The market had a sizable selloff last Thursday due to some comments made by somebody during the trading hours.  It’s really hard to figure out what really caused the market to move like that.  But at the end of the day, the Dow Jones Industrial Average had less selling volume than the previous trading day.  The S&P 500 and NASDAQ had heavier selling volume on Thursday.  The inconsistent volume data between the major three indexes really questions the validity of the one-day selloff.  Then, a blowout job report on Friday morning completely stopped the selloff.  It has become regular occurrences in 2024 that one-day selloffs couldn’t produce follow through energy to continue to go down.

The economists expected 200,000 US nonfarm payroll jobs, but the actual nonfarm payroll jobs were 303,000.  That means the economists were underestimating the strength of the economy.  How can you have a market top when the economists were constantly underestimating the strength of the economy?  A market top can only be made when everyone is overly bullish and the actual data fails to meet the lofty expectations.  The best part of the jobs report is the hourly wage growth.  The hourly wage growth met expectations.  This is the best possible jobs report.  Strong participation, strong employment yet the wages are not growing too much to cause inflation.

The strong fundamentals, either through economic data or Fed supportive statements in 2024 have prevented the market to experience any greater than 2% corrections so far.  This is a very unusual market environment, very much similar to the year of 1995 which didn’t have a single 5% correction in the entire year of 1995.  This type of unusually bullish market activity basically rendered the small cycles unrecognizable.  The weekly cycle gets elongated and the lows are really not low enough for the dip buyers to get in.  In order to get in the market, you basically just have to buy it and forget it.  Eventually you will see some gains after you sit with the position for a little while.

As we blogged before, the October 2023 low is the previous 4-year cycle low.  From the October 2023 low, a new 4-year cycle has started.  This new 4-year cycle was supported by the Fed’s pivot in December 2023 and re-enforcement of the Fed’s peak rates point of view in March 2024 meeting.  Granted, the strong economy surprised everyone including the Fed.  With the peak rates uncertainty removed in the Fed’s March meeting, the market got everything needed to continue the bullish momentum.

March CPI report will be released next Tuesday.  If CPI is not showing crazily high inflation, it would be non-event for the market as the Fed has said that they will tolerate a slightly higher inflation because they are willing for inflation to come down over time.

Besides the strong US domestic conditions for the stock market, the geopolitical tensions in the rest of world are really beneficial for the US stock market.  International capital flow is on the move constantly seeking safe haven. The US has reserve currency, social stability and economic growth.  Even though the US looks bad from inside, but no one would love to leave the US to live in a war torn country.

From this October 2023 4-year cycle low, we expect the 4-year cycle high to be somewhere in Q2 2026.  That’s some time away.  So the bullish stock market is safe to at least the end of 2024.

AI is the main theme of this 4-year cycle.  If you don’t want to pick individual stocks, you are safe to stay with QQQ or XLK.

We hold PLTR and MTTR.  Both are AI software companies.

We are not including a chart in this blog as the cycles are really not visible.  Stay long.