Technology bulls punched their way through Wednesday, sending the Nasdaq 100 to a fourth consecutive gain. The benchmark closed at 15,241, a gain of 0.7%, states Jon Markman, editor of Strategic Advantage.
The advance came despite another hotter-than-expected inflation report. The September producer price index came in at a gain of 0.5%, versus a year ago. The reading was 0.2% higher than the consensus estimates among economists.
In the past, such hot numbers have staggered bulls. The big idea was that hot reports would lead the Federal Reserve to maintain its hawkish policies, a strategy many believed would hurt corporate profitability and stock prices. However, fear of the Fed for professional money managers is now taking a back seat to worry about falling behind the benchmark.
Bears often talk about inflation being the worst inflation in 40 years. It is a comfortable talking point that portends doom. Bears never mention that 1983 was an especially bad time to be betting against the market, though.
Pros understand history and symmetry. This is why they gravitated on Wednesday to stocks that tend to outperform in rising markets. Adobe Systems (ADBE), Alphabet (GOOGL), Nvidia (NVDA), and Meta Platforms (META) pushed higher by 3.2%, 1.8%, 2.2%, and 1.9% respectively.
The fear of falling further behind the NDX is palpable. Although bears have been stealing the headlines for the past month, the NDX in 2023 is still ahead at 39%, the best year since 1983. There will be other bearish headlines and seemingly negative macroeconomic reports. They will have little impact on the trend.
Pros can’t afford to fall further behind the benchmark. They are buying dips, even minor ones. The NDX has overhead resistance at 15,619, the highest from September first. Bears are likely to concede a rally to that level. The first important support level is 15,074, the 50-day moving average.
Hot Trigger: This is a repeat from yesterday as I wanted to make sure members read it.
This is a potentially fateful moment in our lives as investors. Memories of a grueling September are fading and in their place, we can see that stocks are starting to lift from an oversold condition at a time of year that is seasonally the most positive of the year.
Oversold stocks are like kindling, and the positive seasonality is like a match. Put them together, barring any other high-stress development, and you could see an unusually zippy two to twelve months ahead for bulls.
To add some quantifiable rigor to this idea, a SentmimenTrader.com analyst noted that the MACD—a popular technical indicator—just triggered a buy signal for the S&P 500 at the same time that the broad market is in a broad uptrend and the seasonally strongest stretch of the year, October and November, lies straight ahead.
Said the SentimenTrader analyst: “Whenever a MACD buy signal emerges in either October or November, S&P 500 performance is nothing short of phenomenal.”
The researcher said that since 1932, this signal has been triggered 13 times. The last five were October 2014, November 2012, October 2005, October 1999, and November 1997. Results over the next 12 months were 6.5%, 29.1%, 14.8%, 8.2% and 20.4%, according to the research.
There are no sure things ever in markets, but we are always looking for a provable edge, and this appears to have a shot at being one.
