The S&P 500 Index posted an all-time closing high on Friday as it again flirts with the top of the price range it has formed over the past five weeks. The move was decidedly indecisive on a day where NYSE and NASDAQ breadth was negative. What appears to be occurring currently is a narrowing of leadership as a handful of big-stock NASDAQ names drive the indexes higher. Interestingly, a recent report cited the fact that 70% of the S&P 500's performance in 2021 has been due to four stocks: Apple (AAPL), Alphabet (GOOG), Microsoft (MSFT), and Nvidia (NVDA).This would appear to be consistent with the NYSE advance-decline line, which remains well off its highs.
Meanwhile, the NASDAQ Composite is holding along its 10-day moving average and remains well off its recent highs.
NASDAQ breadth also remains weak, in contrast to the recent action in the index itself.
The Market Direction Model (MDM) remains on a CASH signal.
Bitcoin ($BTCUSD) remains in a quagmire as it comes in to test its 200-day moving average. The events of the past week make very plain some essential realities regarding $BTCUSD. That is, $BTCUSD is not a hedge against inflation, it is not a hedge against adversity, and it is not a store of value until and unless it stabilizes and sheds its FOMO characteristics where money piles in and piles out in a flash as fear and greed ebb and flow. That’s said, record levels of QE and spiking inflation are pushing a number of major entities to move out of fiat and into hard assets, real estate, stocks, and bitcoin. The difference between bitcoin and the other assets is volatility. Bitcoin has appreciated by at least an order of magnitude during bull markets while other assets may double. But during bear markets, bitcoin can lose more than 3/4 of its value and even as much as -94% from peak to trough. Nevertheless, it not only recovers losses but heads much higher. That said, past performance is no guarantee of future results. It is prudent to assume total loss but with massive upside so position size accordingly. Never risk money you cannot afford to lose.
At the same time, Ethereum ($ETHUSD) is playing out as an initial double-top short-sale set-up with a second short-sale set-up occuring this week at the 50-day moving average. It is again flirting with the lows of late November, but may be setting up for a test of its 200-day moving average as $BTCUSD has.
The key economic event as we head into year-end will be this week's Fed policy announcement on Wednesday. How the market reacts to this may very well set the tone for the market action heading into year-end, whether that features a narrowly-led melt-up to new highs or a Christmas Chrash. Stay tuned.