Risk On takes a Trip South

This week’s market action was relatively muted and mostly boring. We did get some entertaining headlines like Pelosi’s famous clap down and Bezos’ war with the National Enquirer that tanked both his marriage and his stock.

U.S. Equity markets shrugged off sloppy, choppy sideways action with what appeared to be a mini buying panic in the last few minutes of the trading week. The key stocks indexes (QQQ, SPY, IWM) ended up +.3% on average.

What the market could not do on Friday is unwind the deterioration of our risk indicators. Safe havens such as utilities and bonds outperformed stocks by wide margins.

Gold held its ground and has outperformed the S&P 500 by almost 13% over the past 6 months, and +7% over the last three months, despite the powerful stock rally since Christmas.

Credit markets rallied and the U.S. long gained versus junk debt which is not exactly what Mr. Market wanted to see.bond

This week’s takeaways are:

  • The Dow Industrials held above its 200-day moving average
  • Weekly Charts for US Equites still have major overhead supply and weakening momentum
  • Market internals weakened but have not generated a sell signal
  • Utilities, a safety play, outperformed all other sectors
  • Copper, Gold and Gold Miners are all acting like inflation is coming
  • Volatility ($VIX.X) has not acted decisively and moving between risk off /on
  • Emerging markets are still exhibiting strong momentum despite this week’s retracement
  • Copper put in a strong performance as our real Motion indicator indicates that a breakout over the 200 DMA should be followed

Short term, U.S. equities remain in bull mode but with less enthusiasm. They remain contained between both the 50 and 10-week moving averages.

Risk gauges retreated to a neutral zone, and had the market not jumped almost ½ % on Friday afternoon, the damage would have been much worse.

The question remains was that a brush stroke painting the tape, or the real McCoy?

Have a great week!

Enjoy this week’s videos…

Note: With the major stock indexes so close to changing their Phase (for better or worse) this is a perfect time to review Mish’s latest free training on Market Phases.