Weekly Macro Review

April 2, 2022

Triple Play Review

 It is not too often the chart ends line up this well. I used to post a quarterly chart with this sequence, but don’t really see the need here, so we will start with the Monthly view.  March saw strong closes to the month after plenty of volatility during it.  Second month of big tails as sellers couldn’t hold control. Reversal candles and patterns are printed on this higher level view.  $SPY even put in a Bullish Engulfing pattern.  It is also worth nothing that the larger two $SPY $QQQ put in higher volume accumulation months. $IWM was more concerned with holding over the MA bands and remains the weak link.  All thee remain in stron RSI bull ranges with CFGs getting oversold, but not there yet. We could certainly pull back more within the bull ranges, but don’t we won’t be surprised if April gets continuation higher and confirms these high level reversals.

We have been saying on the weekly level, the $IWM looks the most like a RSI bear range and continues to be the anchor of the group.  $SPY and $QQQ look more like RSI bull range tests that are succeeding.  While the weekly candles were not pretty. The progress so far has been fast and has to be allowed to ebb a little along the way. The noise is getting high about a technical rejection, which could be in the works, but it seems really early to call a winner here as the battle is pretty young. Buyers need not only defend here, they have to be committed enough to keep pushing back up toward the breakdown levels.

The Daily level shows the strong run to push all the RSIs back over 60 for the first time since the start of 2022 for the $SPY and back in November 2021 in $QQQ and $IWM. This is constructive action, but didn’t push far enough to call a clear RSI bull range shift, so we wait. A pullback is fine, but it has to be watched closely to see if it gains traction. If so, we head back down until buyers get serious. Another scenario would be falling into RSI positive reversals.  $IWM actually fired one on Friday as it held up the best.  $SPY $IWM price need to stop and reverse without closing below the purple line on the charts.  The RSI need to cross below the purple line and reverse back without price crossing theirs. That would fire the RSI positive reversals. Often strong short-term signals, and when they fail it’s also good information. The fact that they are above the MA bands that are curling higher is a good start. Overall still constructive even with the extremely high rhetoric at the end of the week about us reversing back to the lows.  Down trends are still intact, but we have to start somewhere and this one seems fine so far to me.

The 65min level gives us a closer look at the action off the lows.  Fast RSI bull range that has now come back to test the range and the 40 levels.  Pierced, but moved back higher off the VPOC areas.   Early week action is likely to either confirm the spikes or fail before RSI gets to 60 which pushes the caution up to the daily and so on.

World and Intermarket

The World ETF view remains energy and commodity driven with Latin America and Middle East being the most represented still at the top ranks. On the second list though we sort it by the weekly performers seeing some moving up from the bottom and middle ranks. There are many that are recovering off the 1st quarter drop, some are forging new RSI bull ranges while others that have bounced hard are still not there yet.

The World ETF that caught our eye:

$TUR $EIDO $GREK $INDA $EDEN $EWC $PGAL

Intermarket ETF RS has been moving around more over the last few weeks as well, Equities making a much better showing as they move up into the top half of the list. Well, all but $IWM. A simple view is when the Equities indexes are all in the top half of the list we are in a favorable environment for the space. When not, the economy and fundamentals are pointing out something is a miss. The Commodity has been on top a long time now and in recent weeks, bonds are grouping on the other side of the RS list. Real Estate made more progress this week as well moving up with equities in this hard asset and yield hungry environment.

Size and Style isn’t giving big information other than $MGK remaining the lone growth play in the top half of the list.  I like the RS color progression here as a simple visual. Mega Cap Growth may become another safe haven type play if institutions get serious about moving back into the growth side. Still looks like leaning larger is better for now, especially in growth.  As a proponent for Midcaps, I do like seeing it move up the list here this week. 

We haven’t focused much on the bond route recently as we waited for the FED to raise and reactions to calm down a little. This week we are taking a closer look as some big reversals took place this week. These drawdowns were historic in depth and velocity, so its worth looking for some additional reversion now that they are putting seeing divergences begin to play out many of the daily charts.  Obviously, the longer the duration, the more volatile and more room to retrace. If bonds have a place in your portfolio, it might be worth starting to shift durations back out longer to capture more if this reversal attempt sticks for now.

Power Universe

This week we separate out the measures we follow by long, intermediate and short term and look at them separately as their message are all slightly different at the moment leaving uncertainty relatively high.

  • Longer Term:
  • NHNL Differential has 2 of 3 signals back above zero, but the 30ma is needs more incentive or time. It is moving higher though.
  • Advance Decline Line is nearing the downtrend off the highs and got rejected midweek. a break over is needed.
  • %>200sma popped over the 50% then got pushed back at the downtrend. clearing and staying above both changes a good bit.
  • Intermediate:
  • %>50sma is back over 50% for more than a week.
  • McClellan Summation continues to run since its cross blew through the flatline. The end of the week pause hasn’t seen any reaction from it yet.
  • Shorter Term:
  • %>20sma looks fine here, would like it to hold 50% on more consolidation
  • McClellan Oscillator holding higher on this weeks pause which is why Summation hasn’t reacted.
  • Breadth Thrust isn’t worried here.
  • PMNLC is not pictured, but held up fine in the second half of the week.

The Power Universe has really been consolidating for two weeks. the mid-week breakout attempt was rejected, but it held at the MA bands and trndline test instead of seeing a fast and hard fail. Friday the Universe put in a gain that fired a small RSI positive reversal similar to what we saw on the $IWM above. This needs continuation early week to not fail. Either way it’s good information for us once it shows its hand.

Power Sectors are still dominated by the usual suspects. Most of the bigger movement was in the bottom of the list. Industrials dropped 28 RS points moving down in the lower half and Financials sank further down the list.  Health Care snapped back with a strong week after the previous weeks troubles. This has been a volatile spot, is once again putting in some good looks. Larger players in most of the sector have been doing fine and trying to lead higher; However, the nature of the healthcare sector is a ton of startups and small players in the devices and biotechnology spaces. These segments within the respective subsectors are finally starting to show more participation and are definitely on the radar it is still the second worst performing sector over the last quarter. 

Wrap Up

After such a strong run off the lows, it feels like we should correct more and retrace a larger percentage of the move.  50% is always a good spot, but doesn’t always materialize.  If this constructive bounce is going to turn into another leg higher, this juncture is important and every skirmish is information. Among other signs, one would be If we can get more RSI positive reversals materializing and hitting targets. Multiple smaller signals in consolidations often are the tells. A new quarter has started, lets see if those new flows we always hear about or inflows or outflows this time around.

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!