As we move into the jaws of second quarter OPEX, things continue to improve remarkably for any index that includes any of the highly weighted NASDAQ 100 components, with the short term trend of volume leading prices to the upside primarily in large cap issues. It should be duly noted that both the XLI and XLK closed at new all time highs today, and with today's added internal fuel, the NDX itself now has a better than 60% chance of challenging its all time highs since it saw its bottom on December 28th.
With it being the 3rd week now that the breadth McClellan Oscillators having remained above their zero lines, this is historically the mid way point of the current short term rally phase sequence. Let's not be too surprised, then, if we see some sort of blow off high in prices sometime next week. From there, wide, volatile swings are likely as prices take a pause before the upside momentum created by this move takes over into the mid July period. With several price parabola's in play here currently, any near term "blow off" might only be a well deserved pause, but it can also be an important top a la the market peak of 2000 given the narrowness of both market and sector breadth and scope.
For now...the trend in prices remains higher in spite of liquidity levels being at their lowest levels since 2007. The 10 day average of CBOE and Equity put/call ratios are currently at levels where we've seen each and every price top since the January 21, 2022's change in trend, while put premiums are at their lowest levels since just before the COVID crash in February 2020. Elliott wise, the raw cumulative breadth data (the amount of money available for investment being distributed among all issues..."supply") is still not leading price to the upside, though volume (the amount of money moving into the market overall..."demand") remains very good. This, of course, suggests that only a small amount of boats are floating in the marina, while the great majority are sitting in dry dock while they wait for the liquidity tide to come in and raise them up. This is certainly not the same situation that we saw in the QE days of 2009 to 2022. But, then again, since we're dealing with emotional humans, any market of supply and demand can act irrationally at anytime in spite of all the negative fundamentals that may accompany them. So, still staying with Elliott analysis, and given that the NASDAQ and NDX retraced nearly 38% from its highs of January to the lows of December 2022, this might be one of those classic 5th wave blow offs in progress....parabolic price moves being led by only some without the benefit of broader market participation.
Just checked the FedWatch tool, and the boys and girls in the pit are looking for a 70% chance of a 1/4 point hike in July and then steady for the rest of the year. The front month opinion could be a knee jerk reaction to Wednesday's Fed suggestion of another 2 more hikes, so it might be a good idea to review this data again from time as we go into the end of the month.
Anyway, as mentioned earlier this month, the market environment can now be deemed as being neutral on a longer term basis, but don't tell that to the few sectors that are enjoying all the pomp and circumstance that only the latest market fad can enjoy...very much like the Nifty 50 in the late 1960's and early 1970's, or even, all the internet enthusiasm of 1999/2000.
Fib
Edited by fib_1618, 15 June 2023 - 08:50 PM.
