Weekly Macro Review

March 24, 2024

Charts That Matter

Last week I ended with the need to see some downside confirmation, especially in the $IWM evening start pattern that developed or the grind would likely continue higher. Well, the grind goes on. This week we see in the weekly chart, there was no follow through to the downside; to the contrary, all three closed at new highs for the move on Thursday on strong participation. The week closed with strong candles and even new high closes for $SPY $QQQ. $IWM isn’t quite there yet, but the lack of breakdown there was a vote of short term confidence. $SPY RSI is nearing 80 which is where we believe things start to get overbought when we are in an RSI bull range depicted by the green upper bound of the bull range in the RSI window of our charts. Overbought often doesn’t mean done, it can also mean a change in angle of the move while it works off such high readings. It does usually bring in more volatility in that time frame, but doesn’t mean the uptrend is ending.

We can look to the Daily Triple Play chart next and see the $SPY RSI peaked above 80 on 12/19/2023 and ushered in a 2-4 week, depending on how you look at it, sideways consolidation to let the RSI get back near 60 before resuming the current grind higher. Good technicals work across all timeframes, so it wouldn’t be out of the question to see something similar in the $SPY as the year goes on. The question is where RS truly peaks above 80. This is the tough part because every point RSI goes above 80 and gets close to 100, the gains that accompany the move will be exponentially growing. It is hard, but dropping down a time frame or two can help give some warnings as to when that peak may occur. Currently, the Daily $SPY is not giving us much for warnings even after the strong run. I would be willing to bet that this lockout rally grind has many portfolio managers who were looking for a good correction to buy into during the “seasonality” on the hot seat right now into the end of the quarter. This could help support things this week.

I wanted to stick with $TLT this week to show that so far it is holding and trying to turn higher after the FED meeting. This is a good sign for all involved. The economy breaths a bit of relief on the interest rate front while lowering some of the outlandish cutting expectations from the start of the year. This back off is due to a strong economy that is trying to do the work for the FED which is confusing (and/or frustrating) the heck out of them. However, if this $TLT chart does recover and break over the down trend line we show here, it would send a message to the markets and the FED about inflation risks versus healthy economic strength.

Power Universe

With no follow through to the downside, the Power Universe saw another breakout close to new highs from the small consolidation last week. The mushy RSI trend is continuing. A better depiction of that might be the zoomed out line chart. We don’t have a weekly version at this time, so when zooming out, I think I will start using a line chart for easier viewing.

Early week was a little shaky, but the middle, including and after the FED meeting, was strong enough to carry the week and save the mushy RSI trend. Friday’s close remained above the Wednesday’s breakout candle close.

Breadth continues to hold up strong and even improve on the longer measures as I posted on X this week, but most of the other time frames have been muddling sideways with a small upside bias. This isn’t bad action, it is pretty normal in a bull market. It is hard to see it anyway else with all of our moving average measures, %>20sma, %>50sma and %>200sma, above the 60 level with the highest one being the %>200sma long term measure. Two-thirds of the 3000+ stocks are above their 200sma. That is a broad participation reading. The last note was the Summation Index did cross back higher to end the week. It needs to move away from the signal line one way or the other before getting excited, but even here the small bias is upward since early February.

This longer view line chart helps show the progress being made a little better as the broader EW market continues to march on. The break above both the 2023 and 2022 highs in recent action is worth noting.

Now let’s talk a minute about highs and lows. While we have seen more new lows pop in over the last week or so, the new highs saw nice spikes on Wednesday back up near their highest levels since that early February upward bias came in. It is notable to me that the one that actually broke the blue line of the previous highs spike was the longer term 63day highs measure. This continues to hint at some indecision in the shorter time frames, but more progress under the surface is being made on the intermediate to longer view.

Relative Strength Rundown

Global Relative Strength

World ETF rankings always see some jockeying. This week it was $ARGT and $EWP making big RS moves while $EDEN clung to the bottom after being the only ETF on the list down for the week. When we go to the Weekly gainers list (2nd list), we see $ARGT the big gainer for the week out in front by a few car lengths. $QQQ and $SPY on the list to represent the US markets. $IWM couldn’t make the cut as it it pulled in some on a low volume Friday to effect its week. The RS Movers were pretty split between winners and losers, but on any list you are looking at, don’t rule out those losers that have pulled back to RS values in the 40-60 range in a broad market uptrend.

Intermarket and Size & Style

The commodities are struggling to hold their spots with the wake of $SLV and $CPER losses this week pulling $DBC down for the week too. $DBA didn’t seem to care as it held the top spot, but $SPY forced its way back into the fourth spot. With $DIA the only equity below the mid point of the list, equities remain in favor with commodities, but a warning flag is flying as long as $DIA remains on its own.

Size & Style this week flipped back to a slight size over style formation. Large caps and Mega caps are at the top of the list now, Growth still edging out Value in both cases, but that shift back to Large caps is notable here as Small and Midcap growth names both take RS hits this week as they lag.

EW Sector RS Rankings

EW Sectors saw a good amount of movement this week on the RS front with Health Care falling out of the top RS spot down to 4th. Industrials was the top gainer helping it jump up to the 2nd spot. Communication Services continues to languish relatively dragged down mainly by the smaller names. $VOX is holding up fine and has the top quarterly performance on our Market Cap ETF Rankings list right now on the Macro View page. One other positive note for markets and the economy is Consumer Staples versus Consumer Discretionary continues to lean toward the ladder other than a brief blip a couple weeks back. The rotation market continues which can keep things moving forward for now.

Wrap Up

The markets overall put up a stand this week by not following through to the downside and did so on decent volume. Many of the data points still point to a positive environment that is currently leaning to the Larger cap names while still broadening out from a high concentration like we have seen build since (and possibly before) this decade started. We do expect this to broaden out into Midcap names and eventually to small cap players, but one question that is still unanswered is, in this environment, how much capital will really make it all the way down to the small and microcaps with so much more liquidity in these larger names?

As often happens in strong economies and a falling interest rate environment, I still believe capital can and likely will bleed down for plenty of opportunities, but we need to be on alert in case it doesn’t it. Maybe not as much for the economy’s sake, but for better allocation of portfolios if in fact the investing landscape has made such a shift.

Good luck out there this week and keep your eyes open for more volatility, but don’t overreact, just pay attention and take action when your plan tells you to.

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!