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With a current value of 68.15, the Market Greed/Fear Index still indicates a prevailing sentiment of greed among investors, revealing their appetite for higher risk-taking in the US stock market
By: Isabelnet | April 22, 2024
• Sentiment
With a current value of 68.15, the Market Greed/Fear Index still indicates a prevailing sentiment of greed among investors, revealing their appetite for higher risk-taking in the US stock market.
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The S&P 500 index generally performs poorly until Memorial Day in election years. However, as the year progresses, the market tends to regain momentum and deliver a solid performance
By: Isabelnet | April 22, 2024
• S&P 500
The S&P 500 index generally performs poorly until Memorial Day in election years. However, as the year progresses, the market tends to regain momentum and deliver a solid performance.
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Nasdaq $QQQ reaches most oversold level since September 2022 - bounce this week?
By: Barchart | April 21, 2024
• Nasdaq $QQQ reaches most oversold level since September 2022 - bounce this week?
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$QQQ GoNoGo flips fully bearish for the first time since October 2023
By: TrendSpider | April 20, 2024
• GoNoGo flips fully bearish for the first time since October 2023. $QQQ
Friendly reminder we still haven't even tested the 2021 all-time high yet.
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Flow: Over the past week, US equity funds saw outflows of $4.69 billion, suggesting a shift in investor sentiment following an extended period of optimism in the US stock market
By: Isabelnet | April 20, 2024
• Flow
Over the past week, US equity funds saw outflows of $4.69 billion, suggesting a shift in investor sentiment following an extended period of optimism in the US stock market.
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Total Number of Stocks Is Shrinking
By: Tom McClellan | April 20, 2024
The major averages may still be trending higher, but the total numbers of issues traded on the NYSE and Nasdaq peaked back in January 2022 and have been declining since then. This is not a bullish sign for the financial markets.
The Nasdaq market has looser listing standards than the NYSE, and so it attracts a larger number of total listings. But ease of doing an IPO on the Nasdaq sometimes means marginal companies which should not come public do so anyway, and then struggle afterward. For that reason, the Advance-Decline statistics for the Nasdaq have always had a bearish bias. In fact, the cumulative daily A-D Line for the Nasdaq has NEVER made a new all time high. It started going down from the beginning of the data in 1972, and it has never gotten back to that level, despite having more issues traded.
Having more IPOs can be a sign of an expanding economy. Perhaps it is better to say that expanding IPOs is a sign of easy money, such that even the marginal companies can still attract the capital to have a successful IPO. That increases the numbers of listed issues.
When the Fed started QE4 during Covid, and Congress threw its own pile of money at the economy, there was so much money sloshing around that the Nasdaq listings grew from around 3500 issues traded around the time of the Covid low in March 2020 to a high of 5175 in January 2022. The NYSE's total number of listed issues grew at that time too, although not by quite as much.
Now both are shrinking, as the marginal companies have revealed themselves and gotten delisted. Mergers and acquisitions also play a smaller part in the shrinkage.
One reason why this is meaningful is that a similar shrinkage in listed issues occurred leading up to the Internet bubble top in 2000. The high point for Nasdaq issues traded was actually back in December 1996, at 6136. By the time prices peaked for the Nasdaq Composite Index in March 2000, that number of Nasdaq issues traded was down to 5100, and it kept heading down.
One hard point about divergences is that they can last for a while, and they won't tell us when they are finally going to matter. But it cannot be seen as good news that money to invest is drying up, and the weak are getting picked off. In the stock market, illiquidity conditions initially come after the weak. But those same illiquidity conditions have a tendency of eventually mattering to even the biggest and supposedly most well-capitalized companies.
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CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | April 20, 2024
• Following futures positions of non-commercials are as of April 16, 2024.
E-mini S&P 500: Currently net long 74.1k, up 137k.
Non-commercials just switched to net long e-mini S&P 500 futures. They have not done so since last October when they were net long for only a couple of weeks; before that, they have not been net long since June 2022.
This is coming at a time when the cash is under pressure after having failed to bust out of 5260s in late March/early April. The S&P 500 peaked at 5265 on March 28th. This week, it shed 3.1 percent to 4967. After dropping for three weeks in a row, the large cap index is down 5.7 percent from last month’s high, which is nothing in the big scheme of things. From last October’s low, the index jumped 28.3 percent before weakening.
The daily is beginning to get oversold. If the weekly wins out, however, selling pressure can continue. In January, the S&P 500 surpassed its prior high of 4819 from January 2022. A breakout retest is just a matter of time. Should it take place right away, it is three percent away.
Nasdaq (mini): Currently net long 8.5k, up 986.
Last December, the Nasdaq 100 pushed through its prior high from November 2021. That 16765 breakout is being tested, as the tech-heavy index tagged 16964 intraday Friday. Earlier on March 21st the index posted a new intraday high of 18465.
After failing to sustainably break out of 18300s for seven weeks, the Nasdaq 100 crumbled this week, down 5.4 percent to 17038, with the week beginning with Monday’s breach of the 50-day. This preceded a breach a couple of weeks ago of a rising trend line from last October’s low.
The sector is behaving this way ahead of March-quarter results from US tech bigwigs in the next couple of weeks. Tesla (TSLA) reports next Tuesday, Microsoft (MSFT) and Google owner Alphabet (GOOG) on Thursday and Facebook owner Meta (META) on Wednesday. Apple (AAPL) and Amazon (AMZN) report the week after.
In the event of a rally, bulls need to recapture 17300s. A lack thereof exposes the index to a drop toward the 200-day (16267). The 50-day (17972) has been compromised.
Russell 2000 mini-index: Currently net short 38.5k, up 10.8k.
Last week, the Russell 2000 closed at 2003. Small-cap bulls, having failed to convincingly break out of 2100, were forced to defend 2000 and they failed. This week, the small cap index declined 2.8 percent to 1948. Ironically, this can be spun as good news by both bulls and bears. For the bulls, bids showed up Friday at 1932. For the bears, breakout retest at 1900 is still possible. On December 13th, the index broke out of a 1700-1900 range in place since January 2022.
US Dollar Index: Currently net short 929, down 213.
Dollar bulls tried to build on last week’s 1.9-percent jump in the US dollar index but did not quite pull it off. On Tuesday, the index tagged 106.33, but only to end the week at 105.98, down 0.03 percent.
This week’s action follows last week’s emphatic takeout of 103-104, which goes back to December 2016.
The bulls would still love to test 107, which between early October and early November last year rejected rally attempts several times.
VIX: Currently net short 22.5k, down 8.8k.
For the second week in a row, VIX rallied nicely but also ended with a weekly candle with a long upper shadow. Intraday Friday, the volatility index rallied as high as 21.36 but reversed to close at 18.71 – this in a session in which the S&P 500 dropped 0.9 percent, closing near the session low. Friday’s high was the highest since last October when VIX peaked at 23.08.
Concurrently, in the futures market, non-commercials are now only net short 22,474 contracts. Again, in the week to October 31st (last year), they cut their holdings to 13,979 before accumulating again. Historically, VIX has tended to peak as these traders go net long or get close to doing that.
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Market volatility is a normal feature of long-term investing
By: Raymond James Financial | April 19, 2024
Key Takeaways
• Over optimism flagged near-term pullback
• Volatility is a normal feature of long-term investing
• Pockets of weakness are not overly concerning
Keep Calm and Carry On! The recent burst of volatility after a prolonged period of calm has captured the market’s attention and temporarily halted the S&P 500’s recent winning streak. While market gyrations can be concerning, remember not to panic – pullbacks and interim spikes in volatility are quite common. Below we put the recent market movements in perspective, which have been driven by time (it has been a while since we had a 5%+ pullback), overly optimistic, complacent market sentiment, and higher Treasury yields amid persistent inflationary pressures and signs of a more patient Fed. However, we reiterate our positive long-term view and suggest using periods of weakness opportunistically.
• A near-term pullback was expected | Our year-end target for the S&P 500 is 5,200. The problem: we exceeded that target in March – approximately nine months ahead of schedule. Why? Because equity market momentum and sentiment tend to cause the equity market to move to exaggerated values to both the upside and downside. It is not unusual and part of the fabric of the market. Let’s break our target down: first, it is based on 2024 S&P 500 earnings of $240, which we recently revised higher on the back of the resilient economy – a good thing. Second, we employ a P/E multiple of 21.5x our earnings forecast. That valuation is already expensive, representing a market priced in the top decile over the last twenty years, signifying the market is priced for perfection and susceptible to disappointments. Third, we base our numbers on fundamentals and strip out emotions/sentiment. However, the market had gotten uber optimistic from a positioning and sentiment perspective. For example, retail investors were the second most optimistic on the equity market over the last 30 years. Lofty levels of investor confidence have historically coincided with periods of more muted performance and increased volatility. What have been the catalysts to shake some of this confidence and initiate the recent pullback? Climbing interest rates (10-year Treasury yields are up ~75 bps YTD), troubling inflation, reduced expectations for Fed rate cuts (fewer than two cuts are now expected in 2024) and rising geopolitical tensions.
• Volatility is expected in the equity market | The S&P 500 had rallied more than 27% since October 27. This uninterrupted rally is uncommon as it is important to appreciate that the equity market does not go up in a straight line. Sure, bouts of market volatility can be unnerving, but they are a normal feature of long-term investing. In fact, pullbacks of the 5% variety occur multiple times a year. Dating back to 1980, the S&P 500 has experienced three to four 5%+ pullbacks on average each year. There have only been two years over that time span (44 years in total) during which the market bucked the trend and did not experience a 5% pullback during the year. Furthermore, the S&P 500 typically experiences a max drawdown (from peak to trough) during the year of ~13-14% on average each year. If the current 4.6% drawdown were to be the maximum drawdown this year, it would mark the third smallest annual drawdown over the last 44 years. The point is: this will likely not be the last or most significant pullback this year.
• Pockets of weakness are not overly concerning | Thus far, the pullback has been orderly and the spillover effects into other asset classes and the broader market have been limited. For example, we are not seeing a huge flight-to-safety into Treasurys, which typically occurs when the market is concerned about sharp shifts in risk appetite. Credit spreads have remained historically tight – not signaling any major concerns that something more ominous may be on the horizon. Within the stock market, the defensive sectors (i.e., Staples, Utilities, Health Care) are still underperforming the S&P 500 since its recent peak in late March. If the market was worried about a major risk-off event, these sectors would typically assume leadership, which they have not. However, areas of weakness have been justifiable: homebuilders and REITS have suffered due to their interest-rate sensitivity; semi-conductors have retreated after an incredible 55% rally over the last four months; and Consumer Discretionary stocks have struggled with the automotive industry (price pressures with EV vehicles) and specialty retailers (some signs of consumer fatigue).
Bottom line | The biggest question on investors’ minds is whether the current drawdown is normal or the start of something more severe (i.e., a bear market)? Our answer: given we have been calling for a pullback, this is likely a consolidation phase to digest the recent gains and not the end of this bull market. But how much further downside can be expected? Well, given the historical average drawdown has been ~14% a year, further downside cannot be ruled out. One area of support – although this is unlikely as uber optimism has already begun to wane – would be the 200-day moving average (~4,670), which reflects 10% downside from recent highs or an additional 5% from current levels. However, even if this were to occur, it would not change our long-term positive equity view as corporate fundamentals remain on solid footing and earnings are trending upwards. While interest rates have moved higher, it is for the right reason—stronger economic growth. Stronger economic growth leads to upside for corporate earnings—the indicator with the strongest predictive power for future equity returns. As a result, we reiterate our year-end S&P 500 target of 5,200 and would use periods of weakness to add to our favorite areas of the market—Info Tech, Industrials, Health Care, and Energy.
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Big Election Year Q1s Dip April-May Before Gains Last 7 Months
By: Almanac Trader | April 19, 2024
2024’s great start was the third best Election Year Q1 since 1950. Looks like we’re tracking Top Q1 Election Years more pronounced April-May dip. Chop continues in July and August and these years have marked time until the election in November, gaining about 2.5% on from April to October. Regardless of the election outcome S&P 500 suffered only two losses in the last seven months of election years since 1950, 2000 and 2008 (2024 STA page 80).
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$NDX - 2nd Target Hit...
By: Sahara | April 19, 2024
• $NDX - 2nd Target Hit...
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$SPX Flow is starting to Flip
By: Cheddar Flow | April 19, 2024
• $SPX Flow is starting to Flip
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Did the S&P 500 Put in a Multi-year Top?
By: Dr. Arnout Ter Schure | April 18, 2024
• By Breaking below $5056, the S&P 500 index has signaled it is ready for a larger correction to at least $4600+/-100, possibly it has struck a multi-year top.
Warning Levels Are There For A Reason
In our update from early March, we anticipated using the Elliott Wave Principle (EWP)
“…. However, if, like last, the index breaks higher because the bears fail to break below critical levels and reach the next target zone of ~$5260, support will be moved up to $5150.”
In our last update from early April, we then concluded that
“… a breakout above last week’s high can ideally target $5390, contingent on holding above the colored warning levels, but ultimately, we still need to see a break below $5056 with a severe warning below $5100 to confirm a significant top has been struck.”
Fast forward, the index could not break above the March 28, $5264 peak; instead, it broke below the warning levels ($5100 and $5056) this week. Thus, our call for a top in the ~$5260 target zone and that we would only see higher prices contingent on holding above critical downside levels was correct. As such, we are now tracking a potential five-wave move, i.e., an impulse, lower to ideally around $4800 for red W-a/i before we see a more significant bounce (red W-b/ii) develop—contingent on the index holding below the colored warning levels for the Bears. See Figure 1 below.
Figure 1. Daily SPX chart with detailed EWP count and technical indicators
How Significant Is This Top?
The “significant top” we mentioned is shown in Figures 2 and 3 below. Namely, either the index can complete a large ending diagonal from the March 2020 low (Figure 2) or the index has completed the Bull run that started in 1933 after the 1929 market crash (Figure 3).
Figure 2 Monthly SPX chart with detailed EWP count and technical indicators
The former means that the SP500 will bottom around $4600 for the black W-4 and then rally one last time to $5800+/-200 for the black W-5. The latter means the index has entered a multi-year bear market, which can last a decade and ultimately bring the price back to ~$1500.
Figure 3. Weekly SPX chart with detailed EWP count and technical indicators
Although the current technical indicator (TI) set up for the weekly chart is like late 2017—see the red boxes in Figure 3 above—suggesting that we could see higher prices afterward akin to 2018, the monthly TIs are heavily negatively diverging—see the red dotted arrows in Figure 2 above—suggesting that any upside will be short-lived and minimal.
Thus, we cannot yet discern between the two bigger-picture options at this stage, but if we see an impulse develop to the downside, as shown in Figure 1, the odds will favor the most bearish scenario.
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Money managers Reduced their exposure to the US Equity markets since last week...
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NAAIM Exposure Index
April 18, 2024
The NAAIM Number
62.98
Last Quarter Average
87.84
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The AAII Investor Sentiment
By: AAII | April 18, 2024
Bullish 38.3%
Neutral 27.8%
Bearish 34.0%
• Historical 1-Year High
Bullish: 52.9%
Neutral: 37.7%
Bearish: 50.3%
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$QQQ The more confluence, the higher the probability
By: TrendSpider | April 18, 2024
• The more confluence, the higher the probability. $QQQ
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When the S&P 500 is positive YoY 12 months in a row, the next 12 months tend to be bullish, with a median return of 9.5% since 1950
By: Isabelnet | April 18, 2024
• S&P 500
When the S&P 500 is positive YoY 12 months in a row, the next 12 months tend to be bullish, with a median return of 9.5% since 1950.
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S&P 500: The increase in aggregate US liquidity since the lows of October 2022 has played a significant role in the upward trend of US stocks, sparking a sense of optimism among market participants
By: Isabelnet | April 18, 2024
• S&P 500
The increase in aggregate US liquidity since the lows of October 2022 has played a significant role in the upward trend of US stocks, sparking a sense of optimism among market participants.
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$SPX $50+ Million Further-Dated Put Orders *Above the Ask*
By: Cheddar Flow | April 18, 2024
• $SPX $50M+ Further-Dated Put Orders
*Above the Ask*
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Election Year Drawdowns Happen – S&P 500 Average Pullback 13% since 1952
By: Almanac Trader | April 17, 2024
After five straight months of gains and numerous new all-time highs, recent weakness and the corresponding spike in volatility seem unfamiliar. Despite lingering inflation and escalating geopolitical tensions, S&P 500 was down 3.86% from its closing all-time high of 5254.35 on March 28 through its close on April 16. This is well below the average historical largest drawdown during an election year since 1952 of 13.07%. Were it not for steep declines in 2020 and 2008, election years have tended to enjoy relatively modest drawdowns. Of the last 18 election years, 11 experienced single-digit drawdowns. The smallest was just 3.55% in 1964. DJIA’s record is similar to S&P 500 while the higher beta stocks of the NASDAQ Comp have experienced larger election year drawdowns.
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$NDX - Tapped the 1st Target from the Bear 'Wedge'...
By: Sahara | April 17, 2024
• $NDX - Tapped the 1st Target from the Bear 'Wedge'...
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The S&P 500 index may potentially reach 5600 during a summer rally, as part of a catch-up trade within a secular bull market presidential cycle
By: Isabelnet | April 17, 2024
• The S&P 500 index may potentially reach 5600 during a summer rally, as part of a catch-up trade within a secular bull market presidential cycle.
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The NYMO (McClellan Oscillator for the $NYSE, which measures market breadth) registered -100 yesterday...
By: Intelligent Investing | April 16, 2024
• The NYMO (McClellan Oscillator for the $NYSE, which measures market breadth) registered -100 yesterday. Readings below -100 are rare (see Chart 1: about once every year on average). It means the market is pretty oversold, but often it requires positive divergence (lower markets but improving NYMO) to signal a low is in place. See chart 2.
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Which Has More Staying Power, Stocks or Gold?
By: Schaeffer's Investment Research | April 17, 2024
• When SPX and gold prices both gain, it usually is a good sign for equities
• When gold and stocks trade in the same direction, it bodes well for stocks
Despite the impressive performance from stocks in recent months, it pales in comparison to gold. Prior to the recent pullback, stocks had surged by more than 10% in the preceding three months and by over 20% in the past six months. Conversely, gold prices have soared by more than 15% in the last three months and by over 25% in the preceding six months. That’s a lot of money flowing into what is often considered competing asset classes. This week, I’m looking into past instances when stocks and gold surged higher together to see if history has tended to favor one or the other going forward… or both or neither.
GOLD, STOCKS FLYING HIGH TOGETHER
Going back to 1980, I found times that the S&P 500 Index (SPX) and gold both shot up at least 10% over a three-month period. There were 16 prior instances, with the last time occurring this past December. The table below summarizes the S&P 500 returns after these instances. Stocks tended to outperform their baseline after these occurrences in each of the timeframes studied from one month to a year out. For example, six months after these two assets rally 10% over a three-month period, the S&P 500 gained an average of 10.4%, with 93% of the returns positive. Typically, the S&P 500 has gained about 5% over a six-month period with 73% of returns positive.
Next, let’s see how gold has performed after the same signals. History clearly favors buying stocks over gold after these occurrences; the safe-haven asset has typically underperformed after strong rallies from equities. Six months after the signals, gold averaged a slight loss, with just 40% of the returns positive. Since 1980, gold typically gained 2% over a six-month period with a 54% chance of having a positive return.
I did a similar study as above, except instead of looking at three-month rallies of 10% or more for both assets, I looked at 15% rallies over six months. The first table shows S&P 500 returns after these updated signals and the second table shows the gold returns. Stocks tended to rally strong immediately after these signals, gaining over 5% on average over the next three months. But then the longer term six-month and one-year returns, the SPX underperformed its typical returns since 1980. Gold, on the other hand, underperformed in the shorter term timeframes then outperformed its baseline over six and 12 months.
Based on the historical data above, stocks have been a much better bet than gold after strong rallies in both assets.
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The 10 Top/Bottom S&P 500 Index percent net change performers
By: Thom Hartle | April 17, 2024
• Today (8:34 CST), the 10 top/bottom percent net change performers in the S&P 500 Index.
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The 10 Top/Bottom NASDAQ 100 Index percent net change performers
By: Thom Hartle | April 17, 2024
• Today (8:34 CST), the 10 top/bottom percent net change performers in the NASDAQ 100 Index.
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$SPX Forward Returns Analog Analysis
By: Nautilus Research | April 16, 2024
• #spx $spx FWIW top 10 unique 1-year analog matches.
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April 2 Seasonal MACD Signal Triggered Right on Time
By: Almanac Trader | April 16, 2024
We issued our Best Six Months MACD Seasonal Sell signal for DJIA and S&P 500 to newsletter subscribers on April 2 when slower moving MACD indicators applied to DJIA and S&P 500 both turned negative after the start of the last month of the BSMs. This marked the start of our transition to a more cautious stance.
Arrows in the charts point to a crossover or negative histogram on the slower moving MACD used by our Seasonal Switching Strategy to issue a sell signal. NASDAQ’s “Best Eight Months” lasts until June. Subscribe to our Almanac Investor Newsletter and get all our trades. https://stocktradersalmanac.com/Alerts.aspx
We do not merely “sell in May and go away.” Instead, we take some profits, trim or outright sell underperforming stock and ETF positions, tighten stop losses and limit adding new long exposure to positions from sectors that have a demonstrated a record of outperforming during the “Worst Months” period.
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$SPX $40+ Million Put Sellers (Unusual) These prints have very near-term expirations and are OTM
By: Cheddar Flow | April 16, 2024
• $SPX $40M+ Put Sellers (Unusual)
These prints have very near-term expirations and are OTM, which means the whales are capitalizing on heightened IV and believe downside will remain muted for the next 2 days
These traders will get paid if SPX remains above the strikes
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$SPX It's a Flow Fight Bull vs. Bear
By: Cheddar Flow | April 16, 2024
• $SPX It's a Flow Fight
Bull vs. Bear
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AI-generated Buy and Sell Daily Signals
By: Hedgeye | April 16, 2024
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The 10 Top/Bottom S&P 500 Index percent net change performers
By: Thom Hartle | April 15, 2024
• Today (8:35 CST), the 10 top/bottom percent net change performers in the S&P 500 Index.
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The 10 Top/Bottom NASDAQ 100 Index percent net change performers
By: Thom Hartle | April 15, 2024
• Today (8:35 CST), the 10 top/bottom percent net change performers in the NASDAQ 100 Index.
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$SPX - Tapped the 1st Target from the Bear 'Wedge'...
By: Sahara | April 15, 2024
• $SPX - Tapped the 1st Target from the Bear 'Wedge'...
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S&P 500 And Nasdaq 100 Each Down Sub-3% From Recent Highs To End Right On 50-Day; Russell 2000 In Slight Breach
By: Hedgopia | April 15, 2024
From last month’s record highs, both the S&P 500 and Nasdaq 100 are down just under three percent and have now approached the 50-day, which has not been lost since last October when they bottomed. Given that the trendline support from the October lows has now been breached, bulls understand the significance of the need to save the 50-day.
The S&P 500 has been under slight pressure since reaching a fresh high of 5265 on March 28th. This was followed by an intraday high of 5264 in the very next session (April 1st) and was preceded by 5261 on March 21st. Inability to push through 5260s has led to downward pressure. Through last Friday, the large cap index is down 2.7 percent from the March high – which is nothing in the big scheme of things.
From last October’s trough through last month’s high, the S&P 500 jumped 28.3 percent! The bullish momentum is at risk of cracking.
As the index pushed higher, the RSI began to diverge in March. Then came a breach of a rising trendline from last October. This was then followed by last week’s potentially bearish cross-down between the 10- and 20-day moving averages. With all this in the background, the index (5123) finished last week right on the 50-day (5111) – just about (Chart 1). It is a must-save for the bulls. In the event of a rally, their first test will occur at 5170s.
Things have evolved similarly on the Nasdaq 100, which surged 31.3 percent from the October low to then hit the wall early March, although it went on to post a new intraday high of 18465 on March 21st.
On the 1st last month, the tech-heavy index tagged 18333 intraday. Since then, 18300s have been touched several times, including last Thursday when the weekly high of 18337 was ticked. The index in essence has gone sideways since early March (Chart 2).
In the meantime, trendline support from last October has been compromised. Last week, the Nasdaq 100 (18003) essentially finished on the 50-day (17984). In fact, the index has essentially hugged the average last seven sessions. Inability to rally right off the average raises the risk that a breach is just a matter of time.
On the Russell 2000 (2003), the 50-day (2042) has been breached, albeit not by a whole lot. Unlike its large-cap cousins mentioned above, it never rallied to a new high post-October low.
The small cap index peaked in November 2021 at 2459. The subsequent drop bottomed next June at 1641, which was successfully tested that October at 1642. Then, last October, bulls once again showed up near those lows as the index ticked 1634 and turned up. The rally that followed stopped at 2135 on March 28th. After that, 2100-plus was hit twice more – and three times before that, with the first occurring on March 8th. This level is important from various angles.
A 61.8-percent Fibonacci retracement of the November 2021-October 2023 decline amounts to 2144 (Chart 3). It also represents a measured-move target of a range breakout that took place on December 13th; before that, it was rangebound between 1700-1900 going back to January 2022. As well, horizontal resistance at 2100 goes back to January 2021. The resistance has held.
Last week, the index closed essentially at 2000 lateral support, a breach of which will expose the index to breakout retest at 1900.
As things stand, be it small- or large-cap bulls, they are being forced to step up and show their mettle. Stocks have rallied huge since last October, and bearish sentiment is way suppressed. The major US tech outfits do not report until late this month and early next month. If to go by how last Friday’s bank earnings got treated, there will be tough sessions ahead in this earnings season.
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S&P 500 Levels to Watch Heading Into Expiration Week
By: Schaeffer's Investment Research | April 15, 2024
• As investor optimism falls, the SPX and VIX are nearing inflection points on the charts
• Delta hedging at the SPY's 510 strike this week could be pivotal to price action
A higher-than-expected consumer price index (CPI) reading on Wednesday, in addition to geopolitical tensions, culminated in additional stock market weakness last week. Remaining hopes of a rate cut in June were dashed as some Federal Reserve officials appeared to backtrack on expectations that inflation was headed in the right direction.
Last week’s decline in the equity market followed a warning shot the week prior, on the heels of hints from one Fed official that there may not be a rate cut in 2024. This helped push the S&P 500 Index (SPX – 5,123.41) below channel support. Additionally, there was a hint from the Cboe Market Volatility Index (VIX – 16.74) that higher volatility was an increasing probability after two closes above 15.40 in the first week of April.
At risk of drawing lines in the sand, bulls and bears should be aware of levels that came into play on Friday that could be a pivot or hesitation point for both the SPX and VIX.
The SPX’s 50-day moving average, which acted as resistance on a bounce prior to the October 2023 trough, marked the Friday afternoon low. As such, keep an eye on this trendline, which is sloping higher and rising about five points each day. It enters the week at 5,111.
There are two points of resistance overhead. The first is the 30-day moving average, which is beginning to flatten, and comes into the week around 5,175-5,180. The second resistance level is at 5,220, site of the channel break on April 4. This level marked highs last week.
Another notable level to watch for the VIX is 18.68, which corresponds with 50% above the 2023 close. If you follow the VIX closely, you know it tends to respect round numbers that anchor to a key high or low, or a key year-to-date percentage level.
In past weeks, for example, we discussed the importance of 15.40, or half the 2023 high. Will 18.68 have the same importance as 15.40 in terms of acting as resistance like 15.40 did in the first three months of the year? If so, a VIX peak would correspond to a low in equity prices.
The SPX is now 2.5% below its late-March closing high, hardly considered a correction at this point. But with optimism among active investment managers and newsletter writers in the early stages of unwinding, equity option buyers increasing the number of put purchases relative to call purchases, and shorts building positions in recent weeks, the risk of corrective action is heightened, since quantified momentum measures on the SPX are no longer in place.
The chart below displays the recent optimistic extreme among active investment managers, as measured by the weekly National Association of Active Investment Managers (NAAIM) survey.
In this survey, managers indicate their net allocation to equities each week, and we smooth the results with a four-week moving average. Note the four-week moving average is currently rolling over from an optimistic extreme, implying active managers are slowly decreasing their allocation to stocks.
This rollover could be short-lived, resulting in little additional downside, but the risk is a decrease in allocations to stocks persisting over weeks or months, which occurred in late 2021 and last summer.
Loyal readers of this commentary may remember that during the momentum stage of the bullish run from November into most of March, short-term traders using SPDR S&P 500 ETF Trust (SPY – 510.85) options were great contrarian indicators, as they were emphasizing put options more so than call options on contracts with five days or less until expiration.
It’s interesting that last week, and after the break below the bottom rail of the SPX bullish channel, this group emphasized calls (or upside bets) more so than puts (downside bets) on the weekly 4/12 options that just expired. In fact, there were put liquidations on multiple strikes.
It is now standard April expiration week. The SPY is currently sitting in the vicinity of the 510-strike, which is also home to more than 80,000 put open interest in the expiring April series.
I point this out because a technical break below this popular moving average could induce selling. Moreover, those short 510-strike puts are likely to hedge their position by selling SPX futures to remain neutral. If an onslaught of both technical-based and option-related selling occurs, big put strikes – such as the peak put open interest at the 500 strike – could become magnets.
But this scenario could occur on a significant break of the 510-strike. The bullish scenario is the 50-day moving average holding, and any short positions related to the out-of-the-money put open interest strikes being unwound, which would support an expiration week rally.
Be open to both possibilities, if trading this time frame.
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Every S&P 500 Sector declined last week. That's the first time that's happened since September!
By: Barchart | April 14, 2024
• Every S&P 500 Sector declined last week. That's the first time that's happened since September!
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The $NYSE McClellan Oscillator is far below 70 already, a level that indicates significant oversold levels
By: SmartReversals | April 12, 2024
• Be Careful Staying Too Bearish On The Market
The $NYSE McClellan Oscillator is far below 70 already, a level that indicates significant oversold levels.
Extreme high or low readings +70 or -70, can indicate overbought or oversold conditions, respectively. It suggests the market might be due for a bounce.
Posted earlier the $SPX chart, indicating support levels and mentioning that a reversal candle would not be a surprise on Monday or Tuesday.
Last Friday, the $NDX McClellan oscillator was oversold, it was not the case for the broader market. It is now.
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The NASDAQ 100's $QQQ performance each year since 1999
By: Evan | April 13, 2024
• The NASDAQ 100's $QQQ performance each year since 1999
1999: +79%
2000: -36.1%
2001: -33.4%
2002: -37.4%
2003: +49.7%
2004: +10.5%
2005: +1.6%
2006: +7.1%
2007: +19%
2008: -41.7%
2009: +54.7%
2010: +19.9%
2011: +3.4%
2012: +18.1%
2013: +36.6%
2014: +19.2%
2015: +9.5%
2016: +7.1%
2017: +32.7%
2018: -0.1%
2019: +39%
2020: +48.6%
2021: +27.4%
2022: -32.6%
2023: +54%
2024*: +7.2% (So far)
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Tech pulling back right on cue? $QQQ
By: TrendSpider | April 13, 2024
• Tech pulling back right on cue? $QQQ
When we refine seasonality data to include only election years, the Nasdaq 100's win rate drops to only 33% in April over the last 25 years.
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CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | April 13, 2024
• Following futures positions of non-commercials are as of April 9, 2024.
E-mini S&P 500: Currently net short 62.9k, down 15.2k.
Equity bulls are at risk of losing short-term momentum on the S&P 500. A potentially bearish cross-down between the 10- and 20-day averages is complete. This is the second time since last October’s low this has occurred. The first one took place mid-January, but that did not amount to much, lasting just a couple of sessions. Back then, the 50-day was much lower; this time around, the average (5111) is right here. In fact, Friday’s intraday low of 5108 did attract some buying, with the large cap index down 1.6 percent for the week to 5123. The index peaked at 5265 on March 28th.
Bears have an opportunity here. For the bulls, the ongoing collapse in bearish sentiment is a problem, as what has been a tailwind is turning into a headwind (more on this here). To boot, trendline support from last October has been breached.
Immediately ahead, in the event of a rally, bulls’ first test will occur at 5170s.
Nasdaq (mini): Currently net long 7.5k, up 12.7k.
As did the S&P 500, the Nasdaq 100 ended the week essentially right on the 50-day (17984). In fact, Friday’s intraday low of 17952 did breach the average but closed the session at 18003. The tech-heavy index has essentially hugged the average the last seven sessions. Inability to rally right off the average raises the risk that a breach is just a matter of time.
Non-commercials probably do not think a breach is in order – at least not right away anyway. After staying net short Nasdaq (mini) futures for a couple of weeks, they switched to net long this week.
For a breach not to occur, catalysts are needed, and the major US tech outfits do not report until late April and early May. Momentum has been down since the Nasdaq 100 peaked on March 21st at 18465, followed by a breach of a rising trend line from last October’s low.
Russell 2000 mini-index: Currently net short 27.6k, up 5.4k.
Once again, small-cap bulls are being forced to defend 2000. The Russell 2000 declined 2.9 percent this week to 2003, having tagged 1995 intraday Friday. Inability to save 2000 will expose the index to breakout retest at 1900. On December 13th, it broke out of a 1700-1900 range in place since January 2022.
As things stand, bulls have their back against the wall, as for nearly a month through early this month several tries at 2100 were rejected. Horizontal resistance at 2100 goes back to January 2021. This level also represents a measured-move target of the 1700-1900 range breakout.
Much as the S&P 500 and the Nasdaq 100 did, the Russell 2000 has now compromised trendline support from last October’s low.
US Dollar Index: Currently net short 1.1k, down 754.
The US Dollar Index had a huge week, up 1.9 percent to 106.01. Resistance at 103-104 goes back to December 2016, and since bottoming at 102.30 on March 8th, it hesitated at the upper end for a few weeks. This week, the resistance was emphatically taken out.
Between early October and early November last year, sellers showed up at 107, which dollar bulls are probably eyeing for now.
VIX: Currently net short 31.3k, down 19k.
VIX closed out the week at 17.31 but rose as high as 19.20 intraday Friday; this was the highest print since October 31st. Back then, after spiking to 23.08 on October 23rd – just before US stocks bottomed – the volatility index was on its way down.
Now, the trend is looking up, with both the 50- and 200-day beginning to turn up – although ever so slightly. If the weekly prevails, volatility likely continues to firm up. The only thing volatility bulls need to watch out for is if Friday’s action is part of a spike reversal. They definitely would not want to see a similar spike followed by a reversal next week.
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$SPY & $SPX They're adding more into the dip
By: Cheddar Flow | April 12, 2024
• $SPY & $SPX They're adding more into the dip.
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% of S&P 500 stocks trading above their 5-Day Moving Average plunges to 4%, the lowest level in 13 months
By: Barchart | April 12, 2024
• % of S&P 500 stocks trading above their 5-Day Moving Average plunges to 4%, the lowest level in 13 months.
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April Monthly Option Expiration Week - DJIA Up 33 of Last 42
By: Almanac Trader | April 12, 2024
April’s monthly option expiration is generally bullish across the board with respectable gains on the last day of the week, the entire week, and the week after. Since 1982, DJIA and S&P 500 have both advanced 27 times in 42 years on expiration day with average gains of 0.22% and 0.17%, respectively. Monthly expiration day was staging a comeback after four or five declines from 2014 to 2018 but took a hit in 2022’s bear market. Expiration week has a bullish track record over the past 42 years. Average weekly gains are right around 1% for S&P 500, DJIA and NASDAQ. The bullish bias of April monthly expiration also persists during the week after although average gains have not been as strong with selling pressure rising recently (since 2014).
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Corporate Insider Velocity indicator: Extremes and/or reversals in corporate insider activity often highlight potential opportunities for alert investors
By: SentimenTrader | April 11, 2024
• Corporate Insider Velocity indicator. Extremes and/or reversals in corporate insider activity often highlight potential opportunities for alert investors.
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1Q24 Earnings Season Begins Amidst Collapse In Bearish Sentiment And More Or Less Sideways S&P 500
By: Hedgopia | April 12, 2024
The earnings season is upon us. The bar is low. With the S&P 500 sideways in recent weeks after a massive rally since last October, better results can help the index push through short-term resistance, but building on the gains will be tough, as bearish sentiment has collapsed.
The March-quarter earnings season begins in earnest later this morning. Customarily, financials will get the ball rolling, with results from JP Morgan (JPM), Citigroup (C) and Wells Fargo (WFC) in the dock. Leading into this, the revision trend is decidedly down. Estimates for all these three are lower from even a week ago.
This is also true for the entire S&P 500. As of Tuesday, operating earnings estimates for these companies stood at $54.45 – up slightly from $54.25 as of March 27th but down from a high of $57.45 as of May 30th last year (Chart 1).
Once again, the sell-side habitually has lowered the bar ahead of the season.
Stocks act as if they are low enough the companies in the aggregate will be able to meet/beat.
The S&P 500 peaked on March 28th at 5265. In three sessions between March 21st and April 1st, the large cap index touched 5260s but only to then retreat. Equity bears, however, have not been able to make much of the subsequent drop.
On both Wednesday and Thursday this week, bids showed up at 5139, with the latter session ending up 0.7 percent to 5199. Bulls stepped up to the plate just above the 50-day; the last time the index closed below the average was early November last year, with an important bottom having been reached only a few sessions ago in October.
As things stand, unless earnings disappoint big time, bulls should fight tooth and nail to save the average. In fact, the S&P 500 has trended lower along a line month-to-date, with Thursday closing right on/underneath it (Chart 2). Concurrently, shorter-term averages (10, 20) are on the verge of a cross-down, which, should one unfold, will embolden the bears.
Hence the importance of this morning’s results from the banks. A trendline breakout will mean the bulls will get another shot at 5260s. And this would have come at a time when there are fewer and fewer bears around.
At the end of March, short interest on SPY (SPDR S&P 500 ETF) was only 101.5 million (Chart 3). This is nothing but an absolute collapse in bearish sentiment. At the middle of September 2022, short interest was 180.5 million – shortly before the S&P 500 reached a major bottom in October. This has been quite a squeeze since.
This also means that the bulls will not be benefiting from a squeeze tailwind going forward; or, if they did, it will be increasingly trivial.
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