The J-Pow Pivot Has Arrived
Market Update December 14, 2023
The original plan for today was to send a stock charts' How to' article.
However, the market action this week is much too important to pass over. So we’ll stick to the charts today and the educational piece will come later. Stay tuned.
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Let’s take a look at what has transpired so far:
Monday, stocks (SPY & QQQ) broke out of the weeks-long box consolidation
On Tuesday and Wednesday mornings, we got CPI and PPI with no surprises
Wednesday afternoon, the FOMC announced no rate hike, as expected
All of this went according to plan. Stocks were joyful participants moving nicely higher in the “good news is actually good news” sequence of events.
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Then, Jerome Powell initiated liftoff. He was much more dovish than anticipated in his press conference.
“Inflation has eased over the past year but remains elevated.”
Furthermore, he indicated the Federal Reserve could potentially cut interest rates three times in 2024.
Stocks liked the news, to put it mildly. QQQ nearly put in a new all-time closing high, missing by only a fraction of a dollar.
The gap-up open this morning was a welcome follow-through, and now we’re right back to that ‘stocks are extended’ situation.
SPY gapped higher at the open today, moved lower to fill that gap, and then closed about where it started. The action is strong. And trends tend to persist.
So it could easily keep grinding higher into new highs by year-end. The environment (sentiment, momentum, year-end window dressing) and the seasonal patterns support that outcome.
However, the extension is notable. Trading $10 above the 8-day MA with RSI nearing 80 tells us that correction could reappear soon.
If so, will it do so by time or by price?
If by time, you know the drill as we just watched it happen. Watch for price to move along in a sideways range while the 8 and 21-day MAs catch up.
If by price, there is room for a retest of the low $460s, which has a pivot high and will have the 21-day MA soon enough while still maintaining bullish momentum.
QQQ teased us a bit today by trading toward new highs early in the day but then, once again, failed to book a new all-time closing high. It’s not quite as extended as SPY. Can it get the new closing high to finish out the week?
If so, it will have to do so despite the annual reconstitution and while going ex-dividend tomorrow.
IWM Up, up, and away. This is a massive gap-and-go for the small-caps today as they touch a new 2023 high on more than twice the average daily volume. The catch-up trade is working well.
DIA The Dow Jones Industrial Average is the first major index to log a new all-time closing high. It did that yesterday and added to the gains today. It now has the luxury of no potential resistance overhead.
TLT Bonds and stocks continue to work in unison. The retest of the 8-day MA was a success, and now TLT is back above the 200-day MA.
DXY The Dollar plummets through the pivot lows, finding no support. For a couple of weeks, we’ve been looking for Dollar futures to get below $103.40 to open the door higher for stocks. Yesterday’s news from the FOMC sent it sharply lower. Today followed with a huge gap-and-go lower.
Now, does it continue back toward lows?
Or stabilize between $100.50 and $102?
It’s still good to watch, but either outcome should be conducive to higher stock prices. As long as there is no sharp reversal higher, the dollar may be less of a factor for a while.
The Closing Bell
Incredibly bullish action.
After weeks of time correction and consolidation, stocks broke out strongly, with many making new all-time highs.
Once again, we are looking at short-term extension as prices have moved well beyond their moving averages, and many RSI readings are above 70. That doesn’t mean prices have to go down. One of the most bullish things a stock can do is get overbought (RSI > 70) and stay that way.
It does mean we need to expand the charts and time horizons and start looking beyond the constraints of the last year or so.
In the near term, though, be patient and mind the extension. Follow the plan and process. Continue to look for low-risk entries that fit the appropriate reward:risk profile.
The Weekly Chart review will be as important as ever this weekend. Don’t miss it.
Follow me here: @Andy__Moss on X and hit the bell to enable notifications while you’re at it.
See you Saturday morning.
***This is NOT financial advice. NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.
Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”), a SEC registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
Statements in this article represent that person's opinions only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.
It is possible that Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual or it may reflect some other consideration. Readers of this article should take this into account when evaluating the information provided or the opinions being expressed.
All investments are subject to the risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants, or other qualified investors prior to making any investment decision.
December 14, 2023, 4:00 PM
Long: ADBE, AMZN, AMZN1229C150, IWM, META, NVDA, QQQ, RXRX, TSLA
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