Fundstrat's Mark Newton: Why December Could Turn Up
Audio Brief
Show transcript
This episode covers the current choppy market, forecasting near-term vulnerability before a stronger rally from mid-December into January.
Three key takeaways emerge. First, exercise patience before deploying new capital. A short-term dip is anticipated, with a sustainable rally expected from mid to late December following market consolidation.
Second, diversify beyond mega-cap tech. Strength is emerging in sectors like medical devices and homebuilders, which show positive technical breakouts and relative strength.
Third, drill down into sub-sectors for outperformers. Insurance stocks, for example, are currently showing more strength than the broader financial index.
Overall, strategic diversification and patience are key during this transitional market phase.
Episode Overview
- Mark Newton of Fundstrat provides a technical analysis of the current market, describing it as a "choppy time" with deteriorating breadth and momentum.
- He forecasts potential near-term vulnerability and consolidation, possibly until the next Fed meeting, followed by a stronger rally from mid-December into January.
- The discussion highlights a key market rotation, with sectors like medical devices, homebuilders, and insurance showing significant strength and breaking out, even as some major tech stocks lag.
Key Concepts
- Market Bifurcation: The tech sector is experiencing a split, with some giants like Nvidia seeing breakdowns while others like Apple and Google are breaking out. This divergence underscores a selective market environment.
- Choppy Consolidation: The major indices (QQQ, SPX) are in a period of sideways, choppy trading. The analyst expects this to continue in the short term before a more decisive move higher can occur late in the year.
- Downside Risk & Key Levels: A critical support level on the QQQ chart was identified. A break below this level could trigger a further short-term drop, representing the main risk before the anticipated year-end rally.
- Sector Rotation: Strength is emerging outside of mega-cap tech. Medical devices are showing a strong base breakout, homebuilders are benefiting from the prospect of lower rates, and insurance stocks are outperforming the broader financial sector.
Quotes
- At 0:14 - "Look, it's a choppy time. Momentum is down, breadth has really deteriorated in the last couple of months." - Mark Newton describing the current state of the market, cautioning against viewing the recent rebound as a clear "all-clear" signal.
- At 1:08 - "We're going to make an equivalent leg of this down before we move up, which is likely mid-December into mid-January." - Newton explaining the potential technical pattern for the Nasdaq (QQQ) if it fails to break out, suggesting patience is warranted.
- At 3:36 - "Sub-sector relationships are key in financials... We're seeing insurance make a giant move in the last few weeks and really start to lead." - Newton emphasizing the importance of looking within broad sectors to find areas of true strength, highlighting insurance as a current leader.
Takeaways
- Exercise patience before deploying new capital, as the market may experience a short-term dip before a more sustainable rally begins in mid-to-late December.
- Diversify beyond mega-cap tech by exploring sectors that are currently showing relative strength and positive technical breakouts, such as medical devices and homebuilders.
- When analyzing broad sectors like financials, drill down into sub-sectors to identify outperformers; for instance, insurance stocks are currently showing more strength than the broader financial index.
