Weekly Macro Review

April 14, 2024

Charts That Matter

The week ended with an exclamation point after the battle gave way to the sellers Wednesday and followed through Friday, solidifying the weekly follow through as well. The first Triple Play Chart is the weekly putting in red candles across the board, more dramatic in $IWM and $SPY. The $QQQ kept it together a little better, but it has been more muted in the last few weeks already while $IWM $SPY kept making pokes higher. Distribution days have added up and finally price levels are showing it. All of this going into OpEx week with a potential war on the horizon. Let’s be clear, the major uptrend is not in danger right here, it’s more a question of how far this correction goes. One thing in the bull’s favor might be the theory of alternation which says alternating corrective cycles usually don’t follow the same framework. The last one we went through in the Summer and Fall of 2023, we can see on the weekly charts was a zig-zag pullback pattern. That could possibly lend to a more sideways or rectangle pattern this time.

The Daily RSI charts are still in RSI bull ranges, so this isn’t dire. It’s more a question of short term direction for now. $IWM is the closest to a hard test of the RSI bull range after the failure swing we got last week on all 3 indices. Now we need to wait and see if the RSI bull range holds or folds as the coming week gets into action. Sellers start the week in control, but the power of the selling Friday hints a short term bounce is likely soon, and when that happens we will be able to get a better gauge of real buyers’ interest after this selling action raised some fear. Geopolitical issues are playing a big role here and often only show short term effects, but we need to stay diligent as a lot can happen in the short term in markets.

Bonds kept sliding this week sending interest rates higher and the $TLT down to the 61.8% retracement level where it bounced to end the week. We found some buyers on the weekly price close support (one of Andrew’s support/resistance systems). The volume grew again not giving much leeway to the bulls here. A rebound is not out of the question, the odds are decreasing and if it doesn’t happen here, the chance we go back to the lows increase a bunch. I will note the daily CFG hasn’t dropped this week with price showing the downside momentum is waning here. Let’s see if it produces any positive action or not. 

This week I want to add the Pressure Gauge snapshot which is in the Power Sector Review each week. This measures the Advancers vs Decliners and Advancing Volume vs Declining Volume all in percentages so we can easily compare across many different spaces. There are differing views to what 80% and 90% days are, but my old school learning of it had 2 components and both had to meet the threshold for it to qualify. You look for a short term bottom after a 90% day or two consecutive 80% days. Once qualified, you would expect a tradeable bounce within 1-3 trading days. How far it goes, nobody knows, but you will definitely get market clues along the way. So ,even though we just lost support in the $IWM and $SPY, a reversal attempt should come by mid week. 

Power Universe

This was the first week sellers really rested control from the buyers into the close of the week. With the vigor we saw in the selling, it was either the end panic move or just the beginning of a larger unwind.

The Universe has just come back to the breakout level and closed just above it and on the lower MA band on Friday. RSI is going for a hard test of the RSI bull range with CFG nearing oversold, but not quite there yet. It all lines up for an early week reversal, IF buyers are still ultimately in charge. If they don’t show up in numbers, we might be in for a more protracted consolidation as we shift into a daily RSI bear range.

This shows us large caps have taken back over from a strength comparative. We will likely see the same thing in the Size & Style ETF RS Rankings below, but this tells the story too. Large are outperforming while smalls are still underperforming the Universe.

The breadth started coming off quicker this week and has now pulled back near short term oversold zones. It is also similar spots where markets have found a floor over the last year, even if a really short term one. The intermediate readings like %>50sma and McClellan Summation are weakening and losing levels that have been holding. Best case scenario is we get one more big selling day early week and drive these short term readings to a solid oversold level enticing institutional buyers back in.

As we saw with the pressure gauges, the selling was pretty intense on Friday and drove the 20day lows percent up to levels we haven’t seen since the heart of the bear market in 2022 and early 2023. If the 8 previous spikes at or greater than the one Friday, 6 of the 8 were right near a short term bottom, and that was in a bear market. I would expect these types of bottoms might fare a little better in this backdrop. Especially into such a big back test as you can see marked on the chart.

Relative Strength Rundown

Global Relative Strength

A good bit of new blood on the list this week with 5 new names, 4 of which came in from an RS below 50. Actually, the RS movers screen shows there was a lot of juxtaposition across the entire list. Both up and down. Through all that, let’s not lose sight that this is all relative performance. The last list were the only 4 to have a positive week out of over 60. Geopolitical news like we saw tends to do that.

Intermarket and Size & Style

Intermarket ETF RS Rankings is still commodity driven with $UUP moving up over all the equity market proxies which puts another point on the side of caution when the $UUP is outperforming equities and they are in the bottom half of the list. Bonds and Real Estate are both singing the higher interest rate song right beside the commodity leadership.

Markets leading to large and growth from both an absolute and RS perspective. The biggest names are being perceived here as the safe havens as has become more common in this era. That goes for both growth and value, but especially the large and mega-cap growth spaces as we see this week with the drastic difference in the weekly returns there.

EW Sector RS Rankings

The top of this list has been pretty solid for weeks now with little movement and most of that between these 4, but below that the changes have been swift and frequent. This week we saw Consumer Discretionary drop the most, Tech has been coming back up of the RS lows for two weeks and Real Estate and Utilities jumped this week. Nothing gained on the week, but the RS moved more defensive other than Tech once you got out of the top 4.

Wrap Up

This was the action the sellers needed to gain control for now, they just hope it wasn’t all news driven, because those moves have a worse track record of sticking and we are seeing some stretched market signs already. Both sides have a good chance here, but the sellers do have the upper hand for the first time in a while. Early weakness would not surprise anyone, but also don’t be surprised if buyers come back in and find a floor early. If they do, I would expect buyers to capitalize on it through OpEx week.

You can find many of these and other charts throughout the power-investing.com site and through our Stocktwits and Twitter feeds @gtlackey and @power1nvesting.com. Anything mentioned is for education purposes only and 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!