Major market indexes shrugged off an ugly outside reversal to the downside on Wednesday to close higher this past week as the Dow Jones Industrials and the NASDAQ 100 posted all-time highs. On Friday, a -0.1% decline in monthly headline PCE inflation and a 0.1% monthly rise in the core PCE inflation number cancelled out to produce a relatively flat market ahead of the long Christmas holiday weekend. For now, all the major market indexes are holding well above 10-day moving average support as bullish sentiment reaches extremes.
The National Association of Active Investment Managers (NAAIM) Exposure Index currently shows active money managers with a net long exposure of 97.4%. While this indicates that active money managers are firmly piled up on the bullish side of the boat, there is still room for this indicator to move higher as we roll into the final trading week of 2024.
Retail investors are also pushing an avalanche of bullish sentiment. The American Association of Individual Investors (AAII) Bulls Index is rapidly approaching prior extreme highs, finishing the week at 52.90% bulls vs.20.90% bearish. The percentage bearish number is rapidly approaching its five-year low of 19.76% which was posted in June of 2021. However, like the NAAIM Exposure Survey, there is room for retail investor sentiment to become even more bullish.
As the market continues higher most stocks tend to correlate to the index action. The recent upside acceleration in the indexes is reflected in the action of Arista Networks (ANET) which we reported on as a pocket pivot over two weeks ago as it launched off the 20-dema and up through the 10-dma. The stock has obeyed the 20-dema for over seven weeks now since regaining the line in late October. Implementing the Seven-Week Rule, one could now use the 20-dema as a trailing stop.
As one of the biggest of the big-stock AI Meme names, Nvidia (NVDA) may be a tell for the market in 2024. It has spend the past four months building a base after a rapid run-up early in the year as the AI Meme Theme took the market by storm. After a move like that it was entitled to take some time to consolidate and digest those gains. Most recently, this past week, NVDA again triggered a Livermore Century Mark short-sale entry at the $500 Century Mark where it reversed on Tuesday after closing above $500 on Monday.
The ensuing pullback has brought NVDA back into the 20-dema on a VDU volume signature as volume declined to -42.2% below average. If the stock can hold support here at the 20-dema it may offer a lower-risk long entry using the 20-dema as a selling guide. This would then bring into play the possibility of a successful move through the $500 Century Mark that would trigger Livermore's Century Mark Rule for the long side using the $500 level as a selling guide.As well, should NVDA bust the 20-dema it would trigger a potential short-sale entry at that point, which would likely need to occur within the context of a market pullback or short-term correction. As we are fond of saying, play it as it lies.
Samsara (IOT) is a recent IPO with a strong AI Meme Theme connection. The stock came public at $23 in late 2021, just before the 2022 bear market began and has since recovered back into new-high price territory. The breakout to new highs occurred on a buyable gap-up move after earnings four weeks ago, and the stock is now showing a three-weeks-tight flag formation. On Thursday it pulled into the 20-dema on the daily chart (now shown) with volume drying up sharply and bounced slightly on Friday. We like this on pullbacks to the 20-dema which is then used as a tight selling guide.
Bitcoin ($BTCUSD) remains near recent highs as it tracks very tight sideways into the Christmas holiday weekend. Volume, as might be expected, has evaporated to extremely low levels. Watch for a move higher this week if this highly constructive action persists. $BTCUSD has obeyed the 20-dema since popping up off its lows in mid-October, ahead of the stock market, so this can be used as a trailing selling guide per the Seven-Week Rule.
The Market Direction Model (MDM) remains on a BUY signal.