Bonnie’s Market Update 5/3/24

The market closed near their highs last week, with nine of the eleven S&P SPDR sectors finishing higher. Utilities (XLU) and Real Estate (XLRE) were the strongest, while Financials (XLF) and Energy (XLE) were the weakest. The SPDR S&P 500 ETF Trust (SPY) was up +0.60%.

S&P SPDR Sector ETFs Performance Summary 4/26/24-5/3/24

050324 SPDR Sectors

Source: Stockcharts.com

 Figure 2: Bonnie’s ETFs Watch List Performance Summary 4/26/24-5/3/24

050324 Bonnie’s ETFs

Source: Stockcharts.com

Last week, China and Emerging Markets outperformed the U.S. Biotechnology and Small Cap Growth and Value had solid gains, while Transportation and Semiconductors lagged. Watch for leadership by Transports this week as the Dow Transportation Average broke its March downtrend on 5/2.

Figure 3: UST 10YR Bond Yields Daily

050324 UST 10 Yr Bond Yield

Source: Stockcharts.com

The 10-year U.S. Treasury fell last week, closing at 4.550%, turning lower at the top of the channel, and remains below the 2023 high. Yields falling and breaking the uptrend (purple line) would likely be positive for U.S. Equities. On the other hand, yields rising and closing above 4.75% could fuel selling pressure in U.S. Equities.

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Figure 4: CBOE Volatility Index VIX

050324 VIX Daily

Source: Stockcharts.com

The CBOE Volatility Index (VIX), a measure of fear, traded above 20.00 for most of 2022, with a high at 36.95 on 3/7 (blue circle on the left), which did not get violated in 2023.

VIX trended higher since December 2023, peaking at 18.71 on 4/19, declined the last two weeks, closing at 13.49 (purple circle), now trending down, and the lowest reading since the end of March. If the VIX closes above 16.00, volatility is likely to increase.

The major market averages all rose last week. The Dow was up +1.14% (broke the March downtrend, the S&P 500 was up +0.55%, and the Nasdaq was up +1.43%. The Russell 2000 Index outperformed all, up +1.68%.

Figure 5: Fear & Greed Index

050324 Fear and Greed Index

Source: CNN.com

Investor sentiment based on the Fear and Greed Index (a contrarian index) measures the market’s mood. The Fear and Greed Index fell slightly, from a reading of 42 to close at 40, remaining in the fear zone. In the past strong market periods, after readings of Extreme Greed, the retracement towards neutral or fear turned out to be a buying opportunity.

Figure 6: Weekly Value Line Arithmetic Average

050324 VLE Weekly

Source: Stockcharts.com

The top chart is the weekly Chart of the Value Line Arithmetic Index ($VLE), which includes approximately 1700 stocks.

The longer-term uptrend from October 2022 (pink line) remains after breaking the October 2023 uptrend (purple line). VLE reversed higher last week, breaking the March downtrend (green line), which is positive. VLE rose +0.92%, closing near its high for the week and remaining above the rising 50-week MA (blue rectangle) and 200-week MA considered bullish.

Support is at 9800, 9600, 8900 and 8600. Resistance is at 10233, 10400, and 10600.

The odds of further upside in the short term will increase if VLE closes above Friday’s high of 10328.53.

Market Breadth Improves

Weekly market breadth was positive on the New York Stock Exchange Index (NYSE) and for the Nasdaq. The NYSE had 1949 advances and 949 declines, with 225 new highs and 84 new lows. There were 2964 advances and 1629 declines on the Nasdaq, with 258 new highs and 297 new lows.

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Figure 7: New York Stock Exchange (NYSE) New Lows

050324 NYSE New Lows Daily

Source: Stockcharts.com

Watching New Lows on the New York Stock Exchange is a simple technical tool that helps increase awareness of the direction of an immediate trend.

For most of 2022, new lows warned of a potential sharp pullback, high volatility, and “panic selling,” closing above 150. The peak reading of New Lows in 2022 was on 9/23 at 1106, not exceeded in 2023.

In 2024, New Lows have stayed below 150, and a good part of the year below 50, a sign of a healthy market.

Last week, New Lows on the NYSE closed at 18 (pink circle), below 25, the lowest risk zone. If new lows remain between 25 and 50, it would be positive in the short term. On the other hand, an increase above 150 would be a warning sign of a market correction.

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 Small Caps Continued Higher, Stronger than the S&P 500 is Favorable

Figure 8: Daily iShares Russell 2000 (IWM) Price (Top) and 12-26-9 MACD (Middle and Money Flow (Bottom)

050324 IWM Daily

Source: Stockcharts.com

The top Chart is the daily iShares Russell 2000 Index ETF (IWM), the benchmark for small-cap stocks, with a 50-Day Moving Average (MA) (blue rectangle) and 200-Day Moving Average (MA) (red rectangle) that traders watch and use to define trends.

IWM peaked in March, formed a bearish pattern of lower highs, and fell below the 50-day MA in early April but held above the 200-day MA, a key area.

IWM gained +1.78%, stronger than the S&P 500 last week. IWM remains above the April downtrend (green line), and the 50-day MA is a positive sign for the near term.

Support is at 201.00, 195.00, 187.50 and 182.50. Resistance is at 207.50, 210.00, and 214.50.

MACD (middle chart) generated a fresh buy, rising below 0, breaking the April downtrend (green dotted line). IWM is close to breaking the downtrend from January 2024 (green line), which would confirm there is more upside.

Money flow (lower chart) turned up after moving sideways, implying buying interest in Small Caps.

Double Bottom Formation in Momentum For Semiconductors and Technology is Bullish

 Figure 9: Daily Semiconductors (SMH) (Top) and 12-26-9 MACD (Middle) and Money Flow (Bottom)

050324 SMH Daily

Source: Stockcharts.com

The top chart shows the Daily Semiconductors (SMH) ETF, concentrated mainly in US-based Mega-Cap Semiconductor companies. SMH tends to be a leading indicator for the market when investors are willing to take on increased risk, and the opposite is true when the market is falling.

The Semiconductor ETF (SMH) peaked on March 3/8 at 239.14 and broke the daily uptrend from November 2023 (pink line), shifting the daily trend to down in early April. However, with further strength, the trend could soon change to up.

SMH consolidated last week after the previous week’s gains of 9.25%, closing up +0.04% at 217.73, remaining slightly below the 50-day Moving Average (blue rectangle). Strength this week will shift the daily trend to up.

Support is at 205.00, 195.00, and 175.00.  Resistance is at 220.00, 225.00, and 235.00.

Last week, MACD (middle chart) generated a fresh buy from below 0 and rising, forming a favorable rising double bottom formation.

Money Flow (lower chart) continued to rise after breaking the January downtrend, implying higher prices.

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Figure 10: Daily Invesco QQQ Trust (QQQ) Price (Top) and 12-26-9 MACD (Bottom)

050324 QQQ Daily

Source: Stockcharts.com

The Chart shows the daily Invesco QQQ, an exchange-traded fund based on the Nasdaq 100 Index. QQQ made a low in October 2023 (red circle), followed by a successful retest of the low in early January 2024 and the start of an uptrend.

QQQ broke the April downtrend, shifting the short-term trend to up.

Nasdaq 100 (QQQ) continued higher, up +1.04%, closing at 435.48, closing slightly below the 50-day Moving Average (blue rectangle) but above the 200-day Moving Average. Support is at 430.00, 420.00, 413.00, and 400.00. Resistance is at 437.00, 445.00, and 450.00.

The bottom chart, MACD (12, 26, 9), generated a fresh buy, below 0, rising from a favorable double bottom formation.  MACD will likely break the downtrend from March (black line) on any strength this week. However, the February momentum downtrend (green line) remains.

Money flow (lower chart) turned up in April, breaking the downtrend, a positive sign, but closed below resistance (brown line).

In Sum:

QQQ continued to rise after a relief rally from an oversold condition, breaking the April downtrend last week, helped by Apple’s (AAPL) best day since 2022, when earnings beat expectations, and the company announced a $110 billion buyback. With QQQ strength, MACD will break both momentum downtrends, confirming a short-term bottom. On the other hand, a weekly close below 420.00 would suggest a failed breakout and further downside.

Figure 11: The S&P 500 Index (SPY) Daily (Top) and 12-26-9 MACD (Middle) and Money Flow (Bottom)

050324 SPY Daily

Source: Stockcharts.com

The SPY April downtrend was broken, shifting the short-term trend to up.

SPY closed up +0.60% at 511.29, closing near last week’s high and slightly above the 50-day Moving Average (blue rectangle) and remains above the 200-day Moving Average (red rectangle).

Support is at 508.00, 505.00, 487.00 and 480.00. Resistance is at 515.00 and 525.00.

MACD (middle chart) generated a buy below 0, rising and breaking the downtrend from March.

Money Flow (bottom chart) turned up after breaking the April downtrend (green dotted line) the previous week, but there is more work to do to get above the February downtrend (green line).

Two closes above 515.00 would imply last weeks rise is more than a relief rally and another test of the March high.

Summing Up.

The relief rally broadened last week and likely a short-term bottom. The major averages ended the week near their highs after the busiest week of earnings announcements, the Fed meeting, and a softer-than-expected April Jobs report that increases the odds that the Federal Reserve will cut interest rates. Technically, daily April downside price trendlines have broken, shifting the daily trend up. Daily momentum oscillators are rising with favorable double-bottom formations, which now support the broad market moving higher. It is bullish that market breadth improved, support levels held, and Small-Cap stocks participated last week. Upside follow-through is needed to excite the bulls so the rally can continue.

Remember to manage your risk, and your wealth will grow.

Let’s talk about investing together. You are invited to schedule your Free 30-minute consultation here or by emailing me at Bonnie@BonnieGortler.com. I would love to schedule a call and connect with you.

Disclaimer: Although the information is made with a sincere effort for accuracy, it is not guaranteed that the information provided is a statement of fact. Nor can we guarantee the results of following any of the recommendations made herein. Readers are encouraged to meet with their own advisors to consider the suitability of investments for their own particular situations and for determination of their own risk levels. Past performance does not guarantee any future results.  

Bonnie S. Gortler

Bonnie Gortler, Consultant, Coach, and Author specializing in Wealth and Well-Being, is a successful stock market expert who has been instrumental in managing multi-million-dollar client portfolios within a top-rated investment firm during her over 35-year corporate career. As the author of “Journey to Wealth,” Bonnie has made it her mission to share the importance of risk management and how to enjoy real financial well-being by applying the technical and mental sides of investing. Bonnie has an M.B.A. and is a certified life coach. It is through her love of coaching, consulting, blogging, and social media that she creates change in the lives of many and inspires people from around the world. Bonnie is fully committed to your personal growth and development as she shares her winning spirit and powerful techniques with you. Visit BonnieGortler.com to gain tips and insights about investing, personal development, and inspiration through her articles on Wealth and Well-Being.
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