Special Bulletin: February 22, 2024

 All Eyes on Nvidia and AI

My grandson & I have recently begun enjoying launching Estes rockets. The thrill of seeing his rockets soar into the bright blue sky with a head snapping speed is exhilarating and captivating for both of us- for the whole family. Watching them come back down (which they do quickly) is a bit more nerve-racking. Will the wind blow them away? Will the parachute work and prevent a freefall? Will they land in the trees or on someone’s roof and be lost? As important as these questions are, they can’t be answered until after the launch.

The stock market acted like an Estes rocket today fueled by strong earnings results and a “blue sky” outlook from Nvidia. Artificial Intelligence (AI) and its related stocks seem to be on a mission to mars! And investors and traders alike remain exhilarated and captivated by them. 

What is in store for them? Will the AI stocks continue to be blown higher by the wind (demand) of eager investors? Will investors need a parachute in case their fortunes change? Or will they run out of fuel having gained so much already and be lost in the shuffle of a sideways market as their moves peter out? As important as these questions are, the answers will begin being known as soon as tomorrow – after today’s launch.

Bullishness remains excessive in the stock market, especially in the aforementioned tech stocks. However, the bullish demand has begun to expand into lesser known, mundane industrial sectors/stocks and we believe that that can be a healthy thing for the market.

Last week we posted, “Tuesday’s sharp sell-off (a distribution day) was possibly a warning, a “shot across the bow,” for alert market participants. What happens in the next few days will bring immediate clarity/confirmation of the institution’s intentions. An immediate push to new highs on big volume would be comforting for the bulls. A series of distribution days that pierce through key moving averages would mobilize the bears.” The former is developing.

Personally, I wanted an upgrade to “green” at today’s opening bell (SPX 5,044.73) due to the violent, positive response to the NVDA’s release overnight. In fact, we were close to upgrading our Current Market Outlook as of Wednesday’s close based on the brilliant test (and hold) of the 21-day mav on the S&P500 during that trading day, but the Core Four didn’t confirm it. So, we remained disciplined and properly waited to see how the NVDA release was received. It obviously went well.

Yet, the math of the market (as measured by our Core Four through monitoring the footprints of money) today continued to signal that caution is advised even with today’s action because the VIX and Distribution Day count remain high. This could change immediately and bring an upgrade to green asap, but for some technical reason it didn’t at today’s open or throughout the day.

Our Current Market Outlook remains “Uptrend Under Pressure” with a yellow light. Our “Core Four” (see top of page) still shows 2 green, 1 yellow and 1 red light with a VIX that is still over its 50-day mav. FYI: The advance/decline lines remain unimpressive. The number of daily new 52-week lows on the NYSE remains tame.

Keep an eye on the small cap stocks as a good market tell, especially regarding the lagging advance/decline lines. The Russell 2000 is trying to “set up” and may be the key for the next leg up- if there is to be one – in this broadening rally.

The trend remains up as long as the major indexes are trading above their 21-day mav’s. That was tested again yesterday and held on both the SP500 and the Nasdaq.

““But in those days, after that tribulation, the sun will be darkened and the moon will not give its light, and the stars will be falling from heaven, and the powers that are in the heavens will be shaken. Then they will see the Son of Man coming in clouds with great power and glory.“  Mark 13:24-26 NASB 1995  

Game plan: Bulls: Expect further price progress but fear a reversal. Bears: Your tail is showing! The trendlines are properly stacked and the major indexes remain over their 21-day mav’s. Please keep praying for Israel and peace for Jerusalem.

Note: You can learn more about The Triumphant Core Four risk management system by clicking here.

Have a Triumphant day! ®