The Market Hasn't Been Like This in 53 Years (March 4-March 8)
March 4-March 8, 2024 by Adit Dayal for RIPPYGLOBAL.
Happy weekend everyone and welcome back to the Rippy Global weekly outlook. The stock market continued to go rippy last week posting gains of 0.9% to new all time highs and sending a bunch of names flying with huge opportunities for retail to take advantage of.
Let’s take a look at what next week has in store for us!
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The S&P has been on a tear recently, but it’s more unusual than most people think. In fact, the index has been up 16 out of the last 18 weeks, the first time this has happened since April 1971 (53 years ago!). Bank of America had a great study with data since 1928 stating that such a bullish Jan-Feb triggers a stronger end to year, closing positive 80% of the time with the March-December gain being 14.1% which would be placing an EoY PT on SPX at 5400. Improvement in corporate earnings as well as AI is fueling this boom, but the question is if it’s overdone? Searches on Google for “stock bubble” have hit a new high and in my opinion, if everyone thinks we’re in a bubble, it can’t blow up just yet. In fact Ray Dalio posted a newsletter explaining why he doesn’t think we’re there just yet:
Dell just posted huge gains after earnings, up nearly 32% which is huge for such a legacy computer company. Why? If you couldn’t guess based on how every company is reporting, the answer starts with A and ends with I. The CEO made it a point to emphasize how the demand for AI centers is greater than the supply and boosting their earnings. The PC market is also waning (something to watch against the Apple Mac market), but Dell guided PC sales to rebound in 2025. The demand for Dell’s AI solution boosted orders by 40% and kind-of puts them in this new basket of AI names the market loves.
Bitcoin has been on a tear as well, with the “halving” coming soon. Essentially, Bitcoin has a maximum supply of the currency of 21 million coins and when a halving happens, it means that for the same amount of work a miner can only get 1/2 of what they had previously, therefore restricting supply as demand should stay the same. This time, we have spot traded ETF’s increasing inflows into the currency as well has institutions getting into the name. It should be interesting with the predicted halving to hit in Mid-April and something to watch.
The last thing I want to talk about is the “China Shock” as labeled by the Wall Street Journal- the period when our markets are flooded by cheap goods from China and reduce inflation, but also lead to a decline in US jobs. China is doing everything they can to boost their economy and can lead to a temporary short term boost to their markets and is something I’m watching, but in the long term I think the world has shifted perspective to see China as more of an economic adversary and will do their best to prevent another shock to US jobs.
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#1) Earnings week is full of EV names this week and smaller stocks as the main companies have already reported. Therefore I’m looking for continuation in different sectors with good earnings since none this week should really move the needle.
#2) On Monday, the American Airlines CEO will be presenting, this is interesting to me because Citi just opened a 30 day upside watch on AAL. Here is the take directly from the note: “The analyst comments "American Airlines’ FCF upside story should continue, with a very good probability that management could provide additional, helpful color during their planned investor event on March 4th.”. I also think the OSK (Oshkosh) event can move with all the retail names running.
#3) On Tuesday, TGT and SMCI (recently added to S&P 500 after this huge move) will be presenting and should provide interesting takes for their respective industries.
#4) On Wednesday, Powell will testify to the House Financial Services Committee and the Fed’s Beige Book will release at 2PM.
#5) On Thursday, Powell will speak again on monetary policy and the European Central Bank will be giving a press conference after their policy rate decision.
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S&P 500
The S&P 500 ($SPX index) continues to trade up in this channel and the main idea here is simple: don’t fight the trend. Until we break below this trend I’m not looking to short- rather I’m looking for secular rotations. There will be a bull market in some sector as money keeps rotating while the indexes run.
My key breaks are $513.62 for bulls and $505.65 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
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INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
TSLA
As I have been continually mentioning, the $206 gap fill area for TSLA is a difficult spot, and with the market breaking out to new highs, I think the weakness is too noticeable to ignore, and at the same time too noticeable to be a short. I think we breakout to the $212 moving average resistance and then this becomes attractive to short again. A strong close over $212 reverses the trend for this name.
AAPL
Apple is breaking down from this bearish pattern on news that they’re slashing prices in China, but the bigger news is that Goldman Sachs removed it from their conviction list of their top names. This is massive news, and while not a downgrade, it means that analyst sentiment has soured and there are differing opinions in the thesis behind the stock. Until Apple makes lengths in their Gen AI offerings, I think this name will chop around.
GLD
“Boomer Bitcoin” is on the verge of a massive breakout from this pattern over $190 here. Gold is benefitting from a weaker US dollar in tangent with oil rising as well. Asian buying of gold futures are propping price up according to Brien Lundin of Gold Newsletter and I think this can be an interesting commodities play that’s setting up to $200.
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Insider Activity
Insider buys were great last week producing meaningful moves (finally) in SPHR and CART. RIG is a new one I haven’t seen in a while and can be interesting.
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Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)