In this post, I want to lay out my thesis that 2024 will be an extremely strong year for the stock market. When we look at the charts of the S&P 500 and Nasdaq Composite, we can see that they have both rallied sharply since bottoming in 2022. While some may be worried that they are extended, a quick look at the higher time frames of the weekly and monthly charts help us see that large bases are being built on these indexes. These type of bases offer enormous potential. This is one of the reasons why I believe the market is poised for a strong 2024.
The S&P 500 and Nasdaq both yielded health returns in 20223, but individual stocks, especially smaller cap names, didn't really start to move until later in the year. This can be easily seen when we compare the QQQ and the Russell 2000. However, it is now starting to look like participation is starting to broaden out which is an extremely bullish sign. While 2023 saw names like NVDA, AAPL, MSFT, and GOOGL thrive, it is great to see other names rally as this indicates that funds and institutions are starting to expand out their positions to riskier names. In addition, while they lagged in 2023, the IWM, IWO, and FFTY are now starting to pick up and are just now beginning to form stage 2 uptrends.
With the FED signaling it will most likely stop hiking rates and instead eventually shift towards lowering rates, it appears investors will not have to "fight the FED" in 2024. This is bullish news as an environment of rising rates can make trading growth stocks extremely difficult as they often need to borrow money in order to fund their growth. However, a dovish FED policy is likely to benefit these same names. This is why we have started to see major accumulation coming into names like MNDY, ZS, AFRM, and PLTR. We've also seen NVDA and SMCI act like true market leaders, an indication that major funds and institutions want exposure to stocks they believe will benefit from the AI revolution.
A long-term margin debt indicator has also flashed a major buy signal recently. With everyone chasing high-interest rates for CDs and savings accounts, there is a relatively large amount of money on the sidelines. This usually happens at major opportunities as we can see from the chart below.
The average person is really not interested in the stock market here. I'd say on our sentiment cycle, most people are in the doubt or interest area. Again, most people believe the correct decision is to place your money in banks to capture higher interest rates. While some may be in the greed phase, the market on the whole is by no means near euphoria. And we are certainly not at panic or capitulation, which took place in late 2022 and early 2023.
It is also important to point out that the major event and focus of 2024 will be the United States Presidential Election, which is looking like it will be a rematch between President Joe Biden and Former President Donald Trump. From a trading perspective, I do not believe the outcome of the election will have much effect on the stock market. Remember, we've seen bull markets under both Democrats and Republicans, and I've learn that "not even a World War" can hold back the market if conditions are bullish, as Jesse Livermore once noted.
From a longer-term view, I still believe that the "1990 vs 2022 Bear Market Comparison" I blogged about a few months ago still holds some weight. Also, I'm very bullish on Bitcoin in 2024. If you missed that post, you can read it here. While it may need some time to base, my long-term view is still ultra-bullish. When you you put all of this together, the possibility of a "Roaring 2020s" begins to make a lot of sense.
While I may have a certain outlook for the market in 2024, I know that opinions are often wrong but "markets never are," as Jesse Livermore would say. I can assure you that I will bend with the market when it bends and quickly throw out all my projections when the market signals to me that I was off track. But one thing I won't be throwing out is my risk management, as it's the only thing that will guarantee me I'll still be around to trade in 2025.
Risk right. Sit tight.
Full Disclosure: I currently own many of the stocks and ETFs mentioned in this post. I also own Bitcoin.
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