Risk Yes or No flow chart
The stock market swings continued last week as the daily doji sell signals last Tuesday (see chart) shifted the daily momentum back to negative heading into Wednesday’s open. That set the stage for the FOMC announcement Wednesday afternoon which quickly pushed the S&P 500 up over 70 points ahead of the press conference. The bullishness did not last as stocks then dropped just as sharply into the close.
The lower close on Wednesday likely encouraged the market bears as the major averages had recorded the largest monthly decline of the year in April. The Dow Industrials lost 5% while the S&P 500 and Nasdaq Composite were both down over 4%. The Consumer Confidence on Tuesday came in weaker than expected at 97 as the median forecast was 103. The selling on Tuesday was heavy as over 80% of the Nasdaq 100 stocks declined.
Given this backdrop, the stock market finished the week with new buying as the advancing issues on the NYSE led the declining issues by a 3-1 margin on both Thursday and Friday. The weaker-than-expected jobs report and Thursday’s earnings from Apple
Markets
For the week the Dow Jones Utility Average led the way with an impressive gain of 3.4% as it outpaced the 1.8% gain in the iShares Russell 2000 as well as the 1.2% gain in the Dow Jones Transportation Average.
The Nasdaq 100 ($NDX) was able to gain 1%, a bit better than the 0.6% gain in the S&P 500 which is now leading the $NDX on a year-to-date basis. The SPDR Gold Shares was down 1.7% last week but is still up 11.4% YTD.
Last week, I thought the stock market bears were likely to be disappointed by the market action as “A positive close this week should convince many of those looking for a more severe market decline to modify their outlook.”
The weekly chart of both the S&P 500 and NYSE Stocks Only Advance/Decline lines were featured last week (see chart) Previously they had turned up from their longer-term EMA which was a bullish sign. They have now risen further above their EMAs and new highs will project additional new highs for the market averages.
SPY With A/D Lines
The daily advance/decline lines had been in a downtrend or a corrective mode since the Spyder Trust (SPY
The S&P 500 A/D line has been in a downtrend, line b, since early April and it was overcome last week. The NYSE Stocks Only A/D line has been even stronger as it has moved further above its downtrend, line c, and the prior peak. The NYSE All A/D line shows a similar move above its downtrend, line d. They have moved above their prior peak so are now in short-term uptrends.
The break of these downtrends along with the positive formations from the weekly A/D lines is consistent with the end of the correction and the resumption of the uptrend from the October 2023 lows. This does not rule out further sharp 1-2 day corrections against the trend as long as the daily A/D lines hold above their recent lows.
Continuing last week’s discussion of growth versus value it was another positive week for growth as it led by almost 1%. During the decline from the early February high value has been leading despite brief rallies in favor of growth. Another strong week for growth over value may be enough to indicate a transition where growth is again leading.
Invesco QQQ Trust
Though the technical outlook for the Invesco QQQ
The daily Nasdaq 100 A/D line closed above its WMA and is positive (not shown) but the weekly is still barely below its WMA. The weekly relative performance (RS) rose last week but needs to move back above its WMA to signal that QQQ is again leading SPY.
More positive readings from the daily A/D lines are needed to indicate that the overall stock market is again trending higher as it was late last year. According to the American Association of Individual Investors (AAII), the bullish % rose last week to 38.5% from 32.1%. This is consistent with my view that bullish sentiment may have declined enough to signal the end of the correction. Therefore the stock market bears are likely to be fighting the trend.
T&J's Themes Watch List
The dynamic Trailing Stop (DTS) analysis is designed to help identify new market leaders early by looking at multiple time frames. I am in the process of reviewing this week’s scan but the NQs Largest Gauge saw some significant improvement last week.
There were new bullish WKs_DTS and 3_DTS signals for Apple (AAPL) last week as well as in Amazon
I am also watching the four sector ETFs that were reviewed last week based on their yearly pivot analysis for signs that they have also completed their corrections. Still more positive action is needed to reduce the risk of new buying so keep your eye on the risk more than the reward. Be sure to use stops.
