Technology bulls traded punches on Friday with desperate bears as investors continued to pour money into big capitalization funds. The Nasdaq 100 gained 0.1% to close at 16,834, states Jon Markman, editor of Strategic Advantage.
The technology-heavy NDX rallied 3.2% on the week, the tenth advance during the past eleven weeks. All of this has been predictable.
Professional money managers came into the final month of 2023 far behind their benchmarks. They were forced to put money to work to catch up. They deployed capital to big capitalization technology, the most liquid part of the investment landscape.
The NDX finished 2023 with a gain of 54%. I wrote a week ago that money flows successfully, sometimes blindly. Pros are now attracting 2024 capital inflows. Much of this has been earmarked for the same big-cap tech stocks that performed so well in 2024.
Analytics at ETF.com shows that the Invesco QQQ Trust (QQQ), an exchange-traded fund that tracks the performance of the NDX, had net inflows last week of $1.25 billion. The ETF was in the top five for net inflows. The top ETF for inflows last week was the iShares Core S&P 500 (IVV), a cap-weighted investment vehicle that tracks the S&P 500.
The takeaway is money is flowing into 2023 market winners, the bigger the cap, the better. This is a huge headwind for bears. They want to tell the story that investors got 2023 wrong, and that valuations are out of whack with the prospect this year for economic growth and corporate earnings. It is a narrative that is falling on deaf ears with investors. There is a good reason.
Data from Nasdaq.com shows that the previous four times the NDX posted a large annual loss, 2002, 2008, 2011, and 2018, gains followed for the next two years. The NDX was down sharply in 2022, and a big winner in 2023. If the past is prolog bulls should win again in 2024. The record intraday high for the NDX is 16,969.
A close above that level will unleash a torrent of new short covering and aggressive technical buying. It would be the knockout punch from the Bulls. There is important short-term support for the benchmark at 16,580, the rising 20-day moving average.
Be ready to buy any pullback to that level or a close above 17,000.