Mid Week Macro 3/02/2022

Triple Play

SPY fell 1.52% yesterday and is currently ~4.6% up from the lows. RSI tested 40 and held on February 14th. That only lasted four days before breaking below. RSI is now back at the 40 level after being rejected at the 9sma.

QQQ fell 1.53% yesterday and is up ~7% from the lows and has shown some relative strength relative to SPY in the recent bounce. RSI is at the 40 level and is in a bear range. 

IWM fell the most of the three Monday at 1.88% and is up ~6% from the lows. RSI isn’t quite to the 40 level and a reversal higher from the two moving averages would be constructive. IWM is the only index to be at the MA bands, and is currently being rejected at the lower band.

Universe Breadth

  • Overall Breadth is still weak
  • The cumulative advance decline line made new lows Thursday last week as price made new intraday lows.
  • The percent of stocks above their 20, 50, and 200 day moving averages have made higher lows.
  • The 50 and 200 day measures have turned lower just shy of the half way mark.
  • A breadth thrust in these measures has yet to be seen as the percent of stocks above their 20-day moving average reached 70 on the recent rally, but is still below what would be considered an extreme on the upside.
  • The McClellan Oscillator has been slowly improving making four consecutive higher lows.

Short-Term Breadth

Short-term breadth from the last Mid-week Macro was constructive. There were significant new highs being made in all sub-sectors other than utilities. This time, Utilities and Energy are the leaders as 5/11 sectors had 20% or more stocks make new 10 day lows. Monday wasn’t terrible though, as there were no sub-sectors where 50% or more of its stocks made new 10 day lows. 

Small over Large?

Here’s a quote from a previous Mid-week macro on the same chart covered here, “Continuation after the failed breakout would mean rotation into smaller names which plays into the broadening breadth perspective as there are many more small-caps than large-cap tech.” IWM continues to outperform QQQ. We’ve been pointing this out for a few weeks and will continue to update this as long as the thesis remains the same. Using this as a breadth measure has two different factors to consider, one is that it compares different sized companies and the other is there are a different number of stocks within each index. The 2000 stocks in the Russell have been outperforming the top 100 stocks in the Nasdaq. By simple math that means that there are more buyers of more stocks. It is important to realize that this may not show up on the major indexes as the largest cap companies drive the performance.


Volatility remains very elevated and hasn’t showed a meaningful decline since early February. From the Mid-week macro on January 2nd, “We like to use the Bollinger bands and concentrate most on when it closes back inside the bands after it has had one or more closes outside the top band.” That signal was generated on January 27th. The S&P rallied over 6% in the four days after. As we’re riding the upper band higher currently, we’ll be watching for a close outside the band and then a subsequent close below. This would be bullish and generate another signal. We can’t expect another four day rally with no down days immediately following. Positioning for that isn’t respectful of risk as short-term volatility can still be negative on stock prices after the close below the Bollinger band. 

Wrap Up

To be short, we’re in a downtrend across the three major indexes we cover. On the daily, the indices have been rejected at the MA bands and weren’t able to push RSI past 60 to create a new bull range. The 65 minute chart shows RSI right around 60 for all three, so a meaningful push through this level would be constructive. Breadth is still weak, but the QQQ vs. IWM relationship shows some improvement as the Russel continues to outperform. Volatility is high as measures by the VIX so large price swings up and down are to be expected.