Financial News vs. Noise
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Just around the time everyone flipped bearish the market had a big run to end the week. Once again it was led by Magnificent 7 names and not a ton else. Interestingly, my S&P 500 weekly mean reversion model now has 140 stocks with 2 week RSIs under 20, mostly made up of energy, utilities, and consumer staples names. This tells me a few things, mainly that a rising tide has not lifted all boats, at least not yet. The NAAIM exposure index is also interesting in that institutional investors were max bullish at the end of the year, right before a bit of a drop, and then have dropped equity exposure quite a bit.
Last week I pointed out the undercut & rally patterns on a bunch of the Magnificent 7 names. Those have now all moved to overbought positions, so will be interesting to see if they become more overbought or pull back into spots where they become buyable again. Again, my sense is that me don’t go anywhere fast until we work out the disagreement between the market and the Fed on rate cuts, but don’t underestimate the power of the bulls when they get going. TSLA is still the laggard, but it is setting up near some potential important lows. It also reports earnings this week.
The first one is 212.36 from August. If it moves back above that level you could go long using it as a tight stop. TSLA is up this morning, but it’s early.
According to Michael O’Rourke, the Magnificent 5 (take out AAPL and TSLA) account for 99.6% of the S&P year to date gain.
This is kind of crazy when you think about it:
@EricBalchunas: Nice chart showing how NVIDIA is a hair away from having a bigger weight in the S&P 500 than the entire energy sector, will be the fifth stock to join this elite club via @Todd_Sohn
https://twitter.com/EricBalchunas/status/1748006453581926755
According to our friends at Unusual Whales, Nancy Pelosi has made nearly $500K in two months on NVDA calls, more than double her annual salary.
As is this:
@jasongoepfert: The S&P 500 closed at an all-time high. The Russell 2000 is still in a bear market*, down more than 20% from its high. That's never happened before.
https://twitter.com/jasongoepfert/status/1748455766565031958
Continue to watch the 10 year, they tried to rally rates on Friday but basically ended flat.
Commodity names continue to be laggards, but I am seeing some potential undercut and rally patterns set up.
The gold miners may be setting up again, something like GFI at 12.40 could be interesting for example.
FCX had an undercut and rally at two moving averages.
CCJ had an undercut and rally at it’s 10 day.
Crypto names are starting to get to interesting levels. I added CLSK on Friday.
VIX continues to pull back, but it’s not far from levels that I would flip long.
On the short side I continue to be short China, which is in the red again this morning. We also added a short on XOP (oil explorers).
I continue to think caution is warranted. I am concerned about breadth and the fact that the Fed and the market disagree on the amount and timing of rate cuts. I still think you buy dips in the magnificent 7 and continue to look for signs of a widening out of breadth.
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Matthew Tuttle is the Chief Executive Officer and Chief Investment Officer of Tuttle Capital Management, LLC.
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