The rally ran out of steam last Friday, but the move into the end of the year was still one for the record books.

But I am concerned about where the market has stalled – a perfect double-top formation (bearish).

The Drought

After a decade-long streak of achieving at least one record-high close, the S&P 500 came up with a goose egg in 2023. 

It would be a two-year drought if the S&P 500 doesn’t establish a new high before tomorrow's close.

Generally, I consider these kinds of stats trivial, but the market must break to new highs very quickly in 2024.

Conversely, an early breakout will add more pressure on those hoping a change in the calendar will allow them to remain on the fence.

Defensive Week

Last week, the action became very defensive, led by Consumer Staples (XLP), Utilities (XLU), and Health Care (XLV).

New highs on the New York Stock Exchange (NYSE) and the NASDAQ Composite stayed positive, but the up (advancing) volume on the latter told the story.

Growth Will Not Go into That Goodnight

Friday’s Session, notwithstanding its growth, moved back into the leadership position at the expense of small-caps.

The moral of the story, do not bail out your growth positions completely until A) momentum has clearly changed and B) the fundamental story stops evolving.

Same Movie

The market is usually up the first week of a new year, then sideways for the next couple of months, except when a sitting president is running for reelection. There is a ton of money in the pipeline to artificially shore up the economy – which also keeps the Fed in play.

Speaking of Trivial – last year, Tuesdays were not great for the market… let's see if it changes. Today could be a good early omen.

Question of the Week:

Will any of this year’s movie sequels (below) be worth the price of admission?

I think Paddington 3 will ‘only’ be worth the price of admission, which I cannot wait to take my granddaughter to see.

Portfolio Approach

We closed this morning a Materials position in the Hotline model portfolio.

Today’s Session

When futures opened for the first time in 2024, a smattering of green appeared on the screen.  Now, not so much.  Some could be selling that was held up to avoid paying taxes, but this week has a ton of key economic data releases, including the jobs report on Friday.

Last year, ‘buy the dip’ reemerged as a great way to make money.  We will get a chance to see if this is still the case.

Hint: it should remain in place unless the ‘dovish’ Fed narrative is turned upside down.

The Challenge

This year's key for the market will be an orderly rotation into other names than the Magnificent Seven.  But a swoon in those names would weigh heavily on the cap-weighted S&P 500.

This means, it remains a stock-pickers market and being nimble is still critical.

To get a free copy of this month’s Payne’s Perspective, contact your rep or email info@wstreet.com.

Comments

Keep our eyes on the unemployment numbers and the GDP. If the unemployment goes up and the GDP down, 10 % or more, not good! Lorin Kenfield on 1/2/2024 11:18:17 AM

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