Bears continued on Wednesday to give up ground as bulls circled back to technology leaders, states Jon Markman, editor of Strategic Advantage.
The Nasdaq 100 closed at 15,005, a gain of 0.8%. The rally was the 12th advance in 14 days. And unlike Tuesday when big capitalization tech stocks succumbed to profit-taking, the rally yesterday was concentrated on those issues.
Nvidia (NVDA) soared 4.8% to a record high. Shares of the artificial intelligence silicon leader are up 52% during the past month, and 194% year-to-date. More importantly, the gains on Wednesday came even after Advanced Micro Devices (AMD) announced a competing AI chip. It’s easy to see what is happening.
Professional money managers are flocking to tech leaders for fear of missing out on the rally and falling further behind the benchmark NDX. It is a frenzy, all to the detriment of naysaying bears.
History suggests there will be a pullback. So many investors can’t all be right concurrently. However, bears are in a bind. Pros are blowing up their shorts, and buying tech leaders into every decline. This is a classic blow-off move higher, and it could last a while.
The NDX has support at 14,700, then 14,302, the rising 20-day moving average. There is no important resistance until 15,265.
The NDX Loop: Members earned an overall profit of 16.5% by buying ProShares Ultra QQQ (QLD), a 2x leveraged Nasdaq 100 fund, on May second and then selling in halves higher for gains of 10.6% and 22.4%. Let’s try to do that again. I’m hunting for a new low-risk entry.
Behind the Headlines: The Dow fell 0.7% to 33,979.3, while the Nasdaq Composite rose 0.4% to 13,626.5. Among sectors, energy, and health care led the decliners, while technology saw the biggest gain, up 1.1%. Breadth favored decliners five-three. There were 115 new lows vs 594 new highs.
The Federal Open Market Committee held interest rates steady at 5% to 5.25%, ending a series of rate hikes that started in March last year.
"Holding the target range steady at this meeting allows the committee to assess additional information and its implications for monetary policy," the FOMC said in a statement Wednesday after its two-day meeting. Fed Chair Jerome Powell said in a press conference after the meeting that "nearly all" committee members expected that further policy tightening will be needed in 2023 to bring inflation down.
The FOMC's updated Summary of Economic Projections showed revisions to several key components, including an increase in its 2023 median funds rate to 5.6% from 5.1% projected in March. Committee members raised the median rate for 2024 to 4.6% from 4.3% and the 2025 rate to 3.4% from 3.1%.
In economic news, the annual producer price index advanced at an annual rate of 1.1% last month, following a 2.3% gain in April, the Bureau of Labor Statistics reported. May saw the smallest annual increase since December 2020, Stifel said in a note. The consensus on Econoday was for a 1.6% rise. Sequentially, PPI fell 0.3% last month, following a 0.2% gain in April and compared with Wall Street's view of a 0.1% drop. In total, a solid session for news.
