Strategy Update (2024-06-20)

Alpha Signals strategy remains on a green signal since May 8.

Chart of TQQQ showing Alpha Signals strategy on a green signal since May 8
Chart of TQQQ showing Alpha Signals strategy on a green signal since May 8

The QQQ, led by tech giants Microsoft, Nvidia, and Apple, continues to soar near 52-week highs, despite being quite extended from key moving averages. This suggests either a lockout rally or a potential pullback/consolidation. Market breadth remains a concern, with only a few stocks holding up the market. Either these stocks will cave, or others will join the rally. On Tuesday, the Nasdaq Composite and S&P 500 reached new all-time highs, with the Nasdaq adding another accumulation day on above-average volume. However, the Dow and Russell 2000 continue to lag.

The narrowness of breadth is striking, with Microsoft, Nvidia, and Apple accounting for over 20% of the S&P 500's value and 40% of the Nasdaq 100. Since the beginning of June, the Nasdaq has rallied over 6% and closed higher in 9 out of 11 sessions, extending the index from its moving averages. Simultaneously, the percentage of Nasdaq stocks above their 50- and 200-day moving averages has declined, signaling that the herd is thinning as the bull run continues. This divergence between the index performance and the underlying stocks' behavior raises questions about the sustainability of the current rally.

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