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Market Summary
The market is short-term oversold but may need to move slightly lower before a bounce. My tea leaves suggest that the market can bounce soon and from not much lower levels. The rally/bounce could last up to a couple of weeks, and we will re-evaluate after assessing the strength of the bounce.
Some indexes may still attempt a new high. Shorter cycles allow for that, while MT cycles have already turned down, and LT cycles are in the process of doing so. But, with or without a new high, everything points down in the intermediate term.
Repeat from before:
Remember that I mentioned several times in the last 2-3 months that in an expected topping formation one should raise cash by selling the rips. Those who followed this strategy did well and got the prices above the present levels. This game scenario is still appropriate.
The short-term analysis is becoming more in line with the intermediate—and long-term analyses, which suggests a reversal is due. The lightning could strike unexpectedly around the tops.
My longer-term expectations do not change. I will repeat from the weekend report: “Despite the market's resiliency and FOMO, I expect a correction in the next 2-4 months, initially.
Market data as of close on 17 Apr. 2024.
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Tracking SOX (Semiconductors)
I have been tracking $SOX.X (Philadelphia Semiconductor Index), which includes NVDA and some other AI chip stocks.
Traditionally, this sector has been one of the classical cyclical sectors. Recently, it has become too popular due to its AI chip stocks, resulting in an extreme ratio of SOX/SPX. This is similar to the 2000 peak when SOX was also too popular due to the wireless and networking chips. It suffered a huge correction then and may repeat the same pattern now.
The bearish technical patterns we noted at the top proved to be correct. Likely, SOX reversed. The NVDA cycle composite posted yesterday in the am blog also paints a negative picture for SOX. For now, I will track SOX using the anticipated EW count and plotted channel. It has several gaps down to Oct’23 lows that wait to be filled.
Technical Analysis
NVDA is bouncing off the support for the fourth time! This must be important. Once it breaks the support, it may accelerate down.
Liquidity
The Fed's Overnight Reverse Repo facility is a tool for managing short-term interest rates, bank reserves, and overall market liquidity. It helps maintain stability in the financial system and supports the Fed's broader monetary policy goals. ON RR going down is generally not good for the market as it does not support excessive speculation in financial markets.
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Cycle Analysis of Major Indexes
NDX reached the 80D cycle target after reaching the 40D cycle target on Monday. It should. . .
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