Weekend Report for Monday, March 18

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Bottom Line:

The major US stock indices have been in a significant choppy churn on a day-to-day basis with little net decline, so far. Next week the big events will be the Nvidia conference that begins Monday, and the Fed interest rate policy announcement and discussion that occurs on Wednesday. It is debatable as to who might could move the market more – Jerome Powell or Jensen Huang.

I still think at some point the SPX will see more than a 2.5% decline that lasts for about 9 trade hours. Whether we are in that process now or not remains to be seen.

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_18

VIDEO

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SPX

Upper KRA: 5189
Lower KRA: 5056

NDX

Upper KRA: 18420
Lower KRAs: 17793

DOW

Upper KRA: 39282
Lower KRA: 38448

RUT

Upper KRA: 2116
Lower KRA: 2000

SPX Profile 

The current profile perfectly illustrates the churn we have been seeing since late February. This was overdue and inevitable – time regulates price

It is very likely we will see the March Auction range expanded.

Internals

Breadth finally broke out of the extraordinarly narrow band in which it had been locked in since mid-February. 

Internals will continue to roll over if we are about to see further downside price action.

                                                                                                                                                                                                                                                                                                                                                     

US 10-yr Notes

Notes are approaching an important downside KRA. 

US Dollar

No change: Consider favoring shorts against 103.85.

Gold

Gold is sitting on a critical short-term level. A break of this level opens up a lot of room to the downside, short-term, but would not necessarily flip a bullish longer-term view.

Crude

Consider favoring longs against 77.39.