Weekly Macro Review

March 3, 2024

Charts That Matter

This week the markets continued to outright ignore or even kick mud in the face of the seasonality we are supposed to be seeing right now which shows a level of buying power we don’t want to ignore. And, while this is great news longer term and could keep going this way, let’s not get ahead of ourselves. We still have March to go, and a 3-5% correction can and will happen at any time. Phew, happy to get that off may chest because when we look though the markets, I can’t find much to have an issue with. Yes, that kind of scares me that things do look this good, but I am having a really hard time matching the current narrative to the chart action I am seeing from multiple angles. The TP Daily chart below showing strong action across all three with some volume at the end of the week. $SPY and $QQQ are both in those “mushy” RSI trends I have spoken about so often. $IWM joining in earnest this week is a big plus in our book. The writing has been on the wall with the broadening out of breadth, but this breakout seals it if it can hold and not fail here in the short term. None of these are currently overbought on the daily view here. Weeklies getting a bit hot, but not outrageous and you can see down there, the Monthlies aren’t stretched at all. This is just not the picture of ensuing problems on the near term horizon. Again, being March, I think we might get some more shakeout, but if that is what everyone is looking for to get onboard these markets, it is less likely to happen. If we don’t see any seasonal weakness into the spring, that might just frustrate the most, a favorite market pass time.

I posted this chart Thursday with the following quote, “Hard to be a hater… but sadly, many still are (with a shrugging emoji).’ I stand by that. Call it what you will, but the one foot out the door rally often resembles the lockout rally we often see. There is nothing I see on this chart that we should be overly concerned about. In fact, they look quite good. Large monthly candles like these are rarely at strong turning points and we currently have two breakouts working and one that just happened in February. 

Power Universe

After experiencing some stalling of price last week at the breakout level, we didn’t seem to have the same issue this week. This could turn out to be a pretty important breakout as further confirmation we should continue to look for broadening out and many ideas to choose from. Small caps breaking out, follow midcaps; of course, all coming after the large caps already left the station. Let’s look at each a little closer.

The RSI is breaking higher here with price clearing the 60 level again. This could turn into a “mushy” RSI trend, but so far its just leaving the consolidation. 

 

Breadth is fine, but I do want to point out it will need to wake up with any price expansion or it will leave us more vulnerable to backfilling. Right now they are all improving slightly, but this week especially, while they are not back readings, it just looks very sideways for decent price action gains we saw for the week. So any further price improvement needs to see these get in gear. 

I figured it was worth zooming out to show you why this breakout carries more weight than just the 2024 action. The peak in late 2021 was the all time highs, so if the universe index clear that level and hold above here after such a tight running consolidation, it would be a strong message.

This chart is another example that there is nothing wrong, but at the same time I will say, we need to see these highs cleared at some point to maintain confidence in this leg that seems to be currently in play. Maybe this is the effects we are seeing of seasonality, they are just not enough to stop the progress.

Relative Strength Rundown

Global Relative Strength

This week’s leading international ETF was $EIS Israel, topping the second place $IWM by over 1.5%. $IWM was the mover this week jumping ahead of both $SPY and $QQQ on the World ETF list. The second list is the RS movers for the week in the World ETF list with a fairly normal sized list. 

Intermarket and Size & Style

The Intermarket Picture remains heavily weighted to equities with $USO Oil, squeezing in to disrupt the exclusive party at the top of this list in the last couple of weeks. $IWM moving to the top of the list is something we haven’t seen in a minute. If it can stay up here, it would be a net positive for our thesis. Either way, we continue with equities with a comfortable position in the top half of the list. The dollar $UUP continues to struggle with these levels and losing RS ground this week. In a zone where it could easily go either direction from here, the dollar does still carry some weight as far as in the intermarket picture, and if it keeps weakening relatively, it is likely to add fuel to the markets, both equity and commodity in many respects. This might be what $USO is trying to tell us. 

Size & Style is giving the nod to small cap growth this week. There is a lot of shakeup in the list with smaller the stature, the more the RS gains. Both growth and value are seeing similar action, but the list remains overall growth over value dominant.

Sector ETF by Size

These are provided for a quick overview for the macro investor to be able to see what sectors are performing and does size make a difference in the space or not. Communication Services continues to flounder, but not really weaken on the market cap view, while struggling more on the lower views. Currently, the small cap list looks much different than the large biased market cap and equal weighted ETFs, both of which are more biased in the largest companies. Equal weight does help, but its still usually the same list of holdings just equal weighting. Many don’t realize that when they are looking at the equal weighted ETFs, which is why we build out equal weighted indexes to show a more complete picture of the sector and subsectors at hand. 

 

EW Sector RS Rankings

As mentioned, our equal weight sectors go further to show a more complete picture of the sectors and subsectors at hand on our multiple screening levels. The RS rankings list showing the same leaders we have had for weeks in contrast to all the bouncing around we see in the lists above. If you are investing in the sector ETFs above, by all means, use them as the proxy while in the trade, but from an overall perspective and a hunting ground mind set, we just prefer to start bigger an funnel down from there like we will do in the Power Sector review later.

Wrap Up

We are supposed to be weak here and this week kicks in an even weaker few weeks in the seasonality scene, so we will be watching for reaction, but there is nothing to hang your hat on yet but lethargic, yet pretty strong breadth as price edges into new high territory. That is not a big deal if it expands on any further price expansion. If not, it becomes more difficult in the short term.

Intermediate term though, I have been saying in every interview, what happened in late October into the end of the year was significant. Significant not only by its own thrusting price action, but also looking at when it happened and where in the bearish cycle it came into play. The institutions that caused those thrusts and drove that early price action do not put that kind of money to work for a month or two. So when we do get a pullback, don’t expect it to be something that is long and drawn out, that is not the current MO. If things change a good bit and that longer pullback develops, we can assess that as we go, but let’s not jump into it before it gives us any real evidence to do so. 

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!