Weekly Macro Review

March 16, 2024

Charts That Matter

The majors ended the week with mixed messages again, indecision remains in the $SPY with the doji. $QQQ put in some downside continuation with a second week of higher volume and $IWM turned tail and put in a pretty clean Evening Star pattern this week. This paints a less encouraging picture over the short term, but isn’t solidified without follow through on the $IWM and a reversal candle on $SPY. We will see if we can get that confirmation this week or if this was just another respite in the grind. 

Last week we took a look at the dollar and it being at a crossroad, and this week we have $TLT at a similar spot. Representing longer term bonds and rates, a breakdown here would mean rates have broken out and that is likely to weigh on equities and give the $UUP a boost. If it bounces on one of these close levels and moves back higher, that would likely have the opposite effect and put a tailwind back behind the equity markets. The current commodity is adding fuel to the higher interest rate narrative this week as well.

Power Universe

The Universe saw a week that leaned toward the small cap weakness, but wasn’t notable until Thursday’s rout. Overall though, it wasn’t a significant change as the week ended.

The RSI mushy trend expanded on the Thursday shot down and may have been knocked off its rhythm for now. The breakout back test held on Friday, but very likely could be tested early week, that will be a better tell. RSI came out of the tight formation, but remains over 50 as we get to the MA bands. This is a minor setback at this point, we will see how or if it grows.

Relative comparatives are trying to remain above some broken downtrends as drawn this week and the longer uptrends below. These are just some spots we might look for support if the ratios go that way, but more importantly for the market broadening is seeing the $SPY and $QQQ comps break above the recent consolidations they have been in.

We had been discussing the breadth chugging along for a while now, everything was meandering higher but it wasn’t very inspiring. The last week changes some of that with smaller gains on some days that looked better and then the big hit on Thursday. It didn’t do huge damage, but it was enough to induce a McClellan Summation index signal, crossing back down for now as the Oscillator dove back below zero.

This week changed the highs and lows dynamics a bit with the large down day we saw on Thursday. On the two shorter time frames you can see we broke the downtrend in lows, but still aren’t near the heavier new lows we saw in late January much less those levels of last fall. What is worth noting is the spike in new 63day lows over anything we have seen since the markets turned sideways as the year ended. If that stays elevated, it will add more credence to the concerns.

Relative Strength Rundown

Global Relative Strength

The $SPY snuck in at the bottom of the world top RS rankings, and unfortunately, $IWM made the weekly worst performer’s list. Your top RS Rankings have a lot of names from Europe leading the 3mo rankings at this point. China and Japan also jumping in there.

Intermarket and Size & Style

Commodities now firmly in the top spots, the top 4 weekly returns were head and shoulders out in front of the pack. I had to change out the delisted $JJC with $CPER to get a copper proxy back on the list. When looking at the complete list here, maybe the biggest surprise is the drag $GLD actually was on the complex for the week, losing RS spots, but remaining at the bottom of the top 5 cluster. Equities aren’t currently out of favor yet on this list with $DIA being the only index below the midpoint of the list which is or normal simple rule for equities being in and out of favor if all are in the top half of the list. Now, with current price action, it won’t take much more equity weakness for the rest of the equity ETFs to join $DIA.

Size & Style is still very clear at the moment that growth is the objective over value, even with the current weakness. We did see larger cap versions move back up the list some while small caps suffered, but growth has not given it up to value yet, even on the 3mo RS readings.

EW Sector RS Rankings

Our EW sectors saw more heavy selling than buying this week and a lot of that selling was in the leaders both in size and in sectors. Health Care and Information Technologies had the biggest losses. Health Care aren’t amounting to enough to dethrone them, but Information Technologies continues to follow Communication Services. Note that both consumer spaces are hanging out in the middle of the pack. The other two roughest performers were Utilities and Real Estate, not showing much for defensive natures this week.

Wrap Up

Markets did continue to be heavy this week instead of spring back for OpEx. The inflation data spooked quite a few and has many revising down their rate cut ideas. That selling exacerbated by the options squaring ignited a bit of a panic Thursday. It will be most telling how the markets react the next few days now that much of that options volume has rolled off for this quad witching event. Those types of events can have short term push and pull effects, but it will usually come out in the wash within a week. If we have a true change of character, it should continue to build as we go forward.

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As always, I hope this helps!