US Equity markets were all in see-saw pattern, pushing up and down into resistance and support.
This action exemplified an uncertain economic environment whereby one indicator can come out positive and the next day another indicator or economic number will come out and tell a completely different story.
This see-saw was not surprising for a “reopening economy” where daily economic indicators are much larger than normal and therefore will create bigger swings.
Interestingly, volatility remained low and suggests that there is not yet fear in the market. This is something our own Mish discussed on a Zoom presentation she gave for UBS Television this past week.
Moreover, it is critical to have reliable consistent data which is why we built “Big View” and our quantitative models which help us maneuver with little to no emotion. We must watch the Risk Gauges, and our proprietary indicators to interpret what markets are telling us and then take appropriate action.
This past week we moved to cash in one of our Alpha Rotation models and are now waiting until the wind settles down to find a new trend to take advantage of.
In the meantime, we remain defensive on some of our models as preserving capital and mitigating risk has been and will continue to be our calling.
The week’s highlights
- Risk gauges were showing a weak neutral reading
- Gold (NYSE:GLD) was outperforming the S&P 500 SPDR® S&P 500 (NYSE:SPY), and one key intermarket relationship, the SPY vs. Utilities Select Sector SPDR® Fund (NYSE:XLU) on the verge to risk-off. Lumber—iShares Global Timber & Forestry ETF (NASDAQ:WOOD) as well, showed market stress was beyond just inflationary pressures.
- 3 of the 4 Indices were down marginally, with the NASDAQ 100 Invesco QQQ Trust (NASDAQ:QQQ) and Grandpa Russell—iShares Russell 2000 ETF (NYSE:IWM) closing the week under their 50-DMA’s, and in warning phases.
- Real Motion indicates that longer-term momentum in the major indices is turning down especially in the Russell 2000 (IWM)
- The S&P500 (SPY) market internals moved back to neutral to slightly positive
- Large-Cap value stocks were leading over Mid and Small-Caps
- 4 of the 6 members of Mish’s Modern Family closed under their 50-DMAs into warning phases.
- Retail—SPDR® S&P Retail ETF (NYSE:XRT) and Transportation—(iShares Transportation Average ETF (NYSE:IYT) gave up ground last week relative to the S&P 500
- Biotech—iShares NASDAQ Biotechnology ETF (NASDAQ:IBB) saw a solid bounce off its 200-DMA and needs to clear its 50-DMA and move to a bullish phase
- VanEck Vectors Semiconductor ETF (NYSE:SMH) was an excellent performer for the week but still closed under its 50-DMA, so whichever way it breaks will give insight into the direction of the overall market.
- Emerging Markets—iShares MSCI EAFE ETF (NYSE:EFA) were outperforming US Equities.
- Cooper—United States Copper Index Fund, LP (NYSE:CPER) was still in an overall bullish mode but ran ahead of itself and WAs underwent a bit of mean reversion.
- Gold (GLD) broke above its 200-DMA but ran a bit rich.
- The Dollar’s—Invesco DB US Dollar Index Bullish Fund (NYSE:UUP) downtrend was still intact, hitting important resistance on a trendline that started in early 2021.
- Volume patterns were extremely weak with only one accumulation day across all 4 US indices over the past 2 weeks.
Cryptocurrency update
- Cryptocurrencies, led by Bitcoin saw a market-wide crash last week, with an Apr. 14 ATH (all-time high) of just under $65,000 to a 2021 low around $28,000.
- BTC broke under its 200-DMA and was struggling to get back above its 10-DMA.
- There appeared to be an inverse relationship emerging between BTC and GLD
- What seemed to have been the main 3 catalysts of this week’s crypto correction were Elon Musk's continual prodding via twitter, China's crackdown on cryptocurrency investments and services, and US speculation that has continually built in-anticipation of regulatory and taxation moves by the Biden administration.
- Blockchain analysis from last week’s drop indicated that those who joined the crypto market in the latter half of this bull market were predominantly the ones that sold off their holdings, while long-term investors mostly held firm.
- Looking forward, this crypto correction may not be done yet and we are expecting potential support to emerge at around $20,000.