State of the Market — June 26 — Indexes and Indicators
Where Does the Market Go From Here?
Market Outlook
As I wrote in my last piece, here is what I am watching for as some key fundamental, economic, and global turning points. In my mind, for this bear market to end, some of these factors need to be trending in a positive direction for this bear market to end.
That being said, if we start to get above moving averages, the 50 as a good sign, and the 200 as a very strong sign, on the SPY and the QQQ primarily, that would be a good signal that the market thinks these things are going to turn around in the near future.
Around mid July we start to get big economic data, and big company earnings, so that seems to be the next real point in time where we will get some more clarity around a lot of this “recession” talk and where we are on inflation.
Now let’s look at the indexes and the indicators and get a better sense of where we are right now in the market.
Market Indexes
SPY (S&P 500)
Spy had a bounce up off the 364 range bottom on Friday last week, and spent this four day week moving up with a strong follow through day on Friday this week — cutting right through the COVID VWAP (grey).
Above COVID VWAP, below all major moving averages.
Here is the channel I am looking at. My thought process here is to continue to stay short, even in the face of this recent rally. I am looking for price to continue to move up, and have a consolidation around the 400 price point. That would put us at 1) the edge of this trend channel, 2) the 50 day moving average, and 3) the 400 price point — an important psychological level.
I believe those three converging resistance lines would be a safer spot to reinitiate some short positions.
QQQ (Nasdaq 100)
QQQ also had a strong rally this week, although volume wasn’t as strong as SPY.
Slightly above the 20 day moving average, below the 50 and 200.
IWM (Russell 2000)
IWM with a strong bounce off of the lower range this week. Fighting back against this range. Doesn’t want to settle back into pre-COVID levels just yet which is a good sign the market may be trying to turn here.
Below all major moving averages.
BTCUSD (Bitcoin)
Bitcoin is slightly above its 21k price point, refusing to settle into this 17–21k range.
Below all major moving averages.
TLT (20 Year Bonds)
TLT made some progress to the upside this week and finished down on Friday. This is still the most concerning chart in the group. If safe money can’t find a bottom, I think that signals more pain.
Below all major moving averages.
Looking for a Capitulatory Move (SPY)
I wanted to look quickly at a SPY monthly chart. We are still in a strong bullish uptrend over the long-term. I believe if we saw sharp move over the next 3–6 months down into the 320 or even a quick drop below 300 (a move like 2008 or 2020), that would have a strong bounce back up which would put us in a strong position to resume this uptrend.
Otherwise, my fear is the market isn’t pricing in a short term move at all, and that this gets drawn out for several months or even years. I am hoping for the strong capitulation, but that’s just because I like bull markets.
Market Indicators
Slow and Fast Moving Averages
Weekly SFMA still strongly downtrending.
The daily SFMA on QQQ are showing in turning up. Because I am personally looking for another place to go short, I am looking for this daily SFMA to cross up as a sign of being overstretched and as a place to look to go short.
VIX
Looking for a VIX spike into 42 range as a capitulatory move. That would be a good sign of a strong market bottom and potential reversal.
Put/Call Ratio
A spike into the 1.4 range would show peak fear. We did have a strong move a few weeks ago though, so that may have been a good sign of a market bottom.
52 Week Lows/52 Week Highs Percentage
Had a strong spike in January, would love to see another big spike here.
Breadth
Advancing/Declining stocks still has some room to move down further, however, it is trending in the right direction for a capitulatory move.
Stocks Above 200-Day Moving Average
A capitulatory move here would be if we had a drastic, sharp move downwards.
Final Thoughts
2001 didn’t have much of a capitulatory move, it just dragged on and on until it wore everyone out.
We really haven’t seen a capitulatory move, but markets seem oversold a bit, I expect to have some upside movement before we turn and move lower. However, the market will test the upside hypothesis and potentially move higher into a new bull market.
Anything is possible! Just keeping my eyes on what the market is telling me.
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