I will post a Market Regime update later today (5-Mar) that covers breadth, yield spreads and interest rates.
The next report will be on Thursday, March 6th.
Stocks were hit hard the last two weeks with small-caps and tech stocks leading the way lower. SPY is down around 6% from its late February high and in the garden-variety correction range (5-8 percent). Believe it or not, five to eight percent pullbacks are not that uncommon – but they feel a lot worse than they look. Also keep in mind that SPY was up 20% from the August low to the February high. I will consider current weakness as a correction within a bigger uptrend as long as SPY holds its support zone and the long-term breadth indicators remain bullish.
There are, however, concerns, and they are growing. Mid-caps (MDY) and Small-caps (IJR) triggered bearish trend signals with Bollinger Band breaks. Home Construction (ITB) is in a strong downtrend with a 52-week low in early March. Semiconductors (SMH/SOXX) broke support with a sharp decline and show relative weakness for over six months. Retail (XRT) is down 16% since mid December and hit a 52-week low. The Regional Bank SPDR (KRE) is rolling over with a lower high this year and sharp decline into early March. W0e are also seeing credit spreads widen and test their 200-day SMAs.
The decline over the last two weeks is the sharpest since mid July, which is when SPY fell 5% in seven days. This decline continued into early August as the Yen-carry trade fiasco spooked the markets and stocks plunged. This plunge created some severe oversold conditions that led to a very sharp bounce. The S&P 500 is trading near its 200-day SMA and this key moving average is often a battle zone. In other words, it does not break quietly. There are often several breaks and bounces before a decisive break.
Leading Uptrends and Relative Strength: Finance SPDR (XLF), Communication Services SPDR (XLC), Utilities SPDR (XLU), Cybersecurity ETF (CIBR), Global AI & Tech ETF (AIQ), Insurance ETF (KIE), Aerospace & Defense ETF (ITA), Medical Devices ETF (IHI), MLP ETF (AMLP), Telecom ETF (IYZ), Gold SPDR (GLD)
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Video Headlines
- SPY and QQQ Tests Key Support and become Oversold
- RSP and XLI Breakouts Fail and both Break Down
- XLF Hits 52-week High and Falls Sharply
- XLC Pulls Back after New High, but Remains a Leader
- XLU Holds Wedge Breakout and Shows Relative Strength
- MAGS Breaks January Low, Tests 200-day SMA
- AIQ Tests Support and Becomes Oversold
- XLK and ARTY Break January Lows and 200-day SMAs
- BOTZ Hits Bullish Setup Zone after Break Down
- CLOU, SKYY and IGV Break January Lows
- CIBR Holds Above January Low and Rising 200-day
- BLOK Hits Bullish Setup Zone
- SMH and SOXX Break Triangle Support
- IHI and AMLP Consolidate Near Highs
- IYZ Pulls Back from Highs, but Remains a Leader
- GLD Continues to Lead
- IBIT Breaks Double Top Support