Bears failed to fight back on Tuesday, the second non-performance in as many days. The Nasdaq 100 index closed at 17,404, a gain of 0.4%, states Jon Markman, editor of Strategic Advantage.
Don’t be fooled because upside progress has slowed. Bears want us to believe the onus is on bulls to continue the robust rally that started last Thursday. Nothing could be further from the truth. When you get punched in the mouth, fighting back is imperative. A fierce response shows the aggressor that there is plenty of fight left and that taking more will not be easy.
Bears are sending the opposite message. They are guarding against further pummeling, throwing up their hands in defense only. This will not be nearly enough to deter future attacks from bulls. It is not difficult to see how bulls are lining up new targets. Smaller stocks have started to attract bids again.
After rallying 30% in the final quarter of 2023, the iShares Russell 2000 (IWM) exchange-traded fund is up this week by 1.9%. Professional money managers often seek smaller shares when they are comfortable with rising stock prices. The Russell index is a proxy for smaller shares. The benchmark rises more quickly than the S&P 500 and Nasdaq 100 index in buoyant markets.
Pros are also attacking heavily shorted issues, bears’ strongholds. Digital World Acquisition (DWAC) is a blank check company that is likely to invest in a conservative political social media platform. Shares are up this week by 92%. The catalyst is supposed to be the narrowing Republican primary field. Bears argue the actual business has no source of revenue. Reality does not matter. Bears are getting skewered.
The bottom line is bulls are not put off because the rally for the NDX has slowed from last week. They are emboldened because bears are not fighting back.
After the close Netflix (NFLX) reported subscriber growth of 13.1 million members. Shares rallied 8.2% after hours. The benchmark could easily begin to run toward the next upside target for the NDX at 18,296. Current support is 16,775, the 20-day moving average.