Weekly Macro Review
April 23, 2022
Triple Play Review
As usual, the markets make the decisions not us. I had to open my mouth mid-week about opportunities only to have them quickly shoved down my throat metaphorically. We did discuss being in somewhat of a no-mans land, but many were leaning much more bearish before the markets made the decision. It looks like they made the decision into the end of the week, at least for now. The attempts to save teh RSI bull ranges are all but over. $SPY still hanging on by a thread, but a rough week there too. RSI remains over 40 for now, but will take a big save next week to keep it above. Both $QQQ and $IWM cracked RSI 40 levels this wee after rolling over at or below the 50 level on this bounce These two also never could clear the falling MA bands. $IWM on the end is losing its bear flag and closed at a new weekly this week on higher volume. Not many positive clues after this weeks ugly candles, evidence stacking up on the bearish side again.
The daily charts are really what had been hanging onto the potential for a more positive resolution with the inverse head and shoulder patterns. There were obviously many eyes on the same pattern because once they started to fail, especially on the $QQQ, most began to throw in the towel quickly. Thursdays reversal and Friday’s drop were both on higher volume and big candles as the rush for the exits was fast. All three are set for retest of the previous lows which get more likely to break with every test. Sellers have take the reigns once again, what they do with them is to be determined.
The 65min chart gives an intraday view of just how much velocity there was in the drop from Thursdays early highs. We had discussed the potential RSI bull range shifts and their need to push further above the 60 level, or at the very least hold the 40 level on any test of them; neither happened. $QQQ never even got its RSI over 60 and remains the weakest here as many of the stalwarts were sold this week. The “Generals” per say. This 65min level went into the weekend very oversold on a straight shot down, which may be the only potential bright spot on these charts. Bounces will occur from these levels and bring information with them. If you are fast and nimble you could find some strong reversion moves under the surface when we do bounce. Otherwise the burden of proof is squarely on the buyers shoulders at this juncture and they have a lot to prove. Path of least resistance is heading back lower after just bounces after the action we saw this week.
World and Intermarket
The world ETF view we are looking at the RS gainers this week. Obviously, nothing domestic on this sort of the list. It shows more of the European countries making RS gains recently. Nigeria was the big weekly performer as it bases near the previous lows. All of these outperformed the $SPY this week held steady near the middle at 50 RS, even with the poor absolute performance. $IWM and $QQQ were further down the World ETF RS list.
Intermarket ETF RS rankings continue to point to an unfavorable equity setup with bonds down at the bottom with them. A noted on the table, the $IYR and $UUP were the only two positive weekly gains on the list. $UUP has been working higher for a while now and the early month breakout has not looked back. $IYR has become the yield alternative to falling bonds. $IYR and other REITs should be watched closely for tells when yields to cool off and pullback. For now, Real Estate plays are working decently in this environment..
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.
It ended up being a tough week on the breadth picture. It started out okay, but Thursday and Friday left their marks across all time frame measurements from longer to short-term breadth views.
- Longer Term:
- NHNL Differential made a hard reversal the end of the week spiking down on Friday. This pulled the 10ma back negative, bull signal re-establishes on the 30ma going negative.
- Advance Decline Line is back nearing the lows on this action. no strength hiding in here
- %>200sma weakened a good bit on the late week move after a little head fake higher during the preceding flagging action
- %>50sma even made it back up in the 70s, but barely crested 5o% on the last attempt. Breaking the 40% level into the weekend is not a good sign.
- McClellan Summation remains on a sell signal and was rejected with an underside kiss this week. It is trying to stay above zero, but won’t for long unless we see a quick change in character.
- Shorter Term:
- %>20sma was trying to extend up through 50% and got clobbered into it, now back at the bottom quartile after the two-day move but no where near extreme if this is a new down leg
- McClellan Oscillator is firmly back below zero, but not near extremes
- Breadth Thrust nears the 40 level which is 1st extreme demarcation. Most times it will bottom, at least in the short term, close to here; but on an initiation down side move, it can go much lower
- PMNLC (not pictured) was working on a good progression of more new highs and less new lows across all time frames while price stabilized until mid-week where we saw a reversal Thursday and a larger spike down on Friday.
On the sector level nothing faired well this week. Real Estate, Industrials, Financials, Consumer Staples and Utilities lost ground on the week, but beat the $SPY’s performance. The line up remain defensive on a whole. Discretionary is still trying to get off the mat, but didn’t exactly shine this week in the end. The selling was broad as we have seen almost all the way down the page and they took out many of the big names in the process giving a larger impact on the major indexes like the $QQQ which is well populated with Technology, Communication Services and Healthcare names via biotech.
The end of the week painted a lot of the picture very quickly. Those who continued to stay bearish and lean down are looking more correct as we review this weekend. The opportunities for buyers to step up were there, but the incentives weren’t enough. This move lower now has some resistance at the lows, but less now that this is our 3rd or forth time down here. In the shortest time frame we are getting oversold so and early bounce this week is not unlikely, but it will take a lot to change the character right here without probing the previous lows in the process.
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!