Mid-Week Macro

May 12, 2022

I started writing this in the middle of the afternoon on Wednesday and decided it was worth waiting for the close and data that would come with it. It was a good thing because the markets closed on the opposite end of the daily range from where I started. Of course that shows the focus on what is going on here and now, but this comes with the backdrop of a larger downtrend and bear market in many spaces across the markets. The CPI number didn’t back off enough to give any confidence to buyers, so they remain on strike while sellers continue to find reasons to unload shares. While overall the selling remains pretty orderly, the fear and capitulation seems to be moving through subsectors in waves right now instead of washing everything out at once. That may still happen, but for now it seems to be rolling through subsectors individually keeping the Universe readings from signalling many extremes itself. We are stretched enough to form a viable reversal at anytime, but not so far it can’t continue down for a bit longer.

Triple Play

Sellers seem to be winning all battles here and pushing markets lower, RSI are all in bear ranges and right around the 30 level which many watch (not important to our work). CFGs are still above zero which gives more room to expand to the downside if we can’t find any buyers.  We have been selling hard for a while now so relief can come at anytime and will be violent, there is just not telling what level it starts from.  It could be a good bit lower or today. Thursday before OpEx can often find a bottom going into the expire just over a week away, but there is not price action evidence of that yet, but we will see how today goes. Futures are down at the start and near the lows as we wait for PPI now. reaction is what’s important and we won’t see the real one until after the open at 9:30.

The 65min view gives more RSI bear ranges and below the falling MA bands. RSI are trying to diverge, but we have to see where the next low pivot comes. Nothing for buyers to hang their hat on yet.  This needs to shift back to a RSI bull range and sustain it for more than a candle. Once that happens and it is back above the MA bands we will have our first step to a potential actionable bounce.

Power Universe

RSI Chart

The Power Universe RSI chart lost the levels late last week and have been down since. RSI bear range and below falling MA bands.. CFG is at zero and and bounced there while in the range, not that it’s below, it is less likely to hold. If it does and forms another divergence, we could retest the range lows, but that is likely to act as resistance on the way back up unless we see a larger change of character from buyers.

Universe Breadth

  • Overall Breadth is very week and getting to washout levels, but no signs of bottoming yet and still some room to stretch.
  • The NHNL differential remains on a major sell signal and posted the lowest reading of the move yesterday
  • The percent of stocks above their 50, and 200 day moving averages all in the lower quadrants. next signal would be a move out of that quadrant for each.
  • McClellan Oscillator diving pulling the Summation Index to new lows for the move as well.
  • Breadth Thrust made new lows thwarting the short-term divergence, but still above the January lows.

Percentage Making new Highs and lows gives us 10day, 21day and 63day lows all diverging slightly as yesterday’s lows versus last week’s spike down. 10day new lows is still diverging from the late April spike, but the longer measures are not. This is interesting, but not something lean to hard on.

Short-Term Breadth

As I mentioned in the first paragraph, the raids have been rolling through our subsectors. Some based the entire sector getting pressure, while others are taken out on their own time. The first sheet below is yesterday’s closing numbers and the one below is from Monday’s close when I mentioned all the red, but maybe not enough yet. We did get more red as of last night, but not necessarily in the same spots and some, while still red, actually showed improvement by a percent or two from then to now. No doubt the selling is broad and enough to forge a reasonable bottom, but not thoughtless like it can get in major panic selling.

Intermarket View

Intermarket ETF RS Rankings saw Equity proxies take another hit in price moving their RS rankings back down, but that is not what stands out right here.  The movement off the lows from bonds this week is notable after such a rout recently.  They are making big 3mo RS moves over the last week and month here and might be worth looking for an opportunity at least in the short to intermediate term.  This would also signal some of the other inflation plays might be a little overdone for now.

Size and style remains Value over growth and large over small with the exception of micro caps which are stuck in the middle. Nothing really new here.

Sector Review

There has been no where to hide over the last week with losses mounting quickly across all sectors.  Energy has been slammed in one week after holding up so long , and remains the top RS even with the losses.  That shows how bad many others have done.  Utilities have been the best over the last week and are holding up pretty well here as they are either building a small base or flagging at the previous breakout level.  We are waiting for resolution. Materials is the other highlight as it has been hit hard over  the last 5 days pulling its RS down to a still green 73. This sharp pullback might be one to watch if markets find footing anytime in the coming days. It seems like a lot fast in a high RS sector.

On the subsector level I have posted a few different views.  The first is the daily gainers yesterday. If you were among those, you probably derserve a look.  The next two are the RS  Gainers and RS Losers from the list so you can see who is moving differently over the last 5 trading day based on RS. Energy and Utilities are the leaders, but on the RS gainers, all the Financials are interesting and will warrant a little more digging soon.


the $VIX is another spot that says we aren’t panicky enough yet if this is a major bottom, but if it is a minor one, we might be and the lower highs we have been seeing could be hinting at more calm soon. A hard break in either direction from here will be telling, but we can continue to drop as it consolidates and decides direction. I and many would have expected it to be higher in recent days, but some options guys smarter than me are suggesting these lower highs are sending a unique message of how institutions are hedged here that may not have the bullish spin lower highs suggests. A strong break lower would give markets some relief, but a break higher could bring panic quick.

Wrap Up

The downtrend is in charge and sellers are too. Markets have been sold hard for a slid week now even with intraday bounces. This is starting to get things stretched, but not to levels make it too tempting to not get involved. Things are ugly and sentiment is too. Rhetoric is getting pretty thick, so bounce attempts should be near, but they aren’t the same as they were in the uptrends. They are likely to be faster and more violent, then get reversed until enough buyers show up to put in a higher low.  It doesn’t need te be more complicated than that at this juncture. Once we have a higher low and maybe a RSI bull range on the 65 minute TP chart, then we can start looking for other progress and what themes it is actually coming from. For now, we wait…

As always, I hope this helps!

All information above is for educational purposes only and is not meant as investment advice. Please see the full disclosure in the footer of the site.