Watch for the Warning Signs getty
The rally failure after Tuesday's sharply higher open set the tone for the week and it was not the holiday gift that most were expecting. In fact, the data compiled by Bank of America revealed that investors 'added $25 billion of fresh money to US stocks in the week through Wednesday and poured a record $14 billion to value funds.' SPY 60 MinTom Aspray - Viper Report.com
The hourly chart of the Spyder Trust (SPY) shows that it traded as high as $410.49 in the first hour of trading Tuesday in reaction to the better-than-expected CPI Report. By Friday's unadjusted close it was down 6% from the early Tuesday high. Likely, most of these late buyers are still long but they must be wondering if they should get out. MarketsTom Aspray - Viper Report.com The stock market rally on Monday cushioned the decline but the Nasdaq 100 was still down another 2.8% for the week and is now down 31.1% year-to-date (YTD). The S&P 500 was not too far behind for the week as it was down 2.1% and even the Dow Jones Industrial Average dropped 1.7% but is only down 9.4% YTD because of its strong relative performance analysis. The Dow Jones Transportation Average and iShares Russell 2000 only had minor losses but both had dropped over 5% the prior week. The Dow Jones Utility Average was down 1.1% and has moved further into negative territory YTD. The SPDR Gold Trust had a minor loss for the week and has a key seasonal turning point in early 2023.
SPY WeeklyTom Aspray - Viper Report.com At the of start the week there were clear technical warnings as a majority of the weekly A/D lines were 'all negative.' The weekly chart of the Spyder Trust (SPY) shows a negative close below the prior four-week lows. There is some support at $379-$380 with much stronger in the $367-$370 area. The weekly starc- band is at $356.70. The pre-Covid high was $333.34 which now is long-term support.
The weekly S&P 500 Advance/Decline line did turn negative last week by dropping below its WMA. It would take a move above the resistance at line c, to turn the weekly A/D outlook positive. QQQ WeeklyTom Aspray - Viper Report.com The Invesco QQQ Trust (QQQ) reached its downtrend, line a, last week before turning sharply lower. A drop below the minor uptrend in the $267 area will suggest a decline to the weekly starc- band at $249. The worst-case scenario right now would be a decline to the lower support at line b, which is close to the pre-Covid high at $236.21
The weekly Nasdaq 100 A/D line has dropped further below its WMA and still has long-term resistance at line c. All of the daily advance/decline lines are negative and continue to favor a further market decline.Growth/ValueTom Aspray - ViperReport.com
It was another positive week for value over growth as the S&P Value ($IVX) was down 1.6% while the S&P Growth ($IGX) was down 2.6% for the week. This chart is a ratio of $IGX to $IVX that first appeared to be topping in November 2021. The bull market that began in 2003 and ended in 2007 was led by value stocks. The positive trend since 2009 represents how growth did lead value for most of the bull market.
The November top was suggested by the bearish divergences in the MACDs and MACD-His, lines b and c, that was confirmed in April 2022 by the drop below the low at 1.880. The ratio is now back inside the trading channel which increases the odds that growth might see a rebound in the first half of 2023.Apple WeeklyTom Aspray - ViperReport.com
One of the market's key growth stocks, Apple Inc. (AAPL), is unlikely to support the major averages as it has done for much of the last six months. AAPL makes up 6.6% of the S&P 500 and 13% of the Nasdaq 100 and it now looks negative based on the weekly chart. A sell signal was generated a week ago and it was down 5.4% last week. The next support is at $129.02, line a, which is just 4% below Friday's close. A break of this support level would then target the longer-term support at $116.27, line b.
The volume increased last week which turned the VolConf negative. The JA Aspray Insight measures the relative performance (RS) and it turned negative on October 3rd indicating that APPL was no longer leading the S&P. In a declining market, those stocks or ETFs with weak RS generally drop more than the S&P 500.DIA WeeklyTom Aspray - ViperReport.com
Over the past three months, the SPDR Dow Jones Industrial Average ETF (DIA) is up 6.8% while the QQQ is down 5.2% and the SPY is about flat. The clue to the stronger performance came from the RS analysis as the downtrend, line a, was broken in September. As DIA was making its lows in October the RS was still rising.
On Friday DIA along with SPY and QQQ did drop below their daily starc- bands. This is a sign that prices are starting to get stretched on the downside so a rebound ior some stabilization is likely. DIA has almost reached its 38.2% Fibonacci support at $324.69 with the 50% level at $317.42. The RS is now in a trading range but the weekly RS favors DIA over SPY.
Last week's technical warnings were followed by a clear increase in selling. Investors and traders now appear to be more worried about a recession and weaker earnings than inflation or the Fed. Though a sharp rally is always possible before the end of the year the negative technical readings indicate the market will decline into early 2023.