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Is this the top in the US stock market?

The easy answer of course is ‘yes, yes it is…’. If we are wrong, our words will be lost in the dust of history and we can continue to be ‘right’ in our positive views. If the view of a top proves lucky – book deals, movie rights and heroes forever, right? To be clear, we don’t think that a long-term top is in place but we are fans of the view that stocks will be swinging around at this part of the cycle, pullbacks can happen!


The real investment heroes, of course, are the investors, advisors and fund managers who put money to work every day in shares and hope for the best. They reinvest dividends and aim, over the long-term, to beat holding cash and inflation whilst taking some risk. The risk is lessened a touch by putting money to work in low cost index trackers and funds, on the view that this lessens individual share risk. Nobody writes a book, or makes a movie about the working families that kept buying shares in 2008 and 2009 in their ISA’s or 401K plans and by early 2024 had made multiple, multiple returns vs. what was lost in 2008.


There are times when individual shares move the earth of course. The chart below shows NVDA (daily, 60 and 250-day moving averages) and the horrible ‘outside day’ posted on Friday (8 March 2024). This could be a key day reversal as it was posted when the share made new all-time highs, but the share price reversed course and prices moved below Thursday’s low and it was a very soft close as well. Bears will be wandering out of the woods and pointing to downside risk. Fair enough. There are a lot of gaps to fill, and the recent share price surge has left the 60-day and 250-day moving averages very far behind. Mean reversion is always a ‘thing’ in stock trading and investing. Sell now? We would lean more to the ‘you may be able to buy the share at a cheaper price if there is a pullback’ camp. Why?



The monthly chart below shows the moonshot in the share price since late 2022. Yes, primed for corrective losses. But, there was a reason for the rocket rise. For now – watching the pullback to see if dips draw out buyers, again.



On the index front the NASDAQ 100 index chart below is worth watching. This is a monthly chart as well, but on a semi-log basis. The rising channel has been helpful as a guide for some time now, and we expect the index to continue to trend higher over time.



The impact of NVDA is seen on the daily chart below though with a potential key day reversal seen here as well. This could see the index drop to the 60-day moving average or even the previous peak (flat orange line). 50% correction risk? Probably not yet, but losing the previous high would not be great for the index and of course the 250-day moving is important to hold below this.


The worry for longs is that we can’t predict the future. We can try to balance probabilities and look at trends in rates and historical data and guess at future earnings etc. Portfolios should be balanced of course, on the view that bonds will do ok if shares fall etc.


On balance, happy enough to remain positive on US stock indices. Watching the pullback to see if buyers step up where they ‘should’ and if new highs are posted after the correction (if there is a correction). The NVDA daily outside session on Friday is interesting, see if this proves to be a blip, or a real event. Time will tell.



Gerry Celaya, Chief Strategist


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