The indexes continue to be news-driven, reflected in the fear index (VIX) and Gold. Overall, neutral short term to risk-off intermediate to longer term.
Risk On
- Volume patterns improved this week, with one of the highest volume days ever on the explosive Wednesday rally. (+)
- Sector rotation is showing 12 of 14 sectors up, with semiconductors and technology leading with many tech stocks having a bullish engulfing pattern.
- The number of stocks above key moving averages bounced off its extreme oversold levels, and it looks like they could trend higher. (+)
Neutral
- Market volatility remains elevated, with a violent rally off the lows Wednesday (largest 1-day gain in S&P history). Short-term, we could continue to see a rally to the 200-Day Moving Average, though the tariff situation remains very unclear and prone to news-driven moves and the S&P 500 may be moving into a bearish phase. (=)
- The risk gauges are closer to neutral with the improvement in SPY/TLT) and HYG/TLT ratios. (=)
- Volatility, after matching its August 2024 highs, backed off. A new high in volatility would be alarming. (=)
- Value’s recent outperformance flipped back in favor of Growth over the short run, but the longer-term trend remains intact. (=)
- Foreign equities continued to lead the U.S. over the last several months and are about even in the last couple of weeks. All equity markets remain under pressure. (=)
- April is usually a reasonably strong month for equities seasonally, though they are lagging this year with the tariff disruptions. (=)
Risk Off
- Contrary to the bullish leadership this week in Technology and Semiconductors, Gold made new highs and gold miners exploded up +20% this week, a concerning signal given all the pressure in equities. Looking at 3-month returns, gold miners, staples and utilities were all positive, a clear risk-off signal. (-)
- Despite the huge rally, the McClellan Oscilator is still negative. (-)
- The 52-week new high new low ratio remains negative, though it is flattening out at low levels. (-)
- The color charts, with the exception of the Nasdaq on the shortest-term reading, are all negative. (-)
- All members of the modern family are in bearish phases, with two members (IBB and KRE) actually negative on an otherwise strong bounce-back week for the market. All of them with the exception of retail are underperforming the S&P. Regional banks and financial sector were weak, a concern with the dollar under pressure and potential changes to global finance and economic activity. (-)
- Soft commodities are outperforming equities. (-)
- Parabolic move in gold, reaching overbought levels. The trend is strong, but the risk on a mean reversion pullback is elevated. (-)
- The dollar broke below its 200-weekly moving average for the first time in several years. A falling dollar poses a risk to markets. Bitcoin continues to hold and outperform the market and raises questions about its roll relative to the dollar and foreign currencies. (+)