Weekend Report for Monday, March 25

PDF: Weekend Report_2024_03_25
VIDEO

Bottom Line:

The trend is strongly up.

A Few Observations:

The SPX broke intuitively from the Balance Area we were watching and traded strongly higher. The DOW traded in lock-step with the SPX with the NDX closing just below its all-time highs. The RUT continues to have trouble getting above its late December high but remains not far from it. A close above its December high is likely very bullish.

The current bull leg in the indices began at last October lows. They are in a historic run to the upside. The momentum is incredibly strong and a persistent bid comes in following every minor decline. Until there is some objective signal of a change in trend the smart thing to do is to look for buying opportunities in all time frames.

Like clockwork, gurus are coming from all directions with every arcane methodology you have ever heard of projecting the top. It doesn’t have to be this hard.

Here are a few of my favorite charts from last week:

This is the new magic – options charting. Or it could be a shot of the next solar system over from ours, not too sure.

All secrets of the universe, past and present, went into the construction of the chart below:

 Here is a worthy attempt to make Market Profile complicated and magical:

The Auction Market Perspective

What can this perspective tell us that might be helpful? First, just as a reminder, Auction Market Principles are based ENTIRELY on what the market itself is doing and has done. It is as “real-time” based as analysis can get. It is a look at what IS, not what should be.

I have always pointed out that market trends have a distinct “personality”. Bull trends and bear trends in general have different characteristics. Bull trends are far more directionally relentless and less volatile than bear trends.

The current bull leg in the SPX is being compared to bull legs that occurred in the mid-1990’s through the run up into the dot com bust in 2000. In particular, the year of 1995 is being suggested as an analog, so let’s take a look at what occurred in 1995, and compare it to the current market.

As we can see on the weekly chart, from the bull leg low that occurred in December 1994, the SPX closed 1995 from that low with a gain of about 39.5%. Through twenty-one weeks off the corrective low the current SPX is up 28.25%. Through twenty-one weeks off the corrective low the 1995 market was up 18.6%.

Below is the daily chart of 1995 and its retracements of 1%+. What do you notice? Anytime the SPX was near a 2% decline further downside was extremely limited and it was a buying opportunity. Also, those opportunities were very short-lived.

From a corrective low in 1996, the SPX continued to have strong bull legs punctuated by only minor declines. I highlighted the three most relentless advances and the retracements within those legs.

From the 1998 low into the 2000 top, there continued to be intermittent relentless bull legs that contained only minor and short-lived retracements.

The same basic pattern occurs in ALL bull legs. The bull leg we are currently experiencing is certainly among the most vertical and extreme advances in terms of velocity, but it is nothing new and the current pattern has been extremely consistent and MUST be respected.

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SPX

Retracements since the late December top have a magnitude from 1.66% to 2.52%. IF the SPX is in process of another minor retracement the “target” for a similar magnitude retracement  is 5172-5129

A close below 5129 would be “something different” and would merit further analysis. 

It doesn’t have to be hard.

Upper KRA: 5261
Lower KRA: 5171-5129

SPX Profile 

The SPX broke very strongly up from the compressed Balance Area formed since the end of February. It appears to be in a new distribution to the upside.

NDX

Upper KRA: 18464
Lower KRAs: 17877-17758

DOW

Upper KRA: 39889
Lower KRAs: 38962, 38448

RUT

Upper KRA: 2116
Lower KRA: 2009

                                                                                                                                                                                                                                                                                                                                                                                                                                       

US 10-yr Notes

Notes are between important pivots after testing an important downside KRA.

US Dollar

I don’t see any well-defined opportunity. Lot of chop.

Gold

Gold left a huge selling tail on Thursday. If 2149 is taken out, and I think it will be, it opens up a lot of downside.

Crude

Crude continues to chop higher. It should hold near current levels under a bullish assumption.