Seismic Shift

May 17, 2020

Weekly Market Outlook

By Keith Schneider

blankUS Equity markets retreated this week down between -.7 to -5.5%, but found support at their 50 day moving averages, preventing what was looking like a meltdown in the making. One short term sentiment indicator hit oversold levels which helped to trigger the bounce. Overall, we have made no forward progress since early to mid-April and are compressing, setting up for a large move.

Globally all stock indexes were down on the week, with Switzerland down the least which is not surprising as gold, gold miners and silver all put in a stellar week. Gold broke out a classic multi-week wedge pattern to the upside. Considering the unprecedented amount of stimulus pumped into the world economy it is one of the few things that is making sense, precious metals moving higher. In terms of making sense the Bio-tech sector also did well, bucking the broad market.

Reducing the noise, equities markets rallied from their March lows and has ran into overhead resistance, hence a standoff. Generally, one should defer to the longer-term view which of course is bearish.

This week’s highlights are:

  • Risk Gauges backed off to neutral
  • Value stocks continue to not live up to its name
  • Market Internals weakened and flipped bearish
  • Volatility (VXX) bounced off their lower Bollinger bands, showing the grizzly is still alive and well, looking for his next meal
  • Markets have moved into a compression zone
  • The Energy sector continued to bounce from its historic meltdown
  • Gold, Gold Miners, and Silver closed strong and look poised for a lot more upside
  • Soft Commodities (DBA) continue its bottoming process

On another note, one of the more surprising developments is that growth stocks continue a tear, leaving value stocks in the dust with no end in sight. Our NASDQ 100 All Stars quant model is designed to find those massive outliers and has been doing just that.

Stay Safe and Best Wishes for your trading.

Keith Schneider


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