A sick bear is sleeping alone in bed
Investors and traders alike were likely feeling a little spooked at the beginning of last week, as the 5.5% decline in the Nasdaq Composite Index was the largest since November 2022. His 10% drop in his high-profile NVIDIA
Nvidia
SPDR Dow Jones Industrial Average ETF Trust
Corp. (NVDA) Friday, April 19thth This further worried stock market bulls, while reinforcing the growing number of bearish comments.
From my technical perspective, a correction in a bull market or a rebound in a bear market can help change market sentiment enough to create an environment where the previous market trend can resume. That’s what I’ve been expecting since April 4th.th An important reversal that began a correction in the S&P 500.
These changes in sentiment can be measured in several ways. In mid-April, S&P Global commented, “U.S. stock investors’ risk appetite fell from 14% in March to 5% in April, the lowest level in three months.” We are confident that we will have a more recent risk assessment as of the close of trading on April 19th.th It would have fallen further early in the week.
SPY AAII Bullish Sentiment
Sentiment data from the American Association of Individual Investors (AAII) dates back to 1987 and has been part of my analysis routine for many years. In a comment last week, I tried to argue that a decline in bullish sentiment will help fuel the next market rally.
The most recent bullish rate high was 51.7% and occurred on March 6th.th A second high was recorded on March 27th.th 50%. As of April 17thth, Bulls have fallen to 38.3% and fell further last week to 32.1%. At the October 2023 low, bullish sentiment was 24.3%. You can find the latest findings on the AAII site every Thursday morning.
Spider Trust (SPY) weekly chart
Major shareholder yield index ETF
SPDR S&P 500 ETF Trust
) also suggested a week ago that the closing price may be close to the April 19 low.th $495.18, just above the 20-week EMA of $494.48. It also came very close to the weekly Stark Band at $493.49. The early 2022 high of $480.50 remains an important support level.
After this week’s move, the S&P 500’s rise/fall has risen above the EMA, reversing the previous week’s negative signal. It has led the SPY rally since June 2023, when SPY predicted a new high for the S&P 500, but that high was not achieved until early 2024. The New York Stock Exchange stock-only A/D line tracked another group of financial instruments and also reversed above that level. This week’s EMA.
Last week’s SPY closing price was $508.60, slightly below the annual R1 price of $509.60. If next week’s closing price rises with positive up/down numbers, it would represent an increase in SPY to its recent high of $524.61, if not R2 per year at $545.36.
IWF/IWD weekly ratio
Many growth stocks peaked in early February 2024. One of my favorite tools for analyzing the relationship between growth and value stocks is to look at the iShares Russell 1000 Growth (IWF) ratio.
iShares Russell 1000 Growth ETF
IWF
). If this ratio is rising, as it has been for most of 2023, that means growth stocks or ETFs have been leading the way in value.
Growth stocks had led the way up from their lows in early 2024, but that all changed in February when value stocks started leading the way. The situation changed again last week, with IWD increasing by just 1.47%, while IWF rose 3.7%.
iShares Russell 1000 Value ETF
Therefore, the weekly chart of the IWF/IWD ratio rose sharply last week, but is still trending downward (i.e., lower highs and lower lows). MACD and MACD-His both went negative in his March and are still hitting new lows. This prioritizes value over growth.
IWF/IWD monthly ratio
Many investors and traders may not realize the importance of growth/value analysis in the past 20 years of stock market history. The dot-com stock market peak in March 2000 was identified by this ratio as the peak for growth stocks, where value stocks began to dominate.
When the stock market peaked in October 2007, growth stocks had already begun to lead value stocks, and this continued during the 2007-2008 bear market. Therefore, value stocks fell more than growth stocks. This was also confirmed by the relative performance (RS) of financial stocks and technology ETFs.
Monthly chart peaks ahead of coronavirus market decline, then likely triple tops as ratio in late 2021 with most of the biggest growth stocks peaking ahead of decline in 2022 It shows that there is. This ratio is about to start rising in April, but remains well below the top break. A decline below the 20-month EMA would support the view that growth stocks may be completing a major ceiling.daily technical study
Invesco QQQ Trust
Invesco QQQ daily chart
Invesco QQQ Trust
The Nasdaq 100’s advance line ended the week just above the WMA, which is aiming for flatness. The A/D line must move significantly above downtrend line b to indicate the end of the correction. That requires a day or two of strong A/D numbers at the beginning of the week. RS ended the week above WMA, which is still falling, and needs to break above downtrend line c to show that QQQ is once again leading SPY.
Stock markets fell sharply early Thursday following a weaker-than-expected GDP report, but the selling was well absorbed as markets rose throughout the day. Actions earlier this week ensured the outlook shifted positively heading into Friday’s PCE report, justifying new purchases. A confirmed signal from the A/D line is required to indicate that the risk of buying more is justified.
A positive close this week should convince many people expecting a deeper market decline to revise their outlook. In that case, it could take several weeks for the bullish percentage to increase significantly. A sharply negative A/D reading earlier in the week would suggest at least a possible test of recent lows.
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