Nov 24, 2023

US stocks were closed Thursday for the annual Thanksgiving holiday, which is an excellent time to review year-end levels. 

NAS 100 – Daily ChartNAS 100 – Daily Chart

The NAS100 trades above 16,000 and has support at 15,500. The upside targets are around 16,344, and the all-time high is 16,766. 

The tech index soared this year on expectations that AI technology will boost earnings at the big tech firms. 

Nvidia has been the initial driver with soaring profits. However, the high demand for its chips and data centres also shows that corporations seek to adopt AI tools. There was a warning in the company’s most recent earnings this week that export controls will slow supply to China. 

With Nvidia’s well-priced revenue, others will need to provide further stimulus. Amazon noted a recent increase in big companies using its AWS cloud for AI reasons. 

Then there is Microsoft with its premium $30 per month Copilot subscription. Wedbush analysts saw early solid interest in the tool.

Economic factors will help stocks as it looks increasingly likely that the Federal Reserve has ended its interest rate increase cycle. There is still a risk to that outlook if oil surges again due to geopolitical issues. But into the year-end, no significant obstacle exists to testing the higher levels. 

The Nasdaq has surged this year on what are known as the “Magnificent Seven” firms. But companies such as Tesla and Apple are now fairly valued. Based on its five-year average valuation, Microsoft trades at a 10% higher price/earnings ratio and a 20% higher price/sales ratio. So, there is little room for upside gains if we push higher into the end of the year. 

Hedge fund crowding in stocks was at its highest in 22 years since Goldman Sachs started tracking hedge fund data. The report said the average hedge fund holds 70% of its long portfolio in its top 10 positions after looking at 735 hedge funds with $2.4 trillion of equity positions.

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