Markets Hit New Highs, Friday Selloff Sparks Concern
Major Indices Week of March 22, 2024
Stocks rallied sharply last week across the board with most major indices moving into new record highs. Markets sold off on Friday in reaction to overbought short-term conditions. The S&P 500 cleared another century mark at 5200 and closed over the area and the Dow came within 100 points from the 40K mark before selling off and filling in the gap left in Thursday’s explosive trade. The oscillators remain choppy on the daily charts and speculators pared some of their short positions but remain short. There could be some chatter now about ‘exhaustion gaps,’ but there still are no tell-tale signs of overblown psychology. Money has moved into stocks over the past month, but margins are average, and earnings have been backing up the rally. As was pointed out in the March Madness Update, there are some unfilled objectives on the weekly chart and market psychology has moved off rate cuts and onto earnings. Old-timey analysts continue to look at the Dow Theory for confirmation. The 2YR-10YR inverted yield curve has set a record for length of time inverted.
2YR-10YR Yield Spread
CFTC S&P 500 Speculative Net Positions
As pointed out above, sellers covered some shorts with the new highs but remained net shorts with the markets at all-time highs. There remains a ‘meme stock’ mentality with the rally as a lot of social media posters continue to fight the new highs. Outside of the FOMC meeting on Wednesday, Thursday saw the IPO of Reddit, with the stock outperforming launch price and, at one point, had the valuation of the company over $10B…even though the 20-year old company has had net losses for years in a row.
Dow Jones Momentum
A reminder that we are now in a critical cycle window that runs between now and the end of April. ?Tech stocks rallied sharply last week, regaining the lost momentum of the past two weeks. The FAANG blasted to new highs.
FAANG (FXCM)
52-Week A/D Line
Sentiment indicators remain in greed/extreme greed readings with breadth greedy but still short of the highs set earlier this year. Last week in the AAII Sentiment Survey: Pessimism Rises. The Dow A/D line moved up to new highs at 5904. The VIX moved sharply lower, closing on the bottom of the week’s range. The Put/Call ratio is at 0.80, reflecting greed. The 52-week, A/D moved up to +6.87% (new highs) and indicates extreme greed. The Dow closed the week up +1.97% at a record high. The S&P had the best week of 2024 and closed into a record high, up +2.29%. The Nasdaq ended the week up +2.85%, the FANG closed up sharply +4.36% and the Russell ended the week up +2.10%. The 10-year notes rallied strongly and closed on the high of the week’s range, with the yield at 4.202%. (For TYM24 S&R see the last Special Report) Commodities closed out the week with a decline of -0.50% in the CRB Index. Crude oil staged a large reversal week and closed on the lows after spot futures reached the highest level since late October 2023. Gold traded an outside week down after setting new record highs above the $2200 level. ?lower all week, closing on the bottom of an inside week’s range. The CoT showed some slight profit taking by commercials and short-covering by the speculators. None of the other indicators are giving major clues.
Timing Points ?
Monday marks minor daily timing. We are now in a period of critical intermediate-term timing that runs through April 30th and possibly into the middle of May.
CNN Fear & Greed Index
AAII Investor Sentiment Survey
Dow Jones Industrial Average Hourly HLC
The Dow sold off sharply on Friday and relieved some overbought hourly conditions. The new highs on the daily have stochastics turning up but need continued rallies to confirm. The MACD is trying to turn up and prices are flirting with a pitchfork trendline. The weekly ended with an inverse hammer, which should be construed as bullish.
领英推荐
Dow Jones Industrial Average Weekly Candles
Dow Jones Industrial Average Daily HLC
Support is 39236 and pivotal at 38832. A breakdown under 38832 can test 38505/38457 with counts to 38179/38170. Closes under 38170 set up a move to 37814 and 37775 with full potential toward critical support of 37239/37122…with support through 37000. Closes under 37000 open counts to 36713 and 36108. A breakdown under 36108 will open counts into 35599 level with full potential to 35215/35200.
Dow Jones Industrial Average Monthly Closes Inflation-Adjusted
Resistance is 39568, 39629, 39679 and 39728/39735. A drive over 39735 should test 39784/39789. Rallies over 39789 should test the intraday highs at 39889/39890. Closes over 39890 will renew momentum toward a daily target at 40106.6 and weekly objectives at 40245.4/40250…with 40000 as a critical psychological area. The 2021 inflation-adjusted highs are 40010 and 40250, and 40300. Closes over 40250 will offer longer-term potential to monthly targets in the 45244 area. Above 45244 gives monthly counts to 47400.
Resistance
Support
S&P 500 Cash Index
S&P 500 Index Hourly HLC?
The S&P sold off slightly on Friday, relieving overbought conditions at all-time record highs. The daily still has a small three-point gap and prices need to continue higher to keep the stochastics upturn intact. The market fell short of the next potential upside objective at 5288. Resistance is 5245 and 5253/5255. A drive over 5255 can test the intraday highs at 5261 with counts to 5288. Closes over 5288 will open counts into the 5432 level. A breakout over 5432 will open potential to the 5576 with counts into the 5720 area. Closes over 5720 offer upside targets at 6000/6008.?
SPY Weekly?
S&P 500 Index Weekly HLC
Support is 5208 and 5175. A breakdown under 5175 should test 5149 with potential to pivotal short-term support at 5123/5120. Daily closes under 5120 can carry to 5039 with counts to 4971 and critical short-term support of 4903/4900. A breakdown under 4900 sets up a move to 4585. Closes under 4585 give counts to 4376 with potential to daily support at 4167/4160.?
Resistance
Support
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Charts courtesy of CQG, Inc., CNN, ?Koyfin, ?Trading View and AAII