Weekly Macro Review

June 17, 2024

Charts That Matter

The week saw a big pop in the middle, but the broader markets couldn’t hold on to them. The two big guys closing the week near highs in strong RS bull ranges. $QQQ is nearing 80, but that in itself just shows strength and is not a reason to sell. We are also seeing the 45ema of RSI (blue line on RSI chart) move above 60 on the larger indexes. I marked where this happened at the end of 2024. You can see both trended for a while once this happened, even though the RSIs were back and forth grinding the entire way. We also need to note the $IWM crossed two, quickly failed and has been sideways since. The $IWM RSI is nearing 40 now which really needs to hold or we are likely heading for a retest of the April lows. 

$TLT making a big move after back testing the trendline break on Monday and climbing the rest of the week after solidifying the RSI bull range as it bounced off the 50 level on that tag. Weekly is still in a bear range. We already noted the RSI held at 40 in late April hinting a reversal, but it has taken its time to follow through. Now we need to get through this stiff level near 94, but if we do we could make a quick run back up to 100-101 area. If we get the break, we will watch to see if the weekly chart can get the RSI bull range shift or if it gets rejected. For now, rates should be a tailwind for the broader markets, but markets will do what they want, so let’s see how things funnel out this week.

New highs and lows are reacting more to the selling this week as well, but an interesting divergence on Friday. The shortest measures in the 10 day lows actually diverged from the rest of the measures as well as Price in Friday’s action. Let’s see if that was a clue for some back fill higher for small caps this week or not. On the downside, the fact that the longer measures are growing to the downside is not what buyers want to see continue. Sellers come into the week with the edge, but that short term divergence has my attention to start. 

Power Universe

We discussed a couple of weeks ago that the current retracement has been shallow and there are pullback levels below we will be watching on any continued weakness. We touched the first Friday at the 23.6% retracement and the previous breakout highs. The second line is just the 38.6% retracement which is still considered a shallow pullback, but most would prefer we not revisit it or those May lows. RSI is nearing a RSI bull range test at 40. I would expect buyers to show up before there if the larger trend is to remain intact. The biggest issue from momentum readings I have right now is the orange box around the CFG right here as it can’t get any upward momentum to stick and is getting rejected at the flatline.  That is not a good look and could be hinting at a fast drop down to test that RSI bull range in the coming days.

Longer term breadth measures are still in decent shape, but they are starting to react more to the price action. Intermediate readings are neutral to weak here as the McClellan Summation is on a short term sell signal as it turned down above the flatline and the %>50sma is now down to 40%. It doesn’t show on this chart, but the 40-50 zone is a normal pullback spot in uptrends, much more than that is a caution flag for larger reversal and we are sitting there right now. The short term measures just can’t seem to get any traction since the latter part of May. The McClellan Oscillator is a good example as it gets rejected every time it tries to go positive right now. The Breadth Thrust is nearing oversold, so we could get a reaction if it can get down between 35-40, but to do that we will need a day or two more of stiff selling.

Relative Strength Rundown

Global Relative Strength

$QQQ and $SPY were finally back on the leading gainers list this week, but it’s a pretty short list. $ARGT that we noted last week is seeing some follow through as well.

$SPY and $QQQ back on the World RS Leaders list with their strong performances. More rotation this week as it was a bumpy ride in the world of equities. The large RS Movers table on the bottom is much longer than usual and has plenty of names to start with if you are looking abroad. Remember, both RS gainers and losers are worth reviewing for opportunities both long and short for the coming week. Don’t make the mistake of just looking at gainers as buys and losers as sells; always remember, it’s all relative…

Intermarket and Size & Style

Intermarket RS list is in a pretty unusual setup here with the $QQQ and $IWM at opposite polls. Equities are showing $SPY and $QQQ in the top half (concentration) and $DIA and $IWM both firmly in the bottom half. All the while, $TLT keeps climbing up the list. I have expected $TLT strength to help $IWM, but that didn’t happen this week, so we will watch that. It is just as important to note when markets don’t go an expected path. It’s always about the reaction, not the news itself, and this time is no different.

Large to Small with Growth beating over value. This shouldn’t surprise anyone after the action the last two weeks.

EW Sector RS Rankings

Everything is negative for the last month and only Tech and Real Estate could eke out gains this week. Real Estate and Health Care were the RS winners while Energy got hit the hardest in the rankings. Breadth suffered as the selling was broad to end the week.

Wrap Up

Sellers really scored some points this week by rejecting the big up day we saw when data came in more favorable than expected for the first time in months. This came along with the FED meeting that helped the sellers cause with the perception of continued hawkishness or maybe even a belief they are holding the old line too long again. They have a history of doing that. Either way, the reaction was bad which is most important. This can happen immediately following FED meetings and work itself out the next week. Buyers hope to see that, if sellers keep pressing, we will start hitting more important levels to take note of soon. All in all though, this is still a shallow correction in the bigger picture, so if we do pull back more into July, it doesn’t mean the trend is over. I have mentioned a few times about the theory of alternation when it comes to corrections. The last one we saw was more vertical, so this one could be more of a sideways move, and so far that is exactly what we have been getting in the Power Universe charts.

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!