Mid Week Macro

April 13th, 2022

Sooner than Later

As I look at the charts below, it brings many major overtones to mind that need to be reminded as we start.  The major trend is currently down and put in a short term bottom last month that showed a decent change of character in both price action and participation.  It was enough to shift they daily charts back to RSI bull ranges, but not keep pushing them higher. Markets began to pull back right after shifting the RSI range and are now seeing the RSIs back at the 40 leveling testing those ranges already.  That is not the best setup for the buyers right here, but the chart patterns could be supportive if they decide to engage. I don’t like using the do or die phrasing, but bulls definitely need them engaged sooner than later to keep the daily patterns constructive.

Triple Play

The daily charts are all still in those RSI bull ranges, but right at hard tests as we enter the last two days of the short week.  CFGs are all at or below zero which would be about as deep as we want to see them go for these Daily RSI bull ranges to have a chance to survive. $SPY and $QQQ have fairly pronounced inverted head and shoulders patterns potentially building the right shoulders. Those drops are nearing spots we should see buyers start to show up if they are valid.  The volume, while putting in distribution days is lower than when we look left and definitely lower than the left shoulder drops. These patterns can definitely fail, but are set up how one would want to see them. $IWM is not really in a discernable pattern at the moment, but has seen the deepest retracement back to the middle of the basing action. Markets can fall on their own weight, so it will take active buyers to hold the lines.

On the 65 minute level there is no sign of those buyers yet.  As we see the early rallies are getting sold into and keeping the RSI in bear ranges and price under the falling MA bands. As and intraday chart, this can change faster than I can post it, but this is what I will be watching for a first step to stopping the slide here after seeing how those daily charts are set up. Right now we have divergences and some confluence trying to form on the $IWM, but price has to follow to confirm. For now it’s just a heads up.

Power Universe

The Power Universe equal weighted chart remains above the 50% retracement, but has fallen slightly below the broken trendline and has been capped by it the last few days.  While it remains in its own RSI bull  range and getting ready to test the 40 level. It has heavy lifting to do to get out of this spot. CFG is trying to turn at the flatline, but that is the only hint so far, and it needs some more evidence on its side to be taken seriously at this point.  Its about where we should stop if this is a pullback, but also where things can accelerate down for a bit if we are back in the major bear trend.

World ETF RS Gainers

Commodity countries are the RS leaders still with that being the play across many categories. Below is the top RS Gainers over the last week which gives a few charts to review if looking abroad. US and Europe are mostly back at the bottom of RS rankings on the 3 month time frame now.

Intermarket View

Keep it simple, Commodities still on top and Equities back to the bottom with Bonds. Not a favorable setup for equities to do well. Real Estate cooling off too after a strong run in recent weeks. It should be watched to see if it sets back up soon and strengthens again or gets hit by the overall fear of a slowdown across the board.

Universe Breadth

  • Overall Breadth weakened a good bit in this pullback, but was up yesterday even with the ugly intraday fade.
  • The cumulative advance decline line is not showing any strength in smaller names
  • The percent of stocks above their 20, 50, and 200 day moving averages all are below 50% teasing a trough in today’s flat close
  • Breadth Thrust  and McClellan Oscillator haven’t been aggressive on this drop and are curling in recent days with the former holding above 40.
  • Lack of participation adds weight to the downside case

Short-Term Breadth

Short Term breadth view getting to some extremes in the harder hit places, but has room down in most Breadth Thrusts before hitting any extremes, if sellers want to push.  If this is jsut a pullback, we won’t see extremes in most of these on this move.  The more that show up, the more evidence things are actually worse off under the surface at this juncture.  Below that is the MA Breadth view that shows the bifurcation we continue to have in the markets.  It matters where you are invested, unfortunately for most, the popular ETFs are most heavily weighted in some of the pinkest areas.

Equal Weight Sector Analysis

Our sectors remain in a defensive and commodity tilted stance with no signs of change.  Consumer Staples and Real Estate moved the most RS on this list as Healthcare, Information Technology and Communication Services all lost their footing again.  Below that I throw in the top performing subsectors over the last week, and most are not surprising at all.  Retail was the only one that really jumped out, so it may be worth digging a little more on that page in the top menu.

Wrap Up

We seem to be at a big decision point over the intermediate term direction. If the patterns play out we can see another leg higher that could continue this retracement higher. If the overriding bear trend re-exerts itself here, it could be a quick panicky retest into  the May FED decision. As always, it could go either way from right here, those are the things to look for on both sides from our view.  Getting prepared for either is all you can do. while we wait.

This information is for educational purposes only and is not a recommendation to do anything, at all. Please see the full disclosure in the footer.

As always, I hope this helps!