Mid-Week Macro

April 28, 2022

Retest it is...

Markets tend to move faster when they are angry, it is just how it works? After losing the flags (which also played right shoulders on TV) a retest is now upon us in less than a week. Sentiment has taken another dive with the markets and both price and rhetoric are getting closer to washed out for now. We should see a bounce stick for more than an hour here soon, but there is still the cascade risk if we lose the previous low zone before the end of the week.  Both are on the table and leave the markets stress level high. Even if we do bounce, it needs a strong showing from buyers to generate any more than a day or few in this environment. Burden of proof lies squarely on the buyers shoulders here.

Triple Play

$SPY is the only one that hasn’t closed at new lows so far.  It isn’t far at all, so I would expect a probe of that area at a minimum. $IWM $QQQ already closed at new lows as of yesterday with Inverted hammers to keep the speculation high. All three are in RSI bear ranges and below the falling MA bands after the rout the last few days. CFG is oversold and also gives a setup for a bounce. Problem is neither CFG nor RSI are at extremes enough to put a lot of weight behind a reversal prediction. That can also be seen as a glimmer of good news. We are seeing the potential for larger divergences IF (can’t make that if any bigger) once of these reversal attempts can stick soon, Maybe even today?  We don’t know, but as we will see below, things are sufficiently oversold to see a solid reversal anytime we see those buyers decide to show back up. And by “buyers” I mean institutional players. Until they leave a footprint, it’s all just noise.

Intermarket View

Commodities remain on top, but have been seeing a lot more volatility both ways.  Energy still carrying a lot of the weight here while metals struggle more. Equities and Bonds are still sharing the bottom of the list and losing back any headway they made. There is nothing easy out there right here on a macro perspective. Some historic moves that will likely be tested, but not seeing a lot of that just yet.

Universe Breadth

  • Overall Breadth took another big hit on this market drop
  • NHNL 30day hanging on to positive by a thread, a break would complete another major sell signal.
  • The cumulative advance decline line made a new low for the move, getting slightly ahead of price here
  • The percent of stocks above their 20, 50, and 200 day moving averages are all is a rough spot, but flattened yesterday with the index slightly down
  • Breadth Thrust low is down in the 30s, it can go lower, but doesn’t that often. It is also notable that it has crooked up here well above the January lows in the indicator with price at the same levels.
  • The McClellan Oscillator is oversold, but plenty of room further if things stay ugly.

Short-Term Breadth

Short-term breadth measures actually improved yesterday over the almost all red list  from Tuesday’s close. No bright spots per say, but Consumer Staples and Energy remain the best of the worst right here. Utilities looking the worst of all as it pulls back to backtest its big breakout. A hold or fold here could be telling for defensives over the near term as well. 

Sector Relative Strength

Not too much to say here, the week long selling has taken its toll on all sectors here as the selling has not just been in Tech. The intensity is also a sign of how bad sentiment is in real world action versus a survey. 

Although every subsector is down over the last week, I thought it would be worth looking at the top 10 RS gainers and losers.  This doesn’t mean gainers are a buy and losers are a sell, just telling us what might be changing character in recent action, whether that be for the good or bad.


$VIX staying elevated is another concern that is worth paying attention to. However, we have a couple of things to note here. First is the lower high we have seen so far with markets right back down at the lows. There is still time for it to make a higher high if we do see price cascade down from here. As of now, a peak would create a lower high and a close back inside the upper BB after being out on Tuesday, a pretty reliable short-term bottom signal in the past when triggered. We will be watching to day to see if it can stay down and close this candle back inside.

Wrap Up

Markets are not is a good spot with lots of sellers, even more rhetoric and sitting on the previous lows that has been touched a few times. This is definitely a recipe for concern and should be respected. But we are getting to short-term washout levels that normally attract some buyers. How many and where will they put their money to work is most important for us to watch for at this juncture. You don’t have to jump in at the first sign of any buyers, but working on keeping an idea of flow and relative strength will help fill out your watch list quickly when the time comes.