Weekly Macro Review

April 17, 2022

Now that April OpEx is done with we can concentrate on earnings, inflation and they FED, or just focus on the charts.  The backdrop isn’t great which is coinciding with more distribution showing the sentiment is agreeing at the moment. However, that distribution was not able to push the markets over the edge this week. Maybe next, or maybe not.  There are still some small positives or green shoots popping up as we get to a logical pullback zone. Question everyone is asking and will likely be answered soon is whether or not this is just a pullback or something bigger. 

Triple Play Review

Beginning our look at the weekly level, it is definitely lined up by how they are holding. $SPY the best after holding 40 RSI and bouncing back above 50 quickly avoiding a RSI negative reversal, but it couldn’t hold and is back testing the MA bands. It still looks the best though, but that isn’t saying much. $QQQ looks worse as  price was rejected right as RSI cleared 50 and  back below the downward sloping MA bands. No buyers as all last couple of weeks, but worth noting the weekly volume is not exactly excessive.

Moving down to the daily, as surprising as it is, all three are still in RSI bull ranges formed off the recent run. They are back testing the 40 levels which are shifting points of their own, but not there yet. This is a good place for buyers to step in, but they aren’t so far and don’t have many visible incentives to do so.  The daily distribution days racked up this week under this cloud and are pressing on those bull ranges. This should resolve soon and sellers have an opening, but have to do it now.

The 65min chart is also in bearish formation with falling MA bands and closing near the recent lows for $SPY $QQQ. the $IWM is actually showing a little more resilience on this level recently, but the higher time frame bear flag looms large above and places a cloud over this being the market savior at the moment.  but anything can happen I guess, and if it did, it would definitely light a short term fire under the rest of the charts here.

World and Intermarket

The World ETF list ranked by weekly (5 days) gainers gives a few fresh names, many European countries and more commodity based economies, Pakistan thinking about reversing a big downtrend, but its early.  $TUR Turkey continues its strong move over the last few weeks off the March lows.

Intermarket ETF RS has settled back here and didn’t see much RS movement over the last week, but the commodity price movement continues to be impressive.  Equities are back in the bottom half unfavorable position.

This week any thoughts of growth gaining a foot hold were quashed for now. All the red on the right side of the table is growth getting stomped back and the green is value regaining the list dominance.

Power Universe

So far we see the backdrop is not great, but the daily chart still has an opportunity to hold the line.  The equal weight universe chart is no different.  It recently broke the downtrend as its RSI moved over the 60 level.  It immediately pulled back and is now testing that trendline.  It even fell back below it for a day or two, but that really isn’t that unusual. It is more about the battle then the exact level or any line.  Right now the battle is still going on and no clear winner has emerged. RSI is still near 50 and CFG bounced off the flatline well. Again these are normal actions in a pullback, if that is what this is.

On the breadth front we are looking at the main view and the Percent Making New Highs and Lows of particular day sets. There is still something about that second one that has my attention.

  • Longer Term:
  • NHNL Differential signals continue to waffle back and forth around the flatline. No good read until we see more expansion in either direction.
  • Advance Decline Line is still a bit weak on a zoomed out view but is moving with price at the moment.
  • %>200sma is weak overall
  • Intermediate:
  • %>50sma is banging on the 50%, but not getting through into the end of the week.
  • McClellan Summation has put in a sell signal and is not nearing a challenge of the flatline, a break isn’t good.
  • Shorter Term:
  • %>20sma is back near the lower quadrant and heaby on this pullback.
  • McClellan Oscillator trying to get its head back above water.
  • Breadth Thrust bounced above the extreme zone hinting still normal pullback potential
  • PMNLC continues to show a positive skew for more than a week now which is also hinting at less pressure than may appear on the surface.

Equal weight sectors remain defensively positioned with the commodity kicker. This is not a favorable set up for indexes and the markets overall, but that doesn’t mean there aren’t places to make money.  From a day and short term swing trading standpoint, there are daily opportunities all over the place, and when growth sectors do move, their velocity can be worth the effort.   That said, it is hard to trust them until they start moving up this list and sticking a bit more.   For the longer term players, what has been working continues and isn’t giving much for warning signs of a change. Commodities have been down and out a long time, they could move a while before it gets overdone from that perspective. 

Wrap Up

There are a lot of reasons to be cautious and more than a couple that continue to point toward outright bearishness. Then there are those few little positive notables that keep us paying close attention for a hold near here. That’s the markets for you, often cloudy at critical points. We enter next week with eyes wide open and not much room for wiggle on the current move off the lows. If we can find footing here and fill out the inverse head and shoulders showing or negate the $IWM flag, it would probably catch the most off sides right now. If we can’t find footing almost immediately, bigger retests are probable and then holding get less probable each time we test those lows. Remain focused on the areas that are working if you want to engage, but there is nothing wrong with waiting a bit longer to see how this resolves before getting any more than you already are. Uncertainty is high which is where the biggest moves can come from; but if they are the biggest, you don’t have to try and anticipate them, let them give you a better reason than they are down a lot.

We cover all of this and more in the video at the top of the page.  Also look for our Power Sector Review for a closer look under the hood. You can find these and other charts on our Stocktwits and Twitter feed @Power1nvesting and throughout this site. Anything mentioned is for education purposes only and are not meant to be recommendations to buy or sell any securities. Please see the full disclosure in the footer for more information.

As always, I hope this helps!