Weekend Report for Monday, March 11

Bottom Line:

Friday was a wide range reversal day in all major US trading indices. It may be signaling a top of some relative importance is in place, but it is certainly and objectively signaling Friday’s high in the indices as important. The indices (ALL FOUR) now must close above Friday’s high to restore the immediately bullish case.

Friday’s trade is not necessarily super bearish; it may simply be a kickoff to a choppy consolidation (Balance Area) that is way overdue.

Special note: This is an election year in the US and in many other countries. There are at least 64 other countries around the world holding national elections in 2024. What could go wrong? Markets are suggesting absolutely nothing. I live in the US so I’ll share my observation that we are setting up for the most contentious US election in any of our lifetimes. It is very important to point out that in the US there has not been a correlation between the party in power and stock market trends. However, markets do not like uncertainty, and never in our lifetimes are there as many potential uncertainties than currently surround the US political situation. There seems to be a similar uncertainty in other major countries. Meanwhile, buy the dip…?

By election year beginning in 1980, here are the significant declines that occurred during that year (charts for each year are on the website under Weekly Updates for this week: 

1980: 21% – Began in Feb. Numerous 3-7% declines. Closed up for the year.

1984: 12% – Began in Jan. Very choppy year. Closed basically unchanged.

1988: Followed the ’87 crash in October. Very choppy with upside bias but numerous 6-7% declines. Closed higher for the year.

1992: 6% but very choppy in a 3-6% range all year. Closed higher.

1996: 5.8% decline that began in Feb., 11% decline that began in June. Straight up from a July low (25.5%, but still included more and deeper retracements than we have had since the October 2023 low) and ended up 20% for the year. This was the middle of the dot com multi-year rally. 

2000: Bubble bursting year that included many declines of 13-20%.

2004: Numerous declines of 6% +. Very wide-swinging, choppy year. Big rally began in early November and continue into the end of the year. Closed up for the year.

2008: Big down year following bull market top in late 2007. Numerous severe declines from 10-30%.

2012: Two significant declines – 10% and 8 %, but very choppy. Closed up for the year.

2016: Choppy but upside bias. Numerous 3.5-6.5% declines.

2020: Covid crash – Epic rally off the low, but still included numerous 3-5% declines.

2024: So far the largest decline from print high to print low has been 2.53%. It occurred and was over in 10 trade hours.

BUT! TRADE PRICE!! If/when there is something resembling even a normal retracement a downside level has to be taken out along the way. Watch those levels.

PDF: Weekend Report_2024_03_11

VIDEO

SPX

Upper KRA: 5189, 5260-5300
Lower KRAs: 5057

NDX

Upper KRA: 18416
Lower KRAs: 17804

DOW

Upper KRAs: 38971, 39282
Lower KRA: 38457

RUT

Upper KRA: 2116
Lower KRA: 2041-2028

SPX Profile 

Below are comments from three four five six weeks ago. Nothing has changed.

From the weekly perspective there has been one minor pocket of Balance since the October 27 low. It appears another distribution (range) began at the January lows in the indices. The relative lack of Balance, and the depth of retracement in that Balance is unusual and likely to eventually result in a top of larger degree than we have seen since that October low. Where that top may occur is a complete unknown (see above).

Internals

No change: 

NYSE internal data has not been helpful. It is never as useful in bull trends than in bear trends, and that is especially true in the present with only 5-7 stocks completely controlling the direction of the NDX, SPX and DOW.

The divergences between price action in the SPX and breadth continue to mount. But when it will matter resulting in some top of relative significance is a total guess.

What is newly notable is that closing NYSE breadth is in its most narrow range in years.       

VIX has made a higher low at every single new price high in the SPX since mid-December.

This is another concern for the short-term bullish case.       

     

US 10-yr Notes

No change: Notes are between levels.

US Dollar

Consider favoring shorts against 103.85.

Gold

Gold has broken above a critical long-term level. Consider favoring longs against 2085.

Crude

Crude is in a choppy Balance Area. Consider taking trades in the direction of the break.