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Stock Market Breadth, Trends, And Opportunities As We Navigate Through The Holiday Trading Season
Stock Market Update Friday November 17, 2023 Stock Market Breadth, Trends, And Opportunities As We Navigate Through The Holiday Trading Season, it’s crucial to keep an eye on the underlying signals and patterns that shape our investment strategies. In recent times, we’ve observed some intriguing trends that are worth highlighting.
Market Breadth: A Mixed Bag An interesting development in the market is the waning breadth, even though overall strength remains robust. This is a nuanced scenario where, despite the strength in the broader market, there are signs of a narrowing leadership. We have seasonality playing in favor of the bulls, which is a positive sign. However, it’s important to stay alert.
On Friday, the major indices, particularly the big caps, showed a relatively calm demeanor. Yet, the real story lies in the “gobs of breadth” we are witnessing. Both the NYSE and Nasdaq have demonstrated strong performances, with more than 2-to-1 advances over declines. This is an encouraging sign but comes with a caveat.
Emerging Negative Divergence We are starting to see a negative divergence building up. This emerging pattern is more of a condition than a direct signal and could persist for several weeks or even a month. This warrants a closer inspection come January 2024 next year.
Positioning and Profit-Taking Our current long positions are performing well, being “in the money.” Given these circumstances, we recommend taking some profits off the table. A closer look at the QQQ Chart reveals bullish consolidation. Remember, the best moves often come from failed moves. If this bull flag fails, we might witness a complete retrace of the entire move early next year. Keep an eye on the orange line for a potential breakout signal or failed break out.
Broader Market and Commodity Insights The market witnessed another rally at the long end of the Treasury curve, with 30-year yields dropping to 4.59% - the lowest in nearly two months. Meanwhile, stocks traded sideways for the third consecutive session, with the S&P 500 ending the week on a high note from its opening gap on Tuesday. The commodities market, WTI crude oil rebounded to $76 a barrel. Gold remained steady at $1,980 per ounce. The VIX, an indicator of market volatility, stayed relatively calm, hovering below 14.