High-flying semiconductors and techs finally succumbed to profit-taking on Friday. Poor earnings from Intel (INTC) gave investors the excuse they needed to take profits in extended semis and techs. The sell-off, however, was merely a blip on the daily chart of the NASDAQ Composite Index as the current market trend remains quite intact to the upside. With the Fed policy announcement due out this Wednesday, the potential for change is always a factor, but for now one is hard-pressed to say that the market rally has been upended by any stretch of the imagination. CME FedWatch shows the next rate hike likely in May with a terminal rate of 375-400 bps by the end of the year.
Financial conditions remain quite loose, as the chart of the Chicago Fed's National Financial Conditions Index(NFCI) continues to show lower lows, indicating ever looser financial conditions. If one area of the market sells off then liquidity may start looking for other areas of the market to inhabit.
On Friday we reported on the price undercut & rally (U&R) move in Bitcoin $BTCUSD as it cleared several prior lows along the bottom of the base from which it attempted to breakout but failed three weeks ago. This latest U&R triggered a long entry along any of these lows which can be used as selling guides. Alternatively, since $BTCUSD also cleared its 10-day moving average by a reasonable margin it could also be used as a reasonably tight selling guide. The 50-dma looms just above as key moving average resistance, however, and we would want to see $BTCUSD quickly clear the line to confirm any bullish tone to Friday’s U&R.
As $BTCUSD was posting its U&R on Friday we simultaneously reported on four crypto-related names that at the time were showing potential bottom-fishing buyable gap-ups (BFBGUs) off their current lows. None of these panned out however as volume did not exceed 50% above average as required for buyable gap-ups. However, these names may attempt to set up along their lows if the current U&R in $BTCUSD remains in force so we will continue to monitor these names closely this week. The price correlation between BTC and these Bitcoin miners is relatively high.
On Friday we also reported on Arm Holdings (ARM) which was trying to decide which side of its 20-dema it wanted to live on by the close. Early in the day it made an attempt at posting a moving average undercut & rally (MAU&R) long entry at the 20-dema failed by the close to trigger a short-sale entry at the line which is now used as a covering guide. If it can quickly regain the 20-dema in the next few days then perhaps the MAU&R long entry will be re-triggered but for now, on its face, the chart is showing a short-sale entry at the 20-day line.
Arista Networks (ANET) remained unruffled by poor Intel (INTC) earnings on Friday as it continued to hold tight sideways all week long. This follows two continuation pocket pivots that we reported on previously on the way up as the stock has stair-stepped its way to all-time highs. If one is using the Seven-Week Rule as a trailing stop method, then the 20-dema would serve as key Seven-Week support for ANET as the trend continues to extend higher.
Strong semiconductors pulled back in an orderly manner on Friday, such as Broadcom (AVGO) and Nvidia (NVDA). Both stocks pulled into Century Mark levels, AVGO into the $1200 level as it looks set to test the 10-dma while NVDA pulled down to well within 2% of its $600 Century Mark where it triggered a Century Mark long entry per Livermore's rule on Wednesday. The rapidly rising 10-dma is also coming into play as the pullback in NVDA progresses and may add to potential support along the $600 Century Mark.
This will be an extremely busy week for the market. Not only will the Fed release its latest policy announcement on Wednesday, but Friday will bring more major economic news from the Bureau of Labor Statistics’ monthly jobs report on Friday. Currently, the US is showing strong growth, a lower rate of inflation, and a dovish Federal Reserve, making for a Goldilocks economy, at least for now.
On the earnings front, we are now moving into the thick of earnings season with several key reports expected from names like SMCI on Monday afternoon, AMD, GOOGL, and MSFT on Tuesday afternoon, and APPL, AMZN, and META on Thursday. Any of these reports has the potential to move the market and/or specific sectors so will likely make for an important market week.
The Market Direction Model (MDM) remains on a BUY signal.