Weekly Macro Review

May 5, 2024

Charts That Matter

Week two of the rebound ended in the green after an intra-week battle. The buyers won in the end. Apple $AAPL helped after having many doubters going into the earnings. It wasn’t just $AAPL caught a bid, there were plenty of sectors and subsectors pulling higher. It was pretty early for the bounce to sell and we hadn’t reached and formidable resistance, so more upside made some sense even if the rebound did eventually fail. The end of the week rebound helped the majors move up closer to the stiffer resistance. The daily survived the bear flags for the week with Friday’s save which also closed back above the MA bands, but we still need to watch the RSI 60 level on all three to make sure we don’t get rejected there. The 65 min charts are in RSI bull ranges and held this week’s challenge with only slight overthrows.

$TLT gapped up Friday away from the 9sma and above the short term range on the daily chart below. Next week we are likely to encounter the MA Bands and the RSI down trend line. Above that we see the previous lows and price downtrend line off the highs. It’s a bad thing to see momentum lead price in breakouts like these, even if still in a bear range. On the weekly, the RSI bull is trying to hold near 40. The weekly is still in a bear range officially since RSI never cleared the 60 level back in late 2023; holding the 40 level now with the CFG holding over 0 could be solid start since it also corresponds with the 61.8% retracement of the move off the lows.

The New Highs/Lows chart saw a big change this week, but it was in the chart itself and not necessarily the data. We added two new windows to these charts throughout the site. The 253 day Highs/Lows adds 12mo or 52wk highs to all our datasets providing another longer term view of how things are doing. We will keep the NHNL Differential as a preferred measure, but with 52wk highs and lows being such a popular talking point, we wanted you to have a version at your fingertips on more than just the broad index.

The measures showed a nice divergence before the reversal and have continued to build on the strength since the lows. We discussed the challenge early week which the buyers overcame in both price and participation by Friday. This is the type of progress we want to see off the lows. Comparing it below to the correction we had last fall, the internals look a bit different to me with the divergence early and the more persistent and consistent rebound of highs after a low was put in. We have a few days to see if sellers follow the last script, but that would not be the norm. The theory of alternation in technical analysis (mentioned often in Elliot Wave theory) suggests that corrections alternate in form and structure, so if that plays out, we are more likely to fill out sideways than we are to proceed with a deeper pullback. The deeper pullback can still happen, but alternation between structures happens often enough, we shouldn’t rule out this time playing out with more chop for a week or few instead of a big drop. However, with the current market sentiment, I wonder if sideways action won’t be just a frustrating one foot out of the door markets.

Power Universe

When we move to our equal weight index, it doesn’t look bad with price moving back over the MA bands and closing at new highs for the move on Friday. RSI continues to recover and barely recognized the down day that put the bounce on notice only to be run over by the end. This week could turn out to be the real battle as we reach the underside of the little shelf built at the highs. At the same time, we are seeing the RSI head toward the 60 level after breaking down below 40 for more than a day or two. A rejection at these levels should be respected for now as it would hint the RSI bear range might need more time in the correction/consolidation.

While I want to be measured here as anything can happen and many readings are more neutral than anything, there is a positive data narrative slowly building under the surface.  Since the rebound started, breadth has quickly shifted to move with it and we are seeing quite a few small incremental positives appear. Starting with the top and move down,
NHNL Differential: all three signals are positive after a short stent of the 10ma below zero, but couldn’t drag the other two with it 
AdvDecl Line: breaking downtrend line
%>200sma: breaking downtrend line
%>50sma: trying to remount 50%
%>20sma: leading price above 50%
McClellan Summation Index: Signaled at/above zero line this week
MClellan Oscillator: out of consolidation and moving away from the flatline
Breadth Thrust: neutral and staying there during the sell raids this week.

We are not seeing any continued deterioration during this rebound attempt that we would expect if there were bigger problems under the surface.

Relative Strength Rundown

Global Relative Strength

The US Equity ETFs have only seen sporadic showings on the leader board for a while now as they have been correcting. Many emerging countries like $ARGT and $TUR have been in the movers for a while, but this week China moved firmly into the playing field after coming hard off the lows in recent weeks. This is starting to look like a larger trend reversal is in the making, so I would have these high on the list if you are looking for overseas allocations. Asia and Latin America seem to be the current focal points to zoom into.

Intermarket and Size & Style

While equities are trying get back in gear, they aren’t really making much of a dent in the Intermarket list. I see it as a favorable structure when all 4 of the equities indexes are above the flatline. Even with the rebound, only $IWM has made it back above the demarcation. Commodities finally took a break with $USO and $DBA taking big hits while the rest were down but not drastically. Bonds put in a reversal week and led for the first time in a while. The jobs data helped take some pressure off interest rates for now, let’s see if this low sticks. This space is still caution on equities from an intermarket relationship standpoint.

The Size & Style list continues to bounce around, but value tilted larger stocks are on top again this week from an RS standpoint. The top performers and the one RS Mover were from the growth indexes in the end.

EW Sector RS Rankings

Utilities leading and being the 2nd place performer for the week is definitely still defensive. I would say Financials climbing this week is probably a little defensive too, but they are starting to nibble on some of the ones that started the correction first like Communication Services and Health Care which might signal an end to the correction is closer than we might think. As we will see in the Power Sector Review, it wasn’t just sectors, some underperforming subsectors are starting to get some attention as we saw make RS moves this week in the subsector RS rankings.

Wrap Up

To wrap this up, we just need to understand there are a lot of mixed signals and crosscurrents right now as things try to find direction, even if it is only temporary. The weight of the evidence from this week suggests to me we are either closer to the end of the correction or more likely to see a sideways grind for a bit longer. If seasonality comes into play, the middle to end of May is when we might see a better low put in. That is right around the corner, so we will be watching to see if the data continues to point in that direction. This could be exactly wrong, so the data will inform our ultimate decision as it fills out in front of us.

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!