Big Biotechs Make a Big Statement

A battle royale is brewing as the long-term downtrends battle the short-term uptrends. Hmm, think I will bet on the heaviest fighter. Today we will try to handicap the winner and mark support for the big three (SPY, QQQ and IWM). I will also examine retracements in the key equal-weight sectors and dissect the signals in the sector breadth model. And finally, I will review recent trend signals in the sector SPDRs using the 125-day Full Stochastic and cover the Fed.

There are just a few clear uptrends, a handful of leaders and lots of counter-trend bounces. IBB and GDX hit new highs and are the leaders right now, while GLD, TLT and UUP are in clear uptrends. Then we get to the rest. Everything else is trading BELOW its prior highs, which were recorded in January or February.

Today we will start with some weekly charts to show performance since January 2018, and it ain’t pretty. I will then focus on the current bounce in the S&P 500 SPDR because it holds the key going forward. We will look at the danger zone for SPY and show that participation narrowed over the last week or so.

Today’s report will focus on the long-term trends for ETFs in the master ETF list (some 200). The vast majority are in downtrends, but 20 or so are bucking the selling pressure or holding up relatively well. I will also talk about trend signals versus setup signals. This report includes a trend table, some scatter plots and charts separating the relatively strong from the relatively weak.

Today we will review the long-term trend evidence for SPY and the recent uptick in volatility with a new twist on the Average True Range (ATR). I will then show a custom breadth indicator measuring 20-day highs and lows in the S&P 500 and finish with the danger zone for SPY. This post also includes a PDF file with charts for the 11 sector SPDRs.

Well, it was another wild week in the markets and there is a lot to cover today. They, and I do mean the infamous “they”, that the four most dangerous words in investing are: It’s different this time. In general, I subscribe to this thesis because trading psychology and human emotions have not changed.

This is one moody market. Less than three weeks ago, the mood was pessimistic as the S&P 500 hit a 52-week low with a 30+ percent plunge. Flash forward 12 days and the S&P 500 is up over 20% and the mood has changed to optimistic. Would you want to be involved with something showing these kinds of mood swings?

The bulk of the evidence remains bearish and this means bounces are expected to fail at some point. Picking that point is, of course, a whole other ball game. Keep in mind that the S&P 500 fell some 33% from February 19th to March 23rd and hit a 52-week low on March 23rd

The weekend video will put the big bounce into perspective and review the breadth charts, which triggered bearish in late February. We will also cover the S&P 500 in detail with insights into prior bear market phases.

Over the next few weeks I will highlight specific stocks and industry groups that could benefit from secular growth trends. The idea is to build out a watchlist for the coming months, if not years.

It may be darkest before the dawn, but it is still pretty dark out there. Furthermore, volatility remains out of control. The S&P 500 fell 4.4% on Wednesday and the futures are pointing to a 1+ percent gap higher on today’s open. We have not seen a dull open since mid February.

There are a number of bear market rules, but the most important rule is to respect the primary trend. In this regard, I ignore bullish patterns, upside breakouts, bullish setups, support levels and bullish retracement zones during a primary downtrend.

Bear markets are difficult because there are big forces competing for control. The big trends are down for the major stock indexes, credit markets are chaotic, the economy is deteriorating and covid-19 is raging.

It’s raining money so today we will cover a couple of bond ETFs, the credit markets and the Fed. In particular, I will highlight the current dislocation in the credit markets using the 20+ Yr Treasury Bond ETF and Corporate Bond ETF. We will then look at credit spreads and note that these spreads often peak ahead of a stock market bottom.

Today’s report will focus on the broad market environment, namely the S&P 500. Volatility is high across the board as we are seeing huge moves in stocks, bonds (TLT, AGG), gold (GLD, GDX) and currencies (UUP, FXF).

The markets, of course, are forward looking and have already priced in a pretty bad situation. The market will at some point start pricing for a recovery, but nobody knows just how bad it will get and when the markets will begin to price in this recovery.