EB Daily Market Report - Quick Update - Wednesday, January 3, 2024

There's a lot going on this week with our January Effect event, scheduled for Thursday, January 4th, 4:30pm ET, and our annual MarketVision 2024 event, scheduled for Saturday, January 6th, 9:30am ET. PLEASE keep in mind that all of our full service ANNUAL MEMBERS, which most of you are, can attend MarketVision 2024 completely free of charge. It's certainly one more reason to become an annual member, if you are not already. If you have any questions, please reach out to us at "[email protected]".

This will be a brief market update.

I want to share two charts with you today, one that's based more on the short-term and the other based more on the long-term.

IWM/TNA

The IWM is the ETF that tracks the small cap Russell 2000. And the TNA is the 3x leveraged ETF that tracks the IWM. We've seen a test of the rising 20-day EMA on the IWM and that's the level where it makes the most sense to consider leverage. Here's the current daily chart on the IWM:

This is reprint from yesterday's chart pointing out the support in the 195-196 area. There's no guarantee this support holds, but this is the first time, in my opinion, over the past few weeks where we can somewhat manage our risk on a TNA trade. If the 20-day EMA holds on the IWM, we hold TNA. If it fails, then risks increase and it probably makes sense to exit the TNA. Obviously, it comes down to each investor/trader's preference. Personally, I've averaged into the TNA close to 36.50 and will likely exit if the IWM fails to hold the above support.

From a longer-term perspective, I love the rolling over of the 253-day moving average of the equity only put call ratio ($CPCE). In the past, clear cut reversals to the downside have signaled very bullish market action ahead:

If history is any guide, this breakdown in the CPCE bodes very well for equities in 2024.

The stock market initially reacted negatively to the FOMC minutes that were released at 2:00pm ET this afternoon. In those minutes, the Fed indicated that rate cuts ahead are likely, but "the path highly uncertain". The knee-jerk reaction was to sell and the market's been under a bit of selling pressure the past few days to boot. Let's see where everything settles today, but my primary focus will be where the IWM closes. Will it be above or below its 20-day EMA?

Happy trading!

Tom