Market Update 3/25/22

The rally continued and is encouraging for the near term. Ten of the eleven sectors rose, four stronger than the SPDR S&P 500 ETF Trust (SPY) up +1.84%, Energy (XLE) and Materials (XLB) were the best performing sectors, while Real Estate (XLRE) and Healthcare (XLV) were the weakest.

3/18/22 – 3/25/22

S&P SPDR Sector ETFs Performance Summary

032522 SPDR Sectors

Source: Stockcharts.com

Figure 2: Bonnie’s Mix of ETFs To Monitor

Performance Summary 3/18/22 – 3/25/22

032522 Week ETFs

Source: Stockcharts.com

Semiconductors and Technology stocks rose despite rising yields.  Global markets lagged, with no follow-through to the previous week’s sharp gains.

Figure 3: UST 10YR Bond Yields Daily

Source: Stockcharts.com

The 10-Year U.S. Treasury yields rose sharply from 2.14% a week earlier, closing at 2.492 %, the highest since May 2019. The upside objective remains at 2.7%, while the 5 Year U.S Treasury yields rose, closing at 2.55%.

All three major averages rose for the second week in a row. The Dow gained +0.31%, S&P 500 up +1.79%, while Nasdaq gained +1.98%, the strongest of the major averages. The Russell 2000 Index lagged down -0.39 %, and the Value Line Arithmetic Index (a mix of approximately 1700 stocks gained +0.28%.

Weekly market breadth was mixed. The New York Stock Exchange Index (NYSE) had 1773 advances and 1787 declines with 259 new highs and 308 new lows. Nasdaq had 2662 advances and 2593 declines and 260 new highs, and 393 new lows.

 Figure 4: CBOE Volatility Index VIX

Source: Stockcharts.com

The CBOE Volatility Index ($VIX), a measure of fear, dropped again, closing on 3/25 (orange circle) at 20.81, its lowest level since early February, after being above average throughout 2022.

VIX previously made a high at 31.96 on 1/26 (brown circle), on 3/1 at 33.32 (red circle), and 36.95 on 3/7 (blue circle).

It will be favorable if VIX falls below 20, but if VIX starts to climb early in the week above 24.00, this would indicate the market is likely to stall, and day-to-day volatility will increase.

Figure 5: Daily New York Stock Exchange (NYSE) New Lows

32522 Daily NYSE NEW LOW

Source: Stockcharts.com

Watching New lows on the New York Stock Exchange is a simple technical tool that helps awareness about 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. Learn more about the significance of New Lows in my book, Journey to Wealth, published on Amazon.  Here is an excerpt, when new lows are above 150, the market is negative, higher risk, selling is taking place. Sometimes it could be severe, and sometimes on a very nasty day, you can have “panic selling,” and big wild swings (high volatility) to the downside may occur.

As the market sold off in January, New Lows rose sharply, peaking at 792 on 1/24 (red circle) and then contracted but not enough to be in a low-risk zone before rising again on 2/24 at 792, matching the 1/24 peak.  On 3/14, it was a positive sign new lows stayed below January and February’s readings, and the latest rally began.

New Lows closed at 187 (pink circle), above 150 up from 57 on 3/18 (brown circle),

It would be worrisome if New Lows stay above 150, then I would expect the rally to stall. However, It would be encouraging if News Lows falls between 25 and 50, indicating lower risk and a sign that the rally will continue

Figure 6: Daily Nasdaq Advance-Decline Line

32522 Nasdaq Daily AD Line

Source: Stockcharts.com

The daily Nasdaq advance-decline line peaked in February 2021 (brown circle), followed by failed attempts to make a new high.  After breaking the October uptrend (blue dotted line), the Nasdaq AD-Line made a series of lower highs and lower lows in November, December, and January and trended down.

Until last week, two clear-down trends (blue and purple) were in effect.

After making a lower low earlier in the month, a potential V bottom identical to December 2019 (purple rectangle) has formed. The downtrend from November (blue) was penetrated for the first time. A positive sign the worst of the decline is over and bullish in the near term. After making a new low, the Weekly Nasdaq Advance-Decline Line broke above the November downtrend, confirming the daily (chart now shown).

Figure 7: Daily Nasdaq New Highs

32522 Daily Nasdaq New Highs

Source: Stockcharts.com

The number of New Highs on the Nasdaq is rising, reaching the highest level since January 2022.  If this trend continues and the New highs expand, it will be bullish in the short term.

MACD and MONEY FLOW show that Small Caps are ready to break out to the upside.

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

32522 DAILY IWM

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. A false breakout occurred in November 2021 in IWM after being in a nine-month trading range.

The February uptrend and support at 200.00 was penetrated on 2/18 (red rectangle) and remained below its 50 and 200-Day Moving Average. In early March, IWM failed to close over resistance at 205.00 and turned lower, a false breakout of the 2022 downtrend (green dotted line).

IWM fell -0.36% for the week closing at 206.12, closing above the resistance of 205.00, and the 50-Day MA (light blue circle). I see last week’s action in IWM as a sideways consolidation before a potential breakout if IWM closes above 207.50.

Short-term resistance is 207.50 and 210.00. Support is at 205.00 and 202.50.

MACD (middle chart) has not shown much upside momentum in 2022, failing to get above 0. However, MACD’s latest rebuy showed a favorable initial thrust, and it’s now above 0 for the first time in 2022, signaling underlying strength.  However, a turn down now would be negative.

Since February, Money Flow (lower chart) has whipsawed in a trading range with only slight upticks (green dotted line), but this pattern has changed. Money Flow is now at its highest level, making a new high for the year (purple circle).

IWM looks the best it has in 2022 for a potential breakout to the upside with a close above 210.00. If IWM closes above 210.00 on Friday, April 1, MACD is likely to give a buy for the intermediate-term, shifting the trend to up. (chart not shown).

MACD and MONEY FLOW show that QQQ is likely to continue higher.

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

32522 DAILY QQQ

Source: Stockcharts.com

The chart shows the daily Invesco QQQ, an exchange-traded fund based on the Nasdaq 100 Index with its 50-Day Moving Average and 200-Day Moving Average. QQQ accelerated after breaking the January uptrend (pink rectangle), penetrating the January lows and falling through the first downside objective at 330.00, not reaching the lower objective of 310.00 before reversing higher. QQQ stalled at 351.00 resistance in early March and turned lower.

Last week QQQ was strong again, up +2.36%, closing near its high for the week at 359.35, getting through resistance at 351.00, and closing only above its 50- Day MA.

Resistance is at 370.00. A close above would excite the bulls and potentially rally quickly to 390.00. On the other hand, support is 355.00, 345.00, and 340.00. A close below 340.00 would break the short-term uptrend (brown line), and likely trip sell stops and excite the bears.

The middle chart is MACD (12, 26, 9), a measure of momentum. MACD remains on a buy, rising at its highest level in 2022, now above 0, which is bullish, showing underly strength in momentum. Money Flow is rising, and it broke out of its sideways trading range to its highest level since November 2021.

A close above 355.00 will be a clue there is more short-term upside without a pullback on its way to 390.00.

 Figure 10: Van Eck Semiconductors (SMH) Daily Price (Top), 12-26-9 MACD (Middle) and, Money Flow (Bottom):

32522 DAILY SMH

Stockcharts.com

Support was broken (red circle) in late January, and SMH fell sharply but held the October 2021 lows. SMH then rallied but turned down again, closing below support at 240.00 on 3/14/22, a false breakdown.

SMH rose, closing at 275.33 up +2.28%, giving up none of last week’s gains. SMH is showing strength closing above the 50 and 200-Day Moving Average after breaking the January downtrend (pink line) the previous week.

Support is at 270.00 followed by 265.00 and 255.00. Resistance is at 280.00 and 290.00.

MACD (middle chart) remains on a buy (green circle) and above the November downtrend (green line), confirming the reentry. Momentum is accelerating higher and closed slightly above 0.

Money Flow (lower chart) had a few turn-ups without upside momentum early in March. However, the downtrend (green line) in Money Flow broken gave a great clue showing investors were buying, confirming the breakout in MACD. Continued leadership is likely to fuel the broad market higher.

Figure 11: Daily ARK Innovation (ARKK)

32522 DAILY ARKK

Source: Stockcharts.com

ARK Innovation (ARKK) is an actively managed ETF by Cathie Wood that seeks long-term growth and is highly volatile. ARKK broke its September short-term downtrend (brown line) in October 2021.

Downside momentum temporarily subsided where ARKK broke its February downtrend (purple line), failing to close above resistance (pink dotted line). Rally attempts failed as ARKK made lower lows into March.

ARKK fell last week after its sharp reversal that broke the February downtrend (blue dotted line), closing at 65.77, down -1.92%, holding most of its previous weeks’ gains. Resistance remains at 70.00, 72.50, and 80.00.  Support remains at 63.00, 60.00, and 57.00.

MACD failed to get above 0 since November 2021, implying internal weakness; MACD repeat buys have been early. However, MACD is now showing signs of improved momentum. Strength in ARKK will benefit the beaten-down growth stocks in the near term.

Money flow (lower chart) broke February’s downtrend (brown dotted line), confirming MACD, and on the weekly chart (not shown), money flow has turned up and is at its highest level of 2022.

Remember, ARKK remains high-risk and volatile. Be alert to 10% swings or more in both directions that can occur at any time. If support holds, look for a rise of over 10% this week.

Hi Yield Bonds Downtrend Continues

 Figure 12: I Shares Hi Yield Corporate Bond (HYG)

32522 DAILY HYG

Hi-Yield Bonds (HYG) peaked on 12/27/21, appeared to stabilize in late February, but reversed lower, reaching their lowest level since November 2020 (blue circle).

HYG lagged last week down -1.47%. The bond market as a whole continues to be under heavy selling pressure. It would be positive if HYG breaks the downtrend and closes above its 50-Day MA at 83.00.

Monitor the performance of HYG. A further decline that takes out the low would not be favorable for U.S. Equities.

 Figure 13 ETFs: SPY, QQQ, IWM, and DIA with MACD (Middle) and Money Flow (Bottom)

032522 SPY-QQQ-IWM-DIA

Source: Stockcharts.com

Exchange-Traded Funds (ETFs): SPY, QQQ, IWM, and DIA all rose after breaking their 2022 downtrends. The short-term trend remains up.

MACD has confirmed the breakout in SPY, IWM, DIA, and QQQ, which are all now above 0, showing internal strength.

Money Flow of IWM and QQQ joined the SPY and DIA,  breaking their downtrend.

MACD and Money Flow are all favorable set up for the rally to continue barring any unexpected news-driven event. It would be bullish if IWM became the leader this week and stronger than the S&P 500.

Summing Up:

The major averages continued higher despite the continuing Ukraine-Russian war, higher oil prices, and rising rates. The short-term trend remains up. The best rallies are the ones that go straight up or only a 1-2% pullback. Momentum oscillators show signs of strength and more room for the upside. Watch for Small Cap stocks, both Value and Growth, to join Technology and Semiconductors to lead the market higher or, if they stall, unable to get through overhead resistance.  Volatility has quieted. However, with the end of the quarter window dressing and Friday’s March unemployment report and key inflation data to be released day to day swings of 1% or more on the major averages may persist.

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

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or if you have any questions or comments or would like to talk about the market, email me at Bonnie@Bonniegortler.com.

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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