Signage for high-tech commercial bank Silicon Valley Bank (Photo via Smith Collection/Gado/Getty … [+]
Getty Images
The S&P 500’s 1.5% drop last Tuesday raised the bar for a positive close last week. Even Friday’s mildly encouraging jobs report failed to support the market as the fall in SVB Financial Group (SVB) stock ended with its shutdown on Friday.
The weekend news was riddled with speculation about the global impact that financial markets could have in the coming week. The challenge facing some tech companies to do their payroll is already being addressed in the UK and Singapore. With Tuesday’s CPI report, the stock market faces more challenges.
10 year T-Note return
Tom Aspray – ViperReport.com
The action in the bond market over the past week has also caught many by surprise as the yield on the 10-year T-Note fell from a March 2 high of 4.091% to a low of 3.674% on Friday. The daily Starc band has been breached, extending the yield to the downside with resistance in the 3.90% to 4.00% range.
The MACDs have turned negative after forming lower highs, line c, and negative divergence has also been noted on the MACD-His. Even if yields recover over the next week, it appears that yields have topped out with the next downside targets in the 3.387% to 3.500% range. The US dollar also fell last week, which should provide some relief to the stock market.
It’s the sharp two-day reversal in yields that spooked bond traders as the yield on the two-year Treasury yield fell 45 basis points in two days. The Bespoke Investment Group’s investigation found 79 similar cases over the past 50 years. They found that “with two exceptions, in 1987 and 1989, all of these episodes occurred either during or within six months of a US recession.”
markets
Tom Aspray – ViperReport.com
Investors are unlikely to be encouraged by this historical analysis or last week’s trading scorecard. All of the previous week’s gains were reversed as the iShares Russell 2000 declined 8% followed by a 6% decline in the Dow Jones Transportation Average. In comparison, the SPDR S&P Regional Bank Index (KRE) lost 16%.
The S&P 500 was down 4.6% this week, just worse than the 4.4% drop in the Dow Jones Industrial Average, which is now down 3.7% year-to-date (YTD). The S&P 500 is about to turn negative on a YTD basis.
Despite being down 3.8% last week, the Nasdaq 100 is still the YTD leader with an 8.1% gain. The SPDR Gold Trust was the only one of these monitored markets to close the week higher. For the second time in the last three weeks, the NYSE’s rise/fall ratios were very negative with only 389 issues up and 2871 down.
Both Thursday and Friday ratios were negative above 5:1, pushing most short-term AD ratios into oversold territory. On Thursday, over 90% of S&P 500 and Nasdaq 100 stocks were lower on the day. The NYSE AD Osc closed the week at -1372, reaching above -1800 at the June and late September lows. The McClellan oscillator closed the week at -297, its lowest reading since -403 on September 26, 2022.
Spyder Trust (SPY)
Tom Aspray – ViperReport.com
While the short-term A/D indicators are encouraging a recovery this week, perhaps as much as 1-2%, the technical damage to the weekly A/D lines has been significant. For the Spyder Trust (SPY), the next key support to watch is the December low at $374.77.
Last week’s positive results in both the weekly and daily A/D lines were reversed by this week’s action. The S&P 500 Advance/Decline line rebounded from its EMA last week but plunged and is now near the December lows.
The change in the NYSE Stocks Only A/D line was even more serious as the uptrend line c and its EMA both broke. This came after previously breaking the downtrend, line b, which was positive based on the medium-term analysis. The NYSE All A/D line also breached its EMA but is still above its support at line e. The daily A/D lines were all positive by the close on March 3rd but turned negative last Tuesday and broke further support by the close on Thursday.
Nasdaq Composite
Tom Aspray – ViperReport.com
The number of Nasdaq Composite and NYSE Composite stocks making new 52-week lows rose sharply on Friday. There were 547 new lows on the Nasdaq Composite, the highest since last October. It is still well below the May 2022 level of 1650, but was above the October high, line b, and could signal a trend reversal. There was no divergence from the new highs that peaked with price in early February. The Nasdaq Composite has the next good support in the 10,800 area, line a.
Financial Sector Select (XLF)
Tom Aspray – ViperReport.com
All 11 sectors were down last week, with Consumer Staples Select (XLP) holding the best, down just 2%. In contrast, the financial sector (XLF) fell 8.5%. There were no serious warnings on XLF from the previous week as it was higher on March 3rd. The weekly RS was just above its WMA while the OBV was negative. XLF has closed below the weekly starc with next good support in the $30-$31 range.
As recently as Thursday’s trading, the level of selling in banking and finance ETFs rose to an alarming level. In terms of this week’s action, it’s difficult to gauge the potential impact of the SVB collapse. Unfortunately, many may not believe the official assessment of the situation, which will not help.
One thing is clear and that is my bullish view on the stock market in March for the past week looks wrong now. I would expect a rally over the coming week for those looking to adjust their portfolio weights. Make sure you have your stops set up before the market opens.
The December lows of $374.77 on the SPY and $259.73 on the Invesco QQQ Trust (QQQ) are the key support levels to watch. I still expect the overall stock market to be higher in 2023, but getting there now looks like it’s going to get tougher.
Comments are closed.