Momentum Monday - A Great 2024 for Most Investors

The range-bound choppy tape remains in full force. SPY rallied to its 20dma where it found resistance and it pulled back to its 50dma where it found support. SPY is market cap weighted. Ten stocks account for almost 40% of SPY. Those ten megacaps have been among the best performers year-to-date and in the past three years. This explains the significant divergence between SPY and the equal-weighted S&P 500 – RSP. Get this – while SPY is up 25% YTD, RSP is up 12%. A few megacaps are keeping the indexes afloat while there’s selling under the surface. What’s new would say some. This has been the case for a long time and it hasn’t mattered. True. I can’t argue against that. Maybe that divergence doesn’t matter and the bullish trend will continue. Maybe, it’ll lead to a market correction. Either way, we will adjust to what the market offers and position accordingly. 

In the meantime, crypto-related stocks and ETFs have been under some pressure lately. Crypto has been the undisputed leader since the elections but it is starting to lose its luster. COIN, MSTR, WMGI, Solana, and Ethereum are now below their VWAP since the elections. This means that the average buyer since the elections is now underwater. Only Bitcoin has managed to hold above its VWAP since the election but barely – this level has been tested multiple times in the past couple of weeks and might break at some point. TSLA is also starting to crack and amass distribution days. NVDA has notably been underperforming in the fourth quarter. The leaders are giving ground back. 

Quantum computing is one of the few spots that has remained predominantly bullish, but even there, we are seeing some signs of exhaustion. In other words, the market might need some break to build new setups. This break could come in the form of a range-bound choppy environment or a 5-15% correction.