NASDAQ 100 index set for a record 1st Half performance
- SPX looks ready to rally to 4500, while Small-caps could outperform
- NDX could turn in its best 1st half performance ever with two days remaining in month
- Consumer Discretionary’s outperformance over Staples looks likely to continue
To watch my guest appearance on “The Compound and Friends” with Josh Brown and Michael Batnick (6/23), click here.
To watch my interview on Fox Business this morning (6/28), click here.
Trend bullish- Expect rally up to test and exceed mid-June peaks near 4459 which should drive rally up to 4500 or higher. QQQ still looks to push higher as well into mid-July
A continued rally looks likely after Tuesday’s strong surge turned in the best performance of the month. While some minor churning happened on Wednesday, this hasn’t altered the thinking that a push back to new monthly highs should occur.
While Technology was down fractionally in trading Wednesday, it was the severe underperformance out of the Defensive sectors that is worth highlighting, as both Utilities and Staples fell greater than 1%.
This kind of severe underperformance in these groups normally can coincide, and in some cases lead, sharp rallies in the market. At present, heading into end of quarter, it looks likely that a period of gains should happen into and past the Independence Day holiday.
As discussed last week, my cycle composite shows a possible peak in mid-to-late July which might arise right around the July FOMC meeting.
While 7/21 stands out as a period of importance time-wise for a possible change of trend(3rd Friday in July), it will be necessary to keep a close eye on sentiment, breadth, DeMark exhaustion, as well as whether the phasing of some of the shorter-term cycles has changed.
Overall, I’m expecting a rally back to test and exceed June peaks near 4448 which could bring about a push back over 4500 before any real resistance takes hold. While some view this current rally as being unusual, it rarely pays to fade rallies which many don’t understand, and have been fighting. Rather, it’s wise to wait until real speculative behavior gets underway, and/or a drying up in buying. Neither one has occurred at present.
NASDAQ 100 index might seem overbought; Yet, long bias remains correct given no evidence of trend deterioration
Many are viewing NASDAQ 100’s rally as being one to fade. However, with AAPL back at new all-time highs and no evidence of deterioration, it still looks likely that further gains are likely in the weeks to come.
Overbought conditions are rarely something to try to sell into quickly following a severe period of negative sentiment which suddenly starts to turn following a widespread broadening out. Such moves take time to unfold, and sentiment also takes time to reach truly exuberant levels.
I suspect that NDX likely will push back over 16,000 without much trouble and should eventually reach all-time highs this year before stalling out.
NASDAQ 100 index could set record for 1st Half performance
This year’s 1st Half could be one for the record books. With just two days remaining in the month, quarter and 1st Half of 2023, NASDAQ 100 index could set the best performance ever over the first six months of the year.
As this table shows below, 2023’s performance thus far for NASDAQ 100 index (NDX) has been +36.6%, in data through 6/27/23.
This beats the impressive years like 1998 along with 1995 and 1991, not to mention 1987.
Of the other four occurrences in the top 5 periods of performance ever, markets turned out additional positive performance in the back half of the year, with both 1998 and 1991 outperforming their impressive first half stats.
1987 was the laggard in this regard, owing much of its underperformance to the 1987 crash. However, this year still managed to turn in gains of +10.5% for the year.
I’m expecting that the back half of 2023 should be positive, but have no illusions about having the ability to guess at a final number for 2023 performance.
You may recall that my SPX end of year 2023 target is 4500. I believe this could be challenged into the middle part of July before some backing and filling into August. At present, the key takeaway just highlights that there stands a chance that 1st half 2023 might produce record performance for the NDX. See the table below.
Consumer Discretionary should continue outperforming Consumer Staples over the next month
The ratio of Discretionary to Staples is something many, including myself, watch carefully to gain an idea of the markets risk appetite, which can be helpful if markets are churning sideways, or have just begun to rally.
In this case, the early warning sign of a possible advance taking hold actually happened back in mid-April, when the ratio of Consumer Discretionary to Consumer Staples broke out of its downtrend and began rallying sharply. This was a combination of strong performance out of Homebuilders and Casino stocks, but also based on the underperformance in many Staples.
This ratio involves Invesco’s Equal-weighted Consumer Discretionary ETF (RSGD) relative to Invesco’s Equal-weighted S&P 500 index ETF, or RSP -0.02% .
This ratio is set to challenge February 2023 peaks within the next week, and my own analysis shows a good likelihood of this being exceeded into mid-July before Staples start to gain footing while Discretionary consolidates.
At present, this chart below helps to visually explain some of the current risk appetite happening in US Equities, and until this ratio begins to rollover, markets still look likely to push even higher.
More from the author
Articles Read 1/2
🎁 Unlock 1 extra article by joining our Community!
Stay up to date with the latest articles. You’ll even get special recommendations weekly.
Already have an account? Sign In 0aa4ff-d99324-4d3f69-100455-013216
Already have an account? Sign In 0aa4ff-d99324-4d3f69-100455-013216
