Big Picture Q&A
What are the most important levels for SPY and QQQ? What is the direction of LT Trend?
SPY (S&P 500) trend turned higher this week with modest momentum. The most important level of support is 406 for direct upside.
IF the trend higher continues, THEN the important levels of resistance above are 412, 415, and 418 prior to reaching the 420-430 Supply Zone.
IF 406 fails to hold as support, THEN initial downside targets are 404, 402, and 399
QQQ (Nasdaq 100) is trending higher with strong momentum. The most important level of support is 313 for direct upside.
IF the trend higher continues, THEN the important levels of resistance are 320, 321, and 322. Above 322 opens the door to 330 over the coming days / weeks.
IF 313 fails to hold as support, THEN initial downside targets are 312, 310, and 308.
What is the tone of the market?
The LT Trend picture remains mixed while the market is experiencing a Risk On LT Momentum move to the upside.
Risk On (XLK, XLY, XLC, SMH, ARKK)
XLK and SMH are the first two Risk On to establish LT Uptrends.
XLY, XLC, and ARKK have strong momentum higher but still in LT Downtrends.
Risk On > Risk Off on the LT Momentum timeframe.
XLU in a LT Downtrend
XLP and XLV LT Trends are roughly flat
What is the value of VIX (expected 30-day volatility of the S&P 500) and what does this mean in the current market environment?
VIX closed the week at 18.4. During the entire bear market, a VIX sub 20 was a poor time to own equities. Will this time be different???
VIX9D (expected 9-day volatility of the S&P 500) < VIX representing little fear in the near term.
VOLQ (Nasdaq 100 Volatility Index) is falling at pace greater than VIX as investors buy up tech stocks.
What is the value of the 10-year treasury. What is its current relationship with the S&P 500?
The 10-yr closed at 3.288% coming into an area of potential support at 3.0% - 3.20%.
Since the SVB implosion, bonds became a safe haven trade. In the near term, lower rates have benefit tech stocks the most.
IF rates begin rapidly rising again towards 4%, THEN equity market likely gets spooked resulting in a near term pull back.
What is the value of the US Dollar Index. What is its current relationship with the S&P 500?
The US Dollar Index closed at 101.922. The US Dollar acted as a safe haven during the market turmoil in 2022. A rising dollar puts pressure on the equity market as multinationals receive less for their revenues overseas. A falling dollar does the opposite.
IF US Dollar Index continues to fall, THEN this likely leads to continued support for the equity market rally.
IF US Dollar Index > 105.50 rallying with pace to the upside, THEN this will likely be a headwind for equity markets to continue their advance.
Are any warning signs flashing towards the current move in markets?
VIX is back below 20. We cannot yet confirm a shift in the market environment.
Bull case: Environment shift with VIX making a move to mid teen and less severe volatility spikes when the market does sell off.
Bear case: Market complacency is settling in as investor get more comfortable owning equities while a pull back is just around the corner.
Less than 50% of stocks in the S&P 500 are above their 50 day simple moving.
Bull case: Breadth broadens as the rally continues.
Bear case: Further deterioration in breadth leads to a pull back in markets.
What news events or catalysts on this weeks calendar have potential to be significant market movers?
Eastern Time Zone
4.10.2023: March Jobs reported 4.7.2023 while the markets observed a holiday. First day of trading with this news.
4.11.2023: None
4.12.2023: CPI @ 8:30am, FOMC Meeting Notes @ 2:00pm
4.13.2023: PPI and Unemployment Claims @ 8:30am
4.15.2023: Retail Sales @ 8:30am, Prelim UoM Consumer Sentiment @ 10:00am
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As always,
Trade with the Wind at Your Back!
Disclaimer: This article contains the views, opinions, and recommendations of the author. Any information provided may not be relied on as investment, financial, legal, tax, regulatory, or any other type of advice.
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