New Year & New Trends

January 3, 2024

It's a new year. But does that mean we need to see new trends?

Well I think we're definitely going to see new trends emerging. But I have a strong suspicion that a lot of the old trends will remain in place as well.

If you recall, back in July we were looking at a bunch of the leading groups running into their former highs from late 2021.

These groups included Industrials, Semiconductors, Homebuilders and Mega-cap Technology.

Add the fact that Q3 of the pre-election years tends to be a rough period, and a correction was set up beautifully.

See: Regime Change (July 30, 2023)

The reason I bring this up is because the exact reasons why we entered August much more cautious on equities is the same reason why we could be a lot more optimistic as we enter 2024.

This is even after the Dow ripped 5000 points in 2 months.

Also See: Welcome to the Year End Rally (Oct 10, 2023)

First of all, Industrials are now breaking out through that resistance and making new all-time highs.

Historically Industrials have the highest positive correlation with the S&P500 of all the S&P Sectors.

So if Industrials are breaking out of a 2+ year base to new all-time highs, is that bearish or bullish?

How about Semiconductors?

New all-time highs completing a 2-year base. Is that bearish or bullish?

Homebuilders?

One of the most important groups in Consumer Discretionary.

New all-time highs completing a 2-year base:

And finally Technology.

This sector represents almost 1/3 of the entire S&P500.

It is dominated by the 2 biggest companies on earth.

If the Technology Index is breaking out of a 2-year base to new all-time highs is that bearish or bullish?

The good news is here for everyone involved, whether you're bullish or bearish on equities, is that the levels are very well-defined.

Just like a failure at those former highs got us cautious in late July, a failure once again here would lead to the same conclusion.

But if these 4 groups are above those outlined levels, then we want to be spending most of our time looking for stocks to buy, not looking for stocks to sell.

Of course, this is for a more intermediate-term perspective on markets.

I would encourage you to identify YOUR personal time horizon, YOUR risk tolerance and YOUR overall objectives.

They could be different than mine perhaps.

Last night was our LIVE Monthly Charts Strategy Session where we discussed exactly what we want to be buying, which areas to avoid, and what the market would have to do to invalidate any of our major themes.

Agenda: