The 30-stock Dow Jones Industrials and the NASDAQ 100 Indexes ended the year in all-time high price ground while their broader brethren the S&P 500 and NASDAQ Composite fell short of all-time high price territory as time ran out in 2023. Some high-volume churning was evident in the NASDAQ indexes over the final few days of trade in 2023, but it is not clear whether this is meaningful given typical year-end cross-currents.
In our view, the major driver for stocks in 2024 will be interest rates. Note that the current sharp year-end rally off the late October lows perfectly and inversely correlates to the sharp decline we have seen in interest rates since that time, as measured by the 10-Year Treasury Yield ($TNX). The current market rally has been predicated on the idea that the Fed will be lowering rates in 2024 at a faster pace than even the Fed itself believes.Should economic events, including the direction of inflation in 2024, veer from this expectation then it could have a negative effect on stocks. Indeed, market determined interest rates have fallen precipitously over the past three months and any natural reaction to the upside could drive at least a short-term to intermediate-term market correction in early 2024. For now, however, the market trend remains to the upside.
Bitcoin ($BTCUSD) had a strong year in 2023 as it rose from the ashes some 180% from the late 2022 lows around $15,000. Currently $BTCUSD is forming a four-week flag formation as it consolidates strong gains from 2023. If the current narrative of lower interest rates in 2024 holds, then we would look for a breakout in $BTCUSD to higher highs at some point in 2024 that could potentially challenge or even exceed the November 2021 highs at $68,978.64.
We discussed a buyable gap-up in former software company turned large $BTCUSD owner Microstrategy (MSTR) back in early December and the stock has rallied over 20% since then. On Friday it was finally hit with some volume selling that could bring 10-dma or 20-dema support into play. Most $BTCUSD miners like Marathon Digital Holdings (MARA) and CleanSpark (CLSK) were hit with heavy selling on Friday as well after moves of well over 300% over the past three months. Please refer to our recent Crypto Reports archives for more commentary on these names.
Another major theme in 2024 will be, in our view, the evolution of the current AI Meme narrative. When the AI Meme Theme first hit the market in the first half of 2023 anything even remotely related to artificial intelligence was off to the races. We believe 2024 will be a year where the AI Meme Theme crystallizes as the lesser names in the space fall by the wayside. We expect, however, that leading AI companies which include some of the MMANGA stocks such as big-stock AI chipmaker Nvidia (NVDA), Alphabet (GOOGL), Microsoft (MSFT), Meta Platforms (META), and Apple (AAPL) will remain potent forces in the AI space in 2024.More recently it has continuously run into resistance along the $500 Century Mark, invoking short-sale swing-trades each time based on Jesse Livermore's Century Mark Rule for the short side. Currently, NVDA is tightening up near the $500 price level so could be setting up for an eventual breakout and decisive move through the $500 Century Mark. We would keep this on our radar for 2024.
Samsara (IOT) remains in a tight four-week flag formation following a breakout to new highs five weeks ago. It is one of the few hot, smaller AI-related names to reach all-time highs which is, in our view, a constructive development for the stock. It also remains buyable as a giant cup-with-handle breakout where the $32 level should function as near-term price support.
2023 was a notable year for gold, at least gold futures, which spiked to an all-time high of $2152.30 an ounce three weeks ago. That move occurred on a Sunday afternoon when futures were trading but stocks were not. Thus the SPDR Gold Shares (GLD) never posted its own correlating all-time high and instead remains less than 2% below its own all-time high of 194.45. Along with $BTCUSD, gold and silver could offer some interesting possibilities in 2024 if and as the current Fed Lower Sooner narrative plays out as expected, or some other global crisis/black swan event pops up in the New Year.
The Market Direction Model (MDM) remains on a BUY signal.