Market Update 11/11/22

Out-of-favor sectors in 2022 surged last week. All eleven S&P SPDR sectors were higher. Technology (XLK) and Communications Services (XLC) were the best sectors, while defensive sectors Healthcare (XLV) and Utilities (XLU) rose but were the weakest. The SPDR S&P 500 ETF Trust (SPY) gained +5.89%.

S&P SPDR Sector ETFs Performance Summary

11/04/22 – 11/11/22

1111 Sectors Week

Source: Stockcharts.com

Figure 2: Bonnie’s Mix of ETFs

Performance Summary 11/04/22 – 11/11/22

111122 Week ETFs

Source: Stockcharts.com

International markets rose sharply, fueled by the U.S. Dollar falling -4.00% and continued rising, including Europe, China, and Emerging Markets. Semiconductor and Technology stocks which have been out of favor, had significant gains squeezing investors who were short.

Semiconductors led the advance outperforming Nasdaq by almost 2 to 1.

Figure 3: VanEck Vectors Semiconductor (SMH) Daily

111122 SMH

Source: Barchart.com

The top part chart shows the Van Eck Vectors Semiconductor (SMH) concentrated, mostly US-based ETF of mega-cap semiconductors companies. SMH is a lead indicator for the market and when investors are willing to take on increased risk.

Semiconductors (SMH), a weak sector in 2022, up 15.4%, closing at 220.80, was a catalyst following the +4.65% rise on 11/4 (see the 11/4/22 market update).

In October, SMH broke its downtrend from August and then turned down, holding above 180.00 support on the pullback above the October low.

The bottom half of the chart is MACD (12, 26, 9), a measure of momentum. MACD remains on its October buy, now above 0, gaining strength after moving sideways since September.

The intermediate trend remains down but could turn up soon.

Figure 4: VanEck Vectors Semiconductor Weekly and 12-26-9 MACD (Bottom)

111122 SMH weekly

Source: Stockcharts.com

SMH closed slightly under its 2022 downtrend and below the 50-Week MA.

Support is at 210.00 and 180.00. Resistance is 230.00 and 240.00.

Its positive MACD (lower chart) is rising and has given a reentry buy, breaking the 2022 downtrend (pink line).

On the other hand, a weekly close below 210 would imply a pullback to 190.00, and if the decline begins to accelerate, to potentially test the October lows.

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 Figure 5: UST 10YR Bond Yields Daily

11122 UST 10 Yr Bond Yields Daily

Source: Stockcharts.com

The 10-Year U.S. Treasury yields fell sharply, closing at 3.813% following the CPI report last week, remaining below the high made on 10/24 of 4.234% and below the upper channel objective.

It is favorable for stocks if yields continue to decline.  On the other hand, yields rising above the channel would likely put pressure on equities.

The major averages were all higher last week. The Dow rose +4.15%, the S&P 500 gained +5.90%, and the Nasdaq was up +8.10%, outperforming both the Dow and S&P 500.

The Russell 2000 Index gained +4.60%, and the Value Line Arithmetic Index (a mix of approximately 1700 stocks rose a whopping +6.61%.

Huge gains on 11/10/22 after the Consumer Price Index (CPI) release.

Figure 6: Dow, S&P 500, and Nasdaq 11/10 Performance

111022 Performance of Major Averages

Source: CNBC

Figure 7: Fear and Greed Index

111122 Fear and Greed

Source CNBC

Market sentiment based on the CNBC Fear and Greed Index (a contrary indicator) rose to 66, showing greed after only one month ago showing extreme fear.  If the market continues higher at the beginning of the week, there is a good chance the index will reach extreme greed.

Weekly market breadth was positive on the New York Stock Exchange Index (NYSE) and Nasdaq. The NYSE had 2660 advances and 1760 declines, with 211 new highs and 346 new lows. There were 3511 advances and 1813 declines on the Nasdaq, with 363 new highs and 872 new lows.

Solid market breadth for the week. If New Highs expand and New lows contract for the NYSE and Nasdaq, the rally is likely to continue in the near term.

On the other hand, if market breadth is negative, new highs contract, and new lows expand, the recent rally will likely fail.

Figure 8: CBOE Volatility Index VIX

111122 VIX

Source: Stockcharts.com

The CBOE Volatility Index (VIX), a measure of fear, has been trading above 20.00 for most of 2022. In late January, VIX made a high at 36.95 on 3/7 (blue circle), followed by a pullback to a low on 4/1 at 18.57 (orange circle). VIX approached the low in August but trended higher, peaking at 33.63 on 10/11 (red circle).

VIX continued to go lower following breaking the August up trend (orange line) in October.

VIX fell sharply last week, closing at 22.52 (pink circle), penetrating support at 24.00 (brown dotted line), implying intraday volatility could slow, and a test of April’s low of 18.57 is possible.

On the other hand, a close above 24.00 would indicate an increase in day-to-day volatility, and a close above 28.00 would signal the start of a short-term decline.

Figure 9: Daily New York Stock Exchange (NYSE) New Lows

111122 NYSE New Lows

Source: Stockcharts.com

Watching New lows on the New York Stock Exchange is a simple technical tool that helps awareness of the immediate trend’s direction.

New lows warned of a potential sharp pullback, high volatility, and “panic selling” for most of 2022, closing above 150 in 2022. The peak reading was 9/23 when New Lows made a new high of 1106 (pink circle).

New Lows fell in late October below 150, out of the high-risk area, and then began to increase but were well below the September peak. New lows have been trending down since October.

Its bullish New Lows closed at 35 (brown circle), its lowest reading since September, now in a low-risk zone.

Learn more about the significance of New Lows in my book, Journey to Wealth, published on Amazon.  If you would like a preview, get a free chapter here.

Figure 10: Daily iShares Russell 2000 (IWM) Price (Top) and 12-26-9 MACD (Bottom)

111122 IWM Daily

Source: Stockcharts.com

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

At the end of March, IWM failed to break out above resistance at 210.00 and then trended lower into June, followed by a rally into August and then turning down until the October low.

Last week IWM rose +4.60%, closing at 186.90, above its 50-Day Moving Average (blue rectangle) and 200-Day Moving Average (blue rectangle), for the first time since the August high.

Short-term resistance is at 200.00, followed by 210.00. Support is at 185.00, 175.00, and 170.00.

MACD (middle chart) remains on its buy, above 0, and in an uptrend.

A close below 175.00 would imply a short-term decline is likely. However, if IWM can hold above 175.00, expect IWM to move higher toward the August high.

The intermediate trend remains positive for Small and Midcaps (see Market Update 11/4/22).

Figure 11: Daily Invesco QQQ Trust (QQQ) Price (Top) and 12-26-9 MACD (Bottom)

111122 QQQ Daily

Source: Stockcharts.com

The chart shows the daily Invesco QQQ, an exchange-traded fund based on the Nasdaq 100 Index. QQQ moved lower after a false break out (purple circle) in September of the August downtrend (green line). In November, QQQ broke its October uptrend (purple line), and the decline continued.

QQQ lagged the Dow and S&P 500 in November as interest rates increased. However, last week, a different story when rates fell sharply. QQQ surged higher, up +8.80%, closing at 287.96, as investors went bargain-hunting for growth stocks. It also helped that the two top holdings in QQQ, Apple (AAPL) and Microsoft, representing over 20.00%, rose +8.18%, and MSFT +11.62%, respectively.

Last week QQQ broke 275.00 and 286.00 resistance.  The next resistance is 290.00, 300.00, and 310.00.

Support at 278.00, 275.00, 265.00, and 260.00.

The bottom chart is MACD (12, 26, 9), a measure of momentum that remains on a buy, giving a rebuy, rising but remaining below 0, not yet showing underlying strength.

Trend Change Forthcoming in QQQ?

QQQ remains in an intermediate downtrend.

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

111122 QQQ weekly

Source: Stockcharts.com

The top chart shows the weekly Invesco QQQ Trust (QQQ) making higher highs peaking in November 2021 (red circles) but failing to make a new high in December 2021. QQQ then formed two downtrends (brown line and green line).

One downtrend (brown line) was broken in August, but QQQ immediately turned down (pink circle), stalling below a down-sloping 50-Week MA. QQQ then made a lower low in October (purple arrow).

MACD in the lower chart has a higher low. Notice the positive divergence. A rebuy with a break of the January downtrend (blue dotted line) as confirmation would imply the downside momentum has subsided and the start of a potential sustainable rally for the intermediate term (weeks to months).

QQQ rose sharply this week, but one week of gains does not imply QQQ is ready for a sustainable rally. It would be favorable if QQQ has a weekly close above 290.00 and MACD breaks its 2022 weekly downtrend confirming the intermediate trend is up.

 Figure 13: The S&P 500 Index ($SPX) Daily and 12-26-9 MACD (Bottom)

111122 SPX Daily

Source: Stockcharts.com

The S&P 500 (SPX) 2022 downtrend remains in effect (green line)

Last week, the S&P 500 (SPX) gained +5.90%, closing at 3992.93 after holding above support on the pullback at 3700.0, and it is now showing gains in November.

Its positive SPX closed above its 50-Day Moving Average (blue rectangle) and is getting closer to the 200-Day Moving Average (red rectangle), where the SPX peaked in August peak, and the May rally stalled.

Support is at 3900, 3800, and 3700. Resistance is at 4100.

MACD, lower chart, remains on a buy, avoiding giving a sell when the SPX fell early last week but above 0. Be alert to a MACD sell should the SPX weaken.

If you are interested in following this chart and other charts during the week, I invite you to join my FB group Wealth Through Market Charts, where I post updated charts intraday throughout the week.

 U.S. Dollar weakness is positive for Global and U.S. Equities

Figure 14: US Dollar Daily

111122 USD Daily

Source: Stockcharts.com

The U.S. dollar appears to have peaked in September, starting a downtrend that remains in effect (mentioned in the 11/4/22 market update).

The U.S. dollar -4.16%, fell sharply, closing near its lows, the biggest weekly drop since 2009. As a result, the international markets rose sharply.

The continued weakness of the U.S dollar falling below support and breaking its uptrend (purple line) bodes well for global and U.S. equities in the coming weeks.

The downside objective is 103.80. A close above 110.00 would negate the downside objective.

Summing Up:

Caution went out the window last week as investors shifted out of defensive stocks and rotated into beaten-up growth stocks sending Technology and Semiconductors sharply higher, lifting the major averages last week. The dollar continued to weaken, helping the international and U.S. market.  It’s bullish that Nasdaq and Semiconductors joined the Small and Mid-Cap stocks in the rally. Although the intermediate downtrend of Semiconductors and Technology remains, they have favorable intermediate technical patterns. A break of the intermediate downtrend would turn the trend positive. Keep an eye on market breadth on the NYSE and Nasdaq. Watch for more stocks participating in the advance on the NYSE to have greater than 98 New highs and Nasdaq above 140, which would be their highest since early November, as a short-term clue that equities will work their way higher.

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

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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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