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Updated Market Thoughts

I’ve been aggressively invested in many leading growth stocks since the two follow-through days and the Zweig Breadth Thrust we saw in early November 2023. I discussed three of the stocks on the IBD Podcast on November 1, 2023, and they have seen very strong gains since that date: NVDA +112.1% , UBER +75.8% , MSFT +21.7%. I also wrote about the bullish factors in these two blog posts in early November 2023: Four Reasons for a Year-End Rally and Another Thing Going for the Bulls.

I reduced my exposure this week for the following reasons:

1) After a strong run, there’s nothing wrong with locking in some profits.
2) There’s been 5 distribution days (days of institutional selling) on the Nasdaq Composite over the past two weeks.
3) Many sentiment measures are showing extremely high levels of bullishness.
4) The end of the quarter tends to see all sorts of shenanigans such as window dressing, profit taking, index rebalancing, portfolio rebalancing, and just overall volatility.
5) The S&P 500 hasn’t visited its 10-week moving average in a while. Who knows? Maybe some hawkish comments from the Fed might be an excuse for the market to pull back.

Please keep in mind that I still have core positions in stocks that I like until year-end and that I’m not turning bearish, just defensive. If the market grinds higher, I still have plenty of exposure, and if the market pulls back, I will look to put cash back to work in some of the relative strength growth leaders. In other words, I am bullish over the long-term, but defensive over the near-term until we shake out some of the excess bullishness. As always, have your own plan, know your timeframe, and stick to your own investment objectives.

I can be reached at: jfahmy@zorcapital.com.

Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained on this blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned on this blog. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.

Market Thoughts for 2024

1) I see a +10-15% gain for the S&P 500 in 2024. I am basing this on the incredible strength we saw in November and December of 2023. The reason for this strength was the Federal Reserve signaling they were done with their interest rate hiking cycle. The market is a discounting mechanism and tends to trade on what will happen 6 to 9 months from now. In other words, the strength we saw at the end of 2023 was the market dramatically shifting, as it began to price in lower rates by the end of 2024. I could list so many statistics such as the recent Zweig Breadth Thrust that support higher prices in 2024. The bottom line is: Incredible strength tends to lead to more strength, and we saw many rare technical indicators showing this impressive strength in November and December of 2023.

2) Will the move be straight up? Of course not! Please keep in mind that the average intra-year correction over the past 50 years is approximately -14.5%. In fact, we just had an -11% correction in August to October of 2023. Over the near-term, I wouldn’t be surprised if the year starts strong and then we see a quick -5% to 8% pullback in the second half of January, as many of the Jan 2024 leap options expire and market makers have less exposure on their books. I know I say this all the time, but many people underestimate how much the market moves based on options positioning and psychology.

3) Coming into 2023, for the first time in decades, Wall Street strategists saw a down year for stocks and they were dead wrong. Now, 19 strategists have an average S&P 500 year-end target of 4800. The S&P 500 is currently 4770 to start the year. In other words, the majority of people have muted expectations for the market in 2024, and the market tends to fool the majority.

4) I entered my friend’s charity Biotech contest in 2023. My pick was CINC (which I also put on my blog at the beginning of 2023). They got bought out in the first week of 2023 for a +140% premium and I finished 18th out of 515 contestants (shows you how crazy the gains for Biotechs can be, lol). My pick for 2024 is ABOS. It’s based on the unusual options activity and their unique approach in targeting Alzheimer’s disease. FULL DISCLOSURE: I currently have a small position for my clients, and it’s a very speculative stock. I’m ok with people speculating in general, but please do it with a smaller portion of your portfolio if you choose to do so.

5) If you did well in 2023, congratulations! Stay humble, stay focused, keep working hard, and don’t get cocky. The second you think you know it all, the market has an incredibly unique way of humbling you. Trust me, I’ve been there more times than I care to admit. If you struggled this past year, don’t beat yourself up! Always make sure your self-talk is strong. Write down your mistakes and work on making the proper adjustments in 2024. Here’s the problem: Very few people are honest with themselves. Without knowing most of the people reading this, I’m going to guess your biggest mistakes are position sizing and impatience. In other words, you’re trying to make tens of millions of dollars in two days. Stop that! That’s the quickest way to go broke in the markets. Instead, work on slow and steady progress and don’t underestimate the power of small gains compounded over time.

Thank you and good luck in 2024!
 
I can be reached at: jfahmy@zorcapital.com.

Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained on this blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned on this blog. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.

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