There's a Dilemma for Investors as the Market Arrives at a Tricky Juncture
My cash levels are now around 40%, but not for the reason you might think.
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The market was mixed on Monday, with the DJIA leading and the Nasdaq 100 QQQ lagging. Small-caps continued to see rotation, but the Russell 2000 faded and closed flat after a robust morning.
The number of stocks hitting new 12-month highs was more 1,300, but the breadth was slightly negative, with around 4300, gainers and 5,000 decliners.
The dilemma for investors right now is that the market remains technically strong, but it is becoming increasingly difficult to find buyable charts. There are breakout buyers, but many investors and traders do not like to buy new highs. They will buy very shallow dips, but they do not like to chase strength.
My cash levels have been increasing and are now around 40%. That isn’t because I’m bearish. It is because I’m locking in some gains and cutting weakening stocks quickly. I do not see many charts that support aggressive buying.
Market participants appeared nervous about upcoming earnings from Nvidia NVDA on Wednesday night. The semiconductor sector SMH lagged, dropping about 2.25%. Retail, financials, and energy all performed well.
The market is at a tricky juncture. It has had a strong run and still has upside momentum, but there isn’t any compelling catalyst like another Jackson Hole speech. Nvidia earnings could easily see a "sell the news reaction, and even if it is solid, how much are investors willing to chase?
I plan to continue to manage positions tightly and be very selective with buys. We know an interest-rate cut is coming, but the market has been celebrating that for a while and is looking tired.
Have a good evening. I’ll see you Tuesday.
At the time of publication, Rev Shark was long NVDA.
