by Ivan Martchev

February 13, 2024

This title begs some explanation of why the stock market is still sometimes referred to as “the tape.”  The reference is to the ticker tape, so called for the ticking sound the machines used to make when they were transmitting stock (“ticker”) symbols and prices printed on a narrow paper tape so that investors away from the stock exchange could see the direction the stock market was headed. While we no longer use a paper tape with prices and symbols, and everything is electronic, the term “tape” has stuck with us.

As Mark Twain famously quipped, “All generalizations are false, including this one.” While the NASDAQ 100 Index is being pushed up by the AI momentum trade, the small-cap Russell 2000 finally woke up last week but is still down for the year. The broad market is lagging the S&P 500 index because of the high concentration of trillion-dollar stocks (the Magnificent Seven) that are pushing the S&P 500 index higher.

Seven Largest Chart 1

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Still, the fact that February has a terrible reputation and, more importantly, the second half of February tends to be one of the worst two-week periods of the year, is in the back of my mind. It doesn’t help that on Friday, when the S&P 500 index closed convincingly for the first time above the 5,000 mark, the VIX Index was up on an up day. This is not normal and, near turning points, suggests that caution is warranted.

The only reason why the VIX would be up is because the cost of protection is going up, because buying protection is getting more popular. Earlier in the S&P rally that started at the end of October of 2023, the corrections were very shallow, typically 1-2 days. We did see something more meaningful in the first week of January, which was overdue as it is not normal to shoot straight up without any meaningful zags.

VIX Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

I think the coming correction will be as big as the first week of January, if not bigger, simply because some of the AI momentum trades have gone parabolic and, when they correct, those selloffs tend to be sharp. When this correction is over, we will likely make higher highs, as the lack of a recession suggests a broader stock market, like we had in November and December, which has been missing so far in 2024.

To summarize, between now and the end of February, I am looking for a 3% to 5% selloff in the S&P 500 index, although I realize that it can come from a higher level for the index. Momentum trades like the NASDAQ 100 can always go higher (much higher in some cases), before they correct. If you are bullish, you’d want the market to correct, you don’t want it to go parabolic, as that typically does not end well.

All content above represents the opinion of Ivan Martchev of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Bull Markets Climb a Wall of Worry

Income Mail by Bryan Perry
Key Market Takeaways in a Record-Setting Week

Growth Mail by Gary Alexander
Rapid U.S. GDP Growth is Disputed by Two Other Measures

Global Mail by Ivan Martchev
The Tape is Getting a Little Stretched

Sector Spotlight by Jason Bodner
Buy, Sell, … or Do Nothing?

View Full Archive
Read Past Issues Here

About The Author

Ivan Martchev
INVESTMENT STRATEGIST

Ivan Martchev is an investment strategist with Navellier.  Previously, Ivan served as editorial director at InvestorPlace Media. Ivan was editor of Louis Rukeyser’s Mutual Funds and associate editor of Personal Finance. Ivan is also co-author of The Silk Road to Riches (Financial Times Press). The book provided analysis of geopolitical issues and investment strategy in natural resources and emerging markets with an emphasis on Asia. The book also correctly predicted the collapse in the U.S. real estate market, the rise of precious metals, and the resulting increased investor interest in emerging markets. Ivan’s commentaries have been published by MSNBC, The Motley Fool, MarketWatch, and others. All content of “Global Mail” represents the opinion of Ivan Martchev

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