Bottom line for this week:
The current rate of change to the upside is unsustainable and will not continue. The indices are likely to be near at least a short-term top and possibly on the verge of the deepest retracement we’ve seen since the New Year began.
Daily KRAs:
SPX
The SPX close on Thursday represented an 8.93% gain since the end of last year. Retracements have been extremely short-lived. The SPX (and other indices) are increasingly likely to have a more protracted series of day-to-day, two-sided trade (Balance in a range).
NDX
The NDX closed on Thursday at just above the level cited in last weekend’s Report at 12,881, a 17.74% gain from the end of year close. Like with the SPX, Balance is likely to begin soon if it has not already.
RUT
The Russell closed on Thursday up 13.56% for year. The next upside level is the August high at 2030.
DOW
The DOW led the charge higher off the October low but has gone net nowhere since. It is mired in a Balance Area within a larger degree Balance Area.
Here is the profile view of the increasingly mature multi-day Balance Area in the Dow within the context of the larger degree structure.
Internals
Internals are screaming caution about pressing the upside, at a minimum. This chart is discussed in detail in the video.
The 30m chart of price (ES day session) and breadth suggests we could see another rally attempt toward last week’s highs. However, the chart above suggests that we’re likely close time-wise to see a deeper retracement than has occurred over the past couple of weeks.
It could be a gift if we see highs tested in one or more of the indices and breadth at another divergence on Monday or Tuesday.
No change:
VIX is again below 20. The market isn’t going to decline by much or for long if VIX remains below 20.
It could be a gift if we see highs tested in one or more of the indices and breadth at another divergence on Monday or Tuesday.
Gold
From last weekend’s Report:
Gold is in an increasingly tight Balance Area. I would not want to see a close in Gold below 1898 under any immediate bullish assumption.
Gold has a lot of downside momentum. This is the largest two day move in Gold since August of 2021. There isn’t a good reward/risk trade at the moment. Short-term it is certainly extended, but the momentum suggests even if Gold bounces from near Friday’s close the Friday low is likely not the low.
Crude
Crude is testing important intermediate term lows. Consider favoring shorts against Friday’s high.
US Dollar
The US Dollar has likely put in a long term top. It is presently spiking up and I don’t see an immediate good reward/risk trade.
US 10-yr. Notes
Notes closed Friday at a short-term downside KRA. Longs near here have a great reward/risk profile.
