Mid-Week Macro

April 20, 2022

Right Shoulder or Retest

As I mentioned yesterday morning on Benzinga PreMarket Prep, we are really in a waiting game, where the volume is turned up to 11.  Markets are hard to love here, but they aren’t really breaking down overall, but instead raiding certain sectors and subsectors.  Those just happen to be the ones that garner a good bit of the market capitalization, so everyone is paying attention.  Yesterday, buyers held the line and we had a strong day leaving the door open to Inverse Head and Shoulder patterns on both the $SPY and $QQQ. We need to see those right shoulders form and a break above the Neckline, but one step at a time. As of Wednesday morning, the Netflix bomb is having some negative effects as expected, but not showing much ripple effects that appear are bad news in really toxic environments. So, this leaves us still in a battle for the next short term direction, and in this muck likely more hints toward the longer-term one. Don’t throw in the towel yet, markets enjoy surprising the most.

Triple Play

The daily charts held where they needed to for now and are right back in the battle attempting to put in higher lows.  All holding their RSI above the 40 level on this backtest of the RSI bull ranges narrowly forged on the first leg off the lows. At the same time CFGs got oversold which is good. The next step on healing is moving over and away from the MA bands.

On the 65 minute chart, we see the move off Mondays gap down put in another set of divergences in the recent action. Yesterday’s price move back through the MA bands is a good start, next would be RSI bull range shifts to signal a change in character. A RSI surge into overbought would be even better, but might be hard to pull off at this juncture.

Top World ETF Weekly Gainers

I decided for now the best way to focus on the World ETF is to look at the weekly gainers and then backtrack from there.  There is so much rotation going on right now, its worth concentrating on the best gainers and trying to find good chart set ups to work off no matter where they might fall. There is still commodity based strength to be found, but Europe and some US domestic showing up as well.

Universe Breadth

  • Overall Breadth is below desirable levels, but just won’t seem to break yet on this pullback
  • NHNL Differential has all 3 oscillating around the flatline
  • The cumulative advance decline line still tightening up with the price pattern
  • The percent of stocks above their 20ma and 50ma are working to get back above 50% levels.
  • McClellan Summation is on a sell while trying to curl back up above the flatline.
  • Breadth Thrust recent lows above extremes along with the McClellan Osccillator even with it going a bit negative
  • Many little green shoots in the breadth world, but nothing that can be called strong yet. 

Short-Term Breadth

Short term breadth picture has improved a good bit over the last two days, even though we aren’t much higher in price action. This is what we want to see a potential turning points.  A different way to show the green shoots mentioned above, but it’s just a start, not something to lean on too much yet.

Intermarket View

No big change in the Intermarket picture. Equities still in an unfavorable position. Real Estate continues to hold up higher as a defensive yield alternative, somewhat out of character, but correlations can and will change over time. With all the concerns about bonds right now, this correlation may be broken for a good while.  Commodities still lead as they start to see more volality after their strong showings

First Movers

Industrials is the big mover over the last week, recovering some from the transportation rout. Consumer Discretionary is also coming off the mat which is not bearish overall. We mentioned the Retail subsector in our Power Sector Review, but it isn’t the only beat up Discretionary subsector that is starting to find buyers. As we go through earnings season this is likely to get more noisy in the short term, but can help point us to the best immediate opportunities along the way. Longer term plays take more focus and need to see the sector then the overall universe firm up before any major new commitments.

The subsectors that have gained the most over the last week have a good mix of current strength and emerging.  Consumer Discretionary may be early, but there is definitely some nibbling going on here recently. Also, don’t forget to keep an eye on those other Materials subsectors playing catchup, they are showing on here as well.




$VIX  has remained in check on this recent pullback, not showing nearly the fear we have seen this year so far.  This has been a bit of a hint toward the pullback thesis. As long as this doesn’t blow back through those upper bands here it can test the immediate trend line and maybe even head down to the lowest we have marked.  Not a given my any means, but if it did, we would be on our way in the next leg higher.  A break and close above 25 or so at the recent highs would kill that perspective quickly. But that is good information too, so we wait…

Wrap Up

We are in a waiting game on the overall markets. If they continue down, what is working will continue to shine like defensives and commodities.  If we find footing here sooner than later, there is likely to be a fast rotation back to growth that will have great velocity.  There is no telling how long it will last, but if you are nimble, there should be good opportunities in the short term that could turn into longer term plays as we watch for milestones along the way. As always, it is about the battle in front of us and which side wins. The downtrend is the prominent driver, but the shorter term uptrend isn’t getting any respect for how its holding here. That might just end up being as good a tell as any in time. Markets still love that wall of worry.