The NASDAQ closed the first half of 2023 with a bang. Apple contributed significantly to the NASDAQ’s gain. Apple is the epitome of safety stocks. Apple still is growing, albeit at much lower pace. But the supreme balance sheet and the buyback of stocks made Apple stock a defensive and offensive play at the same time. There isn’t a better place to hide than Apple stock. The AI growth stocks had a nice rally this year along with the mega tech stocks, but the AI growth stocks have met valuation resistance.
According to data compiled by Refinitiv Lipper, US growth funds post outflows of $44 billion in 2023. Many of the AI growth stocks we follow have topped in May and early June. So when Apple was making a new high last Friday, the AI growth stocks weren’t making a new high. This type of divergence is a warning sign. The market is concerned about the Fed hikes and AI bubble. That’s why the AI growth stocks rally had a short duration and the rally in safety stock like Apple is enduring. This further confirms that we are not in a brand new bull market. We are in the late stage of the current 4-year cycle. A flush is needed in order for a new bull market to occur.
The VIX is super low. The low volatility environment will continue until some events show up out of nowhere to shock everybody. So even if the market has reached a price top, it could still trade near the price top for sometime without going down to create a trade on the short side. In other words, it’s bad to go long because the market has topped. It’s equally bad to go short because the market is not ready to go down yet.
The typical seasonal high place is August through October. So let’s see if the market can stay up until August.
Below is the S&P 500 weekly chart.
It is 15 weeks in the current weekly cycle. And it is still trading below the long term white trend line and also under the 78.6% retracement at 4530 level.
It looks like that the market will try hard to break above the white trend line to reach 4530.
We are staying out of the AI growth stocks for now. Will try to sell covered calls when the market turns down. Probably have to wait until August.