Morning Market Report: Feb. 21st, 2024

This afternoon we get FOMC minutes which has the potential to move the market if FOMC members are perceived to be leaning hawkish. Fed members Bostic and Bowman also both speak today which could likewise move markets ahead of Nvidia this evening.

Last night we learned that Amazon will replace Walgreen's in the price-weighted Dow. Walgreen's was only added in 2018 and the stock has been declining almost continuously since it was added to the Dow. Amazon of course is considered a growth stock so the hope is that it will help the underperforming Dow Industrials "catch up" with the S&P 500 and Nasdaq. One wonders if this re-adjustment is coming just as Tech is about to peak. One thing we know is that Amazon is one of the worst performing mega cap Tech stocks, having been overtaken by Nvidia in market cap just last week.

After hours last night Palo Alto Networks took down forward revenue guidance. They said that their clients are facing more severe cybersecurity attacks but they are reducing spending on cybersecurity regardless, which makes no sense. It only makes sense if "AI" spending is crowding out all other types of IT spending and/or the economy is heading into recession:

"Palo Alto Networks Inc. was headed for its biggest decline in seven years after the cybersecurity company cut its annual revenue forecast, stoking concerns that customers are reining in spending despite an uptick in attacks"

Here we see the Cybersecurity sector had round-tripped back to the November 2021 highs and now it's imploding in the pre-market as the Palo Alto news "infects" the entire sector with malicious forward guidance.

Pre-market, the index is at 61 which is below the 50 dma (red arrow). As you notice, this chart is virtually identical to the USA Momentum fund. Which means that the right shoulder liquidation phase has begun.