian looking 0.38% on Monday, remaining within striking distance of its all-time record high that was set on Dec. 6. The index, more or less, has simply moved sideways for December to date. Monday's gain brings the S&P 500's December performance to +0.69%.
The Ingredients
Just four of the 11 S&P sector SPDR exchange-traded funds shaded into the green on Monday, despite the tales of glory told at day's end by the session's heroes. Consider where those green shoots came from. Discretionaries XLY led the way, up 1.35%. Within that sector, the Dow Jones U.S. Automobiles Index screamed 5.48% higher. The autos were paced not just by Tesla, but all of the non-legacy or EV-only manufacturers. The legacy automakers all closed lower for the session.
The Technology XLK fund gained 1% for the day. Within that group, the Philadelphia Semiconductor Index rallied 2.06%, while the Dow Jones U.S. Software Index gained 0.97%. In third place came the Communication Services XLC fund, up just 0.39%. However, within that fund, Broadcast and Telecom stocks were taken out to the woodshed, while the Dow Jones U.S. Internet Index ran 2.32% higher. The stars there were Alphabet and Reddit RDDT. Those two were up 3.6% and 3.16% respectively.
Though only one sector calls itself technology, from electric vehicles through the internet, the victors not just on Monday, but recently, have all been tech stocks in one way or another. The losers on Monday? Energy XLE gave up 2.2% for the day and is now down 8.7% for December, as Health Care XLV gave up 1.2% for the day and is now down 5.5% month to date.
Check This Out....
The breadth for the S&P 500 has suffered from negative breadth for 11 consecutive sessions despite the fact that the index is up moderately month to date. What does this mean? That the few (not really so few) are carrying the many. Tech. As far as breadth is concerned, as far as bifurcation of our equity marketplace is concerned, Monday really takes the cake.
On Monday, at the NYSE, losers beat winners by a three to two margin. Advancing volume took a 38.2% share of composite NYSE-listed trade, as aggregate NYSE-listed trading volume soared 22.5% higher on a day over day basis. Negative breadth on huge volume means that there was likely some real conviction in the negativity. Now, check this out....
Over at the Nasdaq. winners beat losers by more than 200 names (out of 4,500), as advancing volume took a 69.1% share of composite Nasdaq-listed activity. On a day over day basis, aggregate Nasdaq-listed trading volume screamed 41.9% higher. Positive breadth on such a huge volume means that there was very likely real conviction in the positivity. Fire & Ice. A time for traders more than investors.
Those diversely but passively invested in U.S. equities may be struggling to post victories in this environment. If one's own portfolio is not running at or near its own all-time record highs, then this approach is likely no longer working as we wind down the year. I am an active investor / trader. Therefore, I am biased. That said, if your accounts are ending the year on weakness, this is serious food for thought.
What in The World?
Over the past three months, the U.S. Ten Year Note has gone from paying 3.65% to 4.42%. In a way that's healthy as many of the most important spreads within what we refer to as the slope of the U.S. Treasury yield curve, have normalized. The issue is this. The Federal Reserve Bank has been dovish and has been working towards suppressing yields at the shorter end of said curve.
That means that bond traders are pricing in risk, debt and the fiscal largess of the U.S. legislature even as certain parts of the U.S. equity market sit at all-time highs, even as inflation has undeniably been reaccelerating since at least September if not a month or two earlier (at the core). Where would these rates be, if so, much of the developed world were not in the dumper?
China's economy is not just underperforming, but is leveraged way over its head. Is the only answer there to add stimulus that will only end up exacerbating the problems that arose from fiscal policies that make ours look responsible. The French government has fallen. The German government has fallen. Who knows what's going on up north?
The Canadian government has suddenly become the least stable in North America if not much of the western hemisphere as Trudeau's political allies appear to have started to jump a sinking ship. There may be a confidence vote headed the Canadian government's way ahead of next year's scheduled election. The G-7. A rat's nest of fiscally reckless nations. Yet, U.S. Treasuries, at least from the belly of the curve on out to the deep end, cannot find a safe haven bid. Even as the U.S. Dollar apparently has. More food for thought.
Here We Go Again
Anyone else see the report released by the Philadelphia Fed dated last Thursday? Apparently, for the second quarter of 2024, after going through the preliminary estimates state by state for job creation published by the Bureau of Labor Statistics on a monthly basis for the March through June period or 2024, we have a surprise that surprises not a soul. The Philadelphia Fed findings indicate that results for job creation were significantly different in 27 states that had been reported in the monthly releases.
Readers will likely recall that for the 12 months ended March 2024, the BLS was forced to revise lower its cumulative non-farm payroll creation by 818,000 jobs. Poof. In an election cycle, 818,000 new jobs had been reported to the media that never existed. Thin air.
We don't know, the precise number of the revision now headed our way, as the BLS won't get to that until February, but we do know that the Philly Fed now thinks that for Q2 2024, the United States, instead of experiencing 1.1% growth in job creation for the period, more likely than not, suffered job "destruction" of 0.1%. Hurrah. We live in an era where nothing and no one can be trusted. I guess we knew that already. Just terrific.
Breakout!
Take a look at Alphabet. Surely, we see a breakout. Readers may see an inverse head and shoulder with a $170 pivot that created a fairly mature breakout that may or may have another $10 of upside room:
However, other readers may see a cup with handle pattern sporting a $182 pivot:
Suddenly, what may have been a target price in the $204 area, appears to maybe move up to something more like $218. Hmm....
Just a Heads Up
With retail sales, industrial production and business inventories all on this morning's macroeconomic docket, readers can expect the Atlanta Fed to revise its real-time Q4 GDP model later today. Remember, Atlanta is currently at growth of 3.3% (q/q, SAAR) for Q4, but that makes Atlanta the outlier as every other regional Fed district running such a model (New York, St. Louis and Cleveland) is well below 2%.
Long Live Quantum!
Yes, they are very volatile, but in case anyone is keeping track, D-wave Quantum (QBTS) and Quantum Computing Inc QUBT are up 134% and 76% respectively since I gave them to you in late November.
Economics (All Times Eastern)
08:30 - Retail Sales (Nov): Expecting 0.5% m/m, Last 0.4% m/m.
08:30 - Core Retail Sales (Nov): Expecting 0.4% m/m, Last 0.1% m/m.
08:55 - Redbook (Weekly): Last 4.2% y/y.
09:15 - Industrial Production (Nov): Expecting 0.1% m/m, Last -0.3% m/m.
09:15 - Capacity Utilization (Nov): Expecting 77.2%, Last 77.1%.
10:00 - Business Inventories (Oct): Expecting 0.1% m/m, Last 0.2% m/m.
10:00 - NAHB Housing Market Index (Dec): Expecting 47, Last 46.
13:00 - Twenty Year Bond Auction: $13B.
16:30 - API Oil Inventories (Weekly): Last +499K.
The Fed (All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights (Consensus EPS Expectations)
After the Close: HEI (.98), WOR (.52)
At the time of publication, Guilfoyle was long NVDA , QBTS, QUBT equity.
