08Feb10:27 amEST

Are Big Round Numbers Too Beaucoup, Even for This Market?

Although it seems far more like a bunch of baloney than a brilliant observation, the truth is that Wall Street history is littered with major, multi-year (even multi-decade) showdowns at big, round numbers. 

We currently have the monster, NVDA, dueling with $700, and the S&P 500 Index battling the 5,000 level, both of which are at all-time highs. Thus, there is no real "resistance" of which to speak in terms of prior price memory. 

However. those pesky big, round numbers often matter. And, no, this is not just a bearish dream or pie-in-the-sky thinking.

Case in point: From 1966-1982 (which, oh by the way, was the last time we saw entrenched inflation in this country), the Dow Jones Industrials simply could not break and hold above the 1,000 level--You can see for yourself on the Dow quarterly chart wayback machine, below. 

Simply put, markets can often respond to big, round numbers when making new highs--And randomly find resistance there for extended periods of time. 

In the current tape, we have NVDA as a uniquely rich, extended, crowded play at the epicenter of the AI mania in chips on the back of the liquidity tsunami off the pandemic. The S&P has several heavyweight components from the "Magnificent 7" which surely puts it in the same position as NVDA, in many respects. And both are up against those seemingly random, big round numbers. 

I expect the recent easing of financial conditions, beginning last Halloween, to filter through in Tuesday's CPI print. At that point, markets ought to finally get the message that rate cuts are off the table for the foreseeable future unless and until equities are meaningfully lower. 

In the meantime, watch those big round numbers. 

I Think I'll Just Stay Here ... Afternoon Update 02/09/24 {V...


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