Stark Divergences Stand Out and Our Names See Big News
Can the S&P 500 and Nasdaq keep going higher without broader participation?
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It has been quite a month and year for the Nasdaq and S&P 500 indices. Coming off of a very strong 2023, these two indices have not missed a beat. Through Tuesday, the Nasdaq is up a strong 18% while the 500 is higher by 15%. Not too shabby near the midway point of 2024.
But the small caps and the industrials have been left behind, the Russell 2000 is about flat for the year while the Dow Jones Industrial Average is barely higher than that. It screams divergence, which eventually will be fixed. For the bulls, the ointment will be the small caps pushing higher to join the rest of the market.
However, we have not seen signs of this occurring, and the longer this divergence continues, the worse it may get for the rest of the market (meaning that the small caps may drift lower and pull the rest of the market down with it). Remember, divergences are signals that do not necessarily have to react immediately. If we identify them and are aware of the benefits or consequences, then we can adjust our tactics and strategy to watch these on a daily basis.
Wednesday was a holiday and markets were closed, but on Thursday, a slew of economic data arrived. Jobless claims rose up for a third straight week, the Philadelphia Fed Index was mixed but showed a dampening effect from business last month. The Bank of England had a meeting and decided to keep rates steady at 5.25%. Two members voted to cut rates on Thursday, but the majority believe inflation is still a potential problem.
NVIDIA NVDA, Dell DELL and Super Micro SMCI are jumping on Thursday after reports of an "'AI factory' for Elon Musk's xAI." This could be big news for our portfolio names NVIDIA and Marvell MRVL.
Three Fed speakers will be out later on Thursday talking about the economy, interest rates, inflation and other topics. We'll hear from Neel Kashkari (of Minneapolis), Tom Barkin (of Richmond, Va.) and Mary Daly (of San Francisco). Only Barkin and Daly are voting members for this year.
Strong earnings out this morning from Accenture ACN following strong earnings and revenue but the company lowered guidance for the year. Kroger KR also beat on the top/bottom line on strong grocery demand. It reaffirmed guidance and announced a strong stock buyback.
More Pro Portfolio:
- We Are Calling Up a New Portfolio Position From the Bullpen
- Weekly Roundup: A New Name Joins the Portfolio
- Signals From Our Investing Notebook
At the time of publication, TheStreet Pro Portfolio was long NVDA and MRVL.
