Sunday Post - Recap & Week Ahead 4/21/2024
After a 25% move higher in the S&P 500 over the past six months, the tone in the stock markets seems to have shifted. The S&P 500 was down for the third straight week, while the Nasdaq was lower for the fourth week in a row. The S&P 500 is now 5.5% lower from the all-time record highs, while the Nasdaq is down around 7%. For the week, the S&P 500 and the Nasdaq retreated 3.0% and 5.5%, respectively, while the Dow Jones was flat. However, the interest-rate-sensitive parts of the market, including small-cap stocks (also the real estate sector), have pulled back even more. And the $VIX has climbed to new highs for the year, up 46% from a recent low on March 27. See graph below which shows that growth and interest-rate sensitive parts of the market have pulled back the most from their recent highs (Magnificent 7 represented by Apple, Amazon, Alphabet, Meta, Microsoft, NVIDIA and Tesla).
Source: Bloomberg
With respect to the ES market, the daily 50 MA failed to hold early in the week and the losses were extended with the market approaching the February low. See daily chart below. I believe the selloff is not over, but a bounce is due since the market is oversold in the near term. Overall, the market continues to be in an upward channel from the October 2022 low (pink solid lines).
As usual, I will do a quick recap of this week´s market action, followed by an analysis of the general markets and the different sectors, and finally write about the outlook for next week.
Recap:
On Monday, the Buyers made an attempt to move the ES market back inside the prior 5-Day Balance (5197 level) but failed and sold off hard breaking below the daily 50 MA, as well as below the previous month low of 5124.25. The next day, the market consolidated between the prior month low (acted as resistance) and the 5075 level, followed by more selloff on Wednesday. The losses were extended the following day and all of the downside targets for the week were achieved. This is what I wrote for the Bearish case in the previous Sunday Post, “the Sellers must defend the weekly Pivot of 5201/bottom of the Balance (5197 level)/tomorrow´s Pivot of 5189 and the daily 50 MA for more downside. Then, once the 5151 level (this week´s low) is taken out, the downside targets are at the 5137 level, the 5125 level (prior month low) and the 5111 level, which are strong supports and potential turning points. If the Sellers have traction, the next downside targets are at the 5094 - 5086 area, the 5075 level, the 5064 level and the 5050 level.” However, the 5050 target was broken and the market sold off further down in the OVN session on Friday. The market bottomed at 4963.50 (4970 area) and rallied back higher to the 5050 level. At the open of the trading session on Friday, the 5050 level was rejected and the market sold off back down to the 4990 level. The market continues to be in a Bearish Imbalance phase.
General Markets and Sectors:
Check out the updated Charts Page which goes with this section.
The S&P 500 broke below the daily 50 MA moving lower towards the 4928 support. There could be a bounce from this area and next resistance is at 5030.
The NDX/Nasdaq also broke below the daily 50 MA and sold off breaking below the 17350 support (now resistance).
The Dow Jones sold off to the 37715-support level and consolidated all week. This area could be defended and next resistance is at 38220.
Small Caps (IWM) extended its losses and moved lower towards the 189 support (daily 200 MA), which could be defended.
The FFTY index also extended its losses and moved lower towards the daily 200 MA/the 24 level. The 24 support is the March 2020 low and therefore could see a bounce from this area.
The $VIX rallied higher moving above the 20 level for the first time this year but then sold off below it on Friday. It is currently Bullish.
Crude Oil broke below the $85 support and moved lower to the daily 50 MA, which was defended.
Gold bounced off the 2329 support and moved higher towards the record high but settled right at the 2392 resistance. This market remains quite Bullish.
The US 10-Year yield broke above the 4.57% resistance (now support) but failed to reach the next resistance at 4.75%. For now, consolidating around the 4.57% area.
The USDJPY moved higher towards the 155 resistance. If the gains extend, then the next resistance is at 160 (around the 1990 high).
Bitcoin broke below the daily 50 MA (now resistance) and the 64200-support level (now resistance). Next support at 58355 and could see some consolidation.
Semis, SOX broke below the daily 50 MA and moved lower towards the January 2022 high.
Consumer Disc, XLY extended its losses moving slightly below the daily 200 MA and found support at the January 2024 low.
The Retail sector, XRT also extended its losses towards the February lows and then consolidated in this area. Next support at the daily 200 MA.
The Tech sector, XLK got rejected at the daily 50 MA and sold off hard to the December 2023 highs. Next support at the daily 200 MA.
Transports, IYT also sold off to the December 2023 highs and is holding for now. Next support at the daily 200 MA.
Financials sector, XLF sold off below the daily 50 MA to the March 2022 highs, which was defended. The market bounced back towards the daily 50 MA on Friday.
The Materials sector, XLB sold off to the daily 50 MA, which acted as support for now.
Industrials, XLI sold off below the daily 50 MA and has moved back inside the upward channel.
The Health sector, XLV consolidated above the daily 200 MA, which is next support.
Consumer Staples, XLP bounced off the back-test of the downward channel and moved higher towards the daily 50 MA. This market must reclaim the 50 MA for higher prices.
Utilities, XLU bounced off the daily 50 MA/200 MA and the back-test of the downtrend line was defended. The market moved back higher to the recent highs.
The Energy sector, XLE sold off back down to the upper limit of the previous rangebound area, which was defended.
YEAR-TO-DATE RETURN:
XLE U.S. Energy Sector: +14.2%
XLF U.S. Financial Sector: +7.8%
XLI U.S. Industrials Sector: +6.0%
SOX Semiconductor Index: +5.0%
XLB U.S. Materials Sector: +4.4%
XLU U.S. Utilities Sector: +4.2%
XLP U.S. Consumer Staples Sector: +4.1%
XLV U.S. Health Care Sector: +2.3%
IYT Dow Jones Transports: +0.7%
XLK U.S. Technology Sector: +0.2%
XRT U.S. Retail Industry: -1.4%
XLY U.S. Consumer Disc Sector: -4.9%
Week of 4/22/2024:
United States - Q1 GDP growth rate, PCE prices, personal income and spending figures, durable goods orders, S&P Global Manufacturing & Services PMI's, and pending & new home sales. Also, earnings season with over thirty companies boasting market caps exceeding $100 billion set to unveil their financial reports.
Manufacturing & Services PMI’s - Australia, Japan, India, France, Germany, the Euro Area, and the United Kingdom.
Consumer Confidence data - the Euro Area, South Korea, Italy, Germany, and the United Kingdom.
Interest Rate decisions - Japan, China, and Turkey.
Australia - inflation date.
South Korea - GDP growth rate.
The Sellers remain in control as the Bearish Imbalance phase continues to hold. Currently, the ES market is below the weekly Pivot of 5060 and tomorrow´s daily Pivot of 5008. See hourly chart below. The Buyers must take out the Pivot of 5008 to target the 5021 level, the 5032 level, the 5040 level, the 5050 level and the weekly Pivot of 5060, which are all strong resistances and potential turning points. If the Buyers are able to break and hold above the weekly Pivot, then the next upside targets are at the 5075 level, the 5086 - 5094 area, the 5102 level and the 5111 level, which are also strong resistances and potential turning points. At this stage, the Buyers must maintain their momentum for further upside and a break above the 5111 level targets the 5125 level (prior month low), the 5137 level and the 5151 level, which are strong resistances and potential turning points. Conversely, the Sellers must defend the daily Pivot of 5008 and then take out the 4990 - 4982 area to target the 4970 level, the 4954 level, the 4940 level and the 4928 level, which are strong supports and potential turning points. If the Sellers are able to break below the 4928 support level, then the next downside targets are at the 4890 level, the 4880 level, the 4873 level and the 4861 level, which are also strong supports and potential turning points. With that said, I will provide an update with my daily thoughts and game plan in tomorrow’s post before market open with additional clues from the OVN session.
PLEASE SEE INTRO POST AND READ DISCLAIMER/INTELLECTUAL PROPERTY