Tuesday, January 9, 2024

Morning Note: Nvidia Again, Sectors Warn, And Your Weekly Results Update

After a rough start to the year for equities, all it took was an announcement yesterday from last year's AI darling, Nvidia, of "new products" to set tech stocks afire, recapturing a little better than half of last week's losses for the sector.

As for Nvidia's technical setup, yep, that (green circle) is indeed a bullish breakout... Our momentum indicators (bottom 2 panels), however, call its sustainability into serious question:

Speaking of last week, although one week does not a trend make, take note of the fact that (per the results update below) healthcare and utilities were the top 2 of the 5 sectors that actually bucked last week's downward trend... Those are your defensive sectors that tend to outperform when economic prospects are sketchy -- which comports with our overall concerns going forward... Yesterday’s action, on the other hand, felt more like a resumption of 2023.

Now, note, per our recent video commentaries, the near-term setup heading into this year looks vastly different than the start of last year’s, and, alas, save for current Fed policy, is concerningly similar to that of early 2022.

Stay tuned...

Here's your weekly results update:

Asian equities rallied overnight, with 11 of the 16 markets we track closing higher.

Europe, on the other hand, is mostly red so far this morning, with 14 of the 19 bourses we follow trading down as I type.

US equity averages are lower to start the session: Dow down 226 points (0.60%), SP500 down 0.56%, SP500 Equal Weight down 0.33%, Nasdaq 100 down 0.67%, Nasdaq Comp down 0.65%, Russell 2000 down 1.35%.

As for yesterday’s session, US equities closed higher: Dow by 0.6%, SP500 up 1.4%, SP500 Equal Weight up 1.1%, Nasdaq 100 up 2.1%, Nasdaq Comp up 2.2%, Russell 2000 up 1.9%.

This morning the VIX sits at 13.43.

Oil futures are up 1.82%, nat gas futures are up 6.1%, gold's up 0.48%, silver's up 0.46%, copper futures are down 0.48% and the ag complex (DBA) is up 0.49%.

The 10-year treasury is down (yield up) and the dollar is up 0.16%.

Among our 32 core positions (excluding options hedges, cash and money market funds), 7 -- led by Johnson & Johnson, DBA (ag futures), GLD (gold), XLV (healthcare stocks) and SLV (silver) -- are in the green so far this morning... The losers are being led lower by REMX (rare earth miners), Dutch Bros, AT&T, VWO (emerging mkt equities) and FEZ (Eurozone equities).

In client review meetings we stress the importance of risk management and of viewing portfolio results on a risk-adjusted basis... Here's portfolio manager, analyst, and philanthropist John Hussman on the topic:
"Why are you taking market risk?
Whether you're investing for yourself, or you're a member of an investment committee making decisions for a pension fund or a charitable organization, you're responsible for asking that question. The natural answer is that you expect positive and adequate investment results to compensate you for the risk. The next questions are then a) on what basis do you expect that investment return? And b) on what basis do you believe that the expected return is adequate and proportionate to the risk you're accepting."

Have a great day!

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