Weekend Report for Monday, May 20

Bottom Line:

The trend is up in the US stock indices in all degrees of time.

Price structure and technicals suggest any retracements are likely to be shallow and short-lived. Until proven otherwise, retracements are likely to be similar in duration in magnitude and time as those experienced from last October’s low to the April high. 

As always, price action is the final arbiter. The signal something more bearish may be developing is if/when the SPX begins making a series of lower lows and lower highs in the 30m timeframe. SEE VIDEO

PDF: Weekend Report_2024_05_20

VIDEO

SPX

Upper KRA: 5326
Lower KRA: 5263-5246

The SPX through Thursday’s print high is up 6.27% in 10 trade days. That is a rate of change that will not continue. However, it does not imply a large retracement, or that the trend will not continue higher.

What it suggests is the high probability of a change in market condition. For a trader this is critical information. You don’t use the same trading strategies and tactics in all market conditions. 

NDX

Upper KRA: 18669
Lower KRA: 18369

DOW

From last weekend’s report: The DOW has closed higher eight consecutive days. You know what that means? Nothing. It’s trivia. Bull runs typically have streaks like this. 

Upper KRA: 39890
Lower KRA: 38814

RUT

Upper KRA: 2112
Lower KRA: 2085

The Russell 2000 continues to lag.

New York Composite

Upper KRA: ?
Lower KRA: 18322 ; 18131

The New York Composite is an index of all companies listed on the New York Stock exchange. It is confirming the trend of the SPX, NDX and DOW.

SPX Profile 

Market Profile is a graphing format that gives a unique perspective of price behavior. It highlights trade activity on the horizontal scale of the chart. In doing so, it provides a visual display of the Auction Market Process. The Auction Market Process of Development is a three-step process of price behavior that occurs in all degrees of time – 1) Trend; 2) Stop ; 3) Develop.

The current pattern of the May auction is best described as “Funky”; it is relatively wide-ranged (with almost two more weeks to go in the May auction) and lacks development. “Development” will occur, but at the moment there are several potential paths. So, there is nothing particularly helpful from this perspective at the moment.

Internals

The 10-day MA of NYSE advancing issues recently hit its highest level since last January and turned down. The last two times this occurred the SPX was near a top – a significant one in July 2023, and a very minor one last December. I discuss this in more detail in the VIDEO.        

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

VIX

VIX has crashed in the last two weeks and closed Friday at its lowest point since before the Covid/2020 bear market.

VIX can stay low for long periods of time and it is almost always accompanied by a decrease in daily range. Again, this is an important market condition observation. I discuss this in more detail in the VIDEO.

 

US 10-yr Notes

Notes are in a long-term downtrend – choppy but clearly making lower lows and highs.

US Dollar

The Dollar is mired in a range. 

Gold 

2283 is the critical downside KRA in Gold.

Crude

Crude bounced off an important downside KRA but is still making lower lows and highs.