Market Health Tracking

How has NVDA been impacting the overall market according to PuddinHead42?

RE: Factset. Andy, I will have to check that out. Thanks

5/29/24 Update.

DJIA down 1.1%, falls farther below 50dma. Russell down 1.5%, MDY down 1.3%, S&P down 0.7%, Naz down 0.6%

On the Nasdaq, breadth had actually turned positive in recent days. Not on Wednesday. Falling issues beat gainers by nearly a 3-1 ratio. Also, the 10-day moving average of the Nasdaq’s advance-decline line peaked in the middle of last week and has begun to soften.

Market breadth was terrible.

NVDA is no longer hiding the weakness in the broad market.

We have had a number of “one-day-corrections” this year, and then a slightly longer, slightly deeper correction in April, but no 10% correction yet. This is feeling like it will be more than a day or two, but PCE on Friday could end that or accelerate the decline.

We just take it day by day.

IBD shows 3 distribution days on the Naz and 3 on the S&P. Recommended exposure is 60-80%. Some caution advised.

Inverse ETFs like RWM, SPXS, SQQQ are turning positive.

2 Likes

Thanks for posting your updates.

Many moons ago there was a trader on TMF who used to trade an Index ETF based on the Bullish Percent Index, which is a breadth indicator.

He used the $BPCOMPQ (that’s the stockcharts.com symbol) and if it was above the 10 and 20 day MA’s he would be mostly invested, lighten up if it fell below the 10 day, and go mostly cash if it went below both MA’s. He didn’t short. I’ve always been intrigued by this method, and have looked at it often but never done it. I may start trying it with some money that I can afford to play with.

It looks on the verge of falling below the 20 day MA, so it is showing pretty bearish at the moment, similar to what you’ve said.

2 Likes

5/30/24:

Markets down: DJIA down 0.9%, S&P down 0.6%, Naz down 1.1%. With volume up on S&P and Naz, each added a distribution day. Now each has 4 in a relatively short period. But, in opposite action, IWM, RSP, were up, and QQEW was down about half that of the QQQ, indicating smaller stocks finally had the advantage (NVDA off 3.77%, MSFT off 3.38%). Small caps probably helped by a dip in the 10-year rate.

We are still in a power trend.

Enterprise software stocks crushed. CRM outlook bad and dragged stocks like NOW and CRWD down with it. But after hours, ZS up 16% on earnings.

2 Likes

Just a little side note I found from listening to IBD weekly. You can see how the sectors are rotating here, they will even send you a weekly report. It might be useful.

https://www.sectorspdrs.com/

Andy

2 Likes

I’ve always appreciated Julius de Kempenaer’s work in Relative Rotational Graphing. Especially how dynamic and interactive it is. Stockcharts does a great job supporting it.

Lakedog

2 Likes

I forgot to post this weekend, so here it is.

Remember “sell in May and go away” :wink:
Naz up 6.9% in May
SPY up 4.8%
DOW up 2.4%
Russell 2000 (IWM) up 5% in May.

The stock market rally started the short week in decent shape. The Nasdaq topped 17,000 for the first time on Tuesday, even as the laggard Dow Jones undercut its 50-day line. But then Salesforce, Dell and other earnings losers hit techs hard. The S&P 500 nearly tested its 10-week line Friday before rebounding higher.

Despite Friday’s afternoon bounce, the stock market rally enters June in a weaker state than the broad advance for much of May. The indexes are at least testing key levels while a number of leading stocks have come under pressure or worse.

The Nasdaq composite got support at the 21-day exponential moving average as it ended the session essentially flat.

S&P tested sliced through 21dma and then bounced off the 50dma to finish above the 21dma, a sign that big institutions started supporting market after lunch. Also, algos seem to fight it out near trend lines, bearish algos want to push down and bullish want to push up. Once one side starts winning, the other side gives up and the move can be big.

Mike Webster: Thursday a week ago was an outside day and downside reversal ending near the lows, so today’s action was an important counterbalance to that.

Cybersecurity leader CrowdStrike (CRWD), Semtech (SMTC) and Samsara (IOT) are among the noteworthy firms reporting in the coming week.

SMCI has been falling below 50dma on strong volume, a sign of weakness.

2 Likes

6/3/24 - markets up as expected after Friday’s reversal…sort of.
S&P gapped up a little bit then fell again like yesterday. Today it stopped at the 21dma and finished the day up 0.1%.

Naz followed the same pattern, but did not get too close to the 21 day before it gave us an upside reversal. Now we want to see the indexes keep their lows above the 21dma as the next sign of strength

IWM and MDY did not fare as well, closing negative, near the lows and on the 50dma. The breadth is not with us.

The ISM manufacturing survey, which hit the wires at 10 a.m. ET, came in at 48.7 for May. An index below 50 signifies contraction in the nation’s factories. According to Econoday, Wall Street had expected the ISM to edge up to 49.8 vs. a 49.2 reading in April. This dropped interest rates and made investors worry about industrials.

OPEC+ decides to keep oil production cuts in place longer. Investors think this means a dimmed outlook on world economic growth. This caused heavy volume declines in FANG, TDW, OII, EOG.

The market rally is struggling somewhat, even with Nvidia stock masking some of the weakness. It wouldn’t take much for the Nasdaq and S&P 500 to rev back to record highs. If so, a number of stocks would flash buy signals while others could set up promptly. But it wouldn’t take much for the Nasdaq and S&P 500 to break below their 21-day and 50-day lines.

2 Likes

Stay away from software stocks the odds are not in anyone’s favor.

Andy

The major stock indexes closed near highs for the third straight session in the stock market Tuesday. But small caps took another hit, and several top-rated growth stocks struggled below the surface. IWM closed down 1.3% and below its 50dma again, this despite lower ten year yields. This points to weak breadth.

The JOLTS report showed a weakening job market and caused the bet for a rate cut in September to rise to 67%.

NVDA closed up, but none of the baby ducks are following. AI/Datacenter stocks taking hits,

Infrastructure stocks taking hits. Mining and energy down.

CRWD up 6.75% after late earnings, need to see how it reacts in the full market, but it seems to be bucking the enterprise software trend.

This is a tricky market. The Nasdaq and S&P 500 are holding near highs, above their 21-day moving average. But there’s a lot of underlying weakness, including in leading stocks.|

1 Like

6/5: Markets got healthier today on week job number, which make people believe the Fed will be more likely to cut this year.

Naz was up 2%, over a (Jesse Livermore) big round number of 17,000. Vol was up, but still below average. Finished at the top of the trading range (sign of strength). All-time high. Growth stock feeling their oats. Breadth was ok but not great.

S&P also at an all-time high, though vol was below average and below yesterday.

IBD “The suggested current outlook for active investors got upgraded to a recommended level of exposure in growth stocks to 80%-100%, up from 60%-80%. We are still in a power trend.”

6/6: sleepy day, S&P an Naz touch new highs but settled a little lower. Perfectly normal after yesterday’s big workout. Russell down 0.7% and back down to the 50dma. Just teetertotter that every other day :wink:

The S&P and Naz continue to have closing prices above the 21dma, that is when we push on the gas.

6/11/24: Naz up 0.9% (thanks Apple), S&P +0.3% and Russell 2000 small caps down 0.4%.

The market rally is definitely mixed, which is not ideal. But there are still a number of stocks that are working, flashing buy signals or setting up.

Fed speaks Wed. I predict nothing before December meeting, but some important measures are showing some economic slowing, so who knows. Which is to say, the market may be disappointed and have another 1-day temper tantrum.

1 Like

6/12/24 - market very strong, power trend in effect.

Market up nice on favorable inflation numbers in the morning. Fed speak throws a little water on the fire, but markets close at highs. There were some nice breakouts.

||○ The Nasdaq closed 1.5% higher and had been up more than 2% before it pulled back in the final half-hour of trading. The S&P 500 rose nearly 0.9% after sellers swarmed in the final 30 minutes.|
||○ The Russell 2000 rose 1.6% but halved a 3.2% morning burst. The index, nonetheless, closed back above the 50-day moving average.|
||○ Volume rose on the Nasdaq and NYSE from Tuesday. It was only the second day that NYSE volume is above average this month.|
||○ The Nasdaq closed 7.4% above its 50-day line, above the 5-6% level that starts looking extended. The tech-heavy composite could keep getting more extended, but the risks of a pullback would increase as well. Nvidia stock is 31% above its 50-day line, though it’s gotten above 40% a couple of times in the past year.|
||○ Investors can be adding exposure, but do so gradually. If you have heavy exposure, you can stand pat or simply reshuffle your portfolio|
||○ Federal Reserve policymakers guided to just one Fed rate cut this year, defying market expectations for two cuts. That’s based on the dot plot of individual forecasts, with four members predicting no moves at all in 2024.|

1 Like

6/14/24 (Friday)

Naz up 0.1%, S&P flat. Russell 2000 (IWM) down 1.6%. Still in a power trend.

Stocks ended higher this week amid benevolent inflation readings, which cheered investors even as the Federal Reserve lowered its outlook on interest rate cuts this year.

The relative strength line for the Russell 2000 is at a 23-year low, reflecting small caps’ long-term underperformance vs. the S&P 500.|

Webby’s indicators are good, not too hot, not too cold. So we think about things that would not be normal. Right now, a gap up would not be expected and might make the markets too hot, even though we would theoretically like that to happen. Base case now is sideways to a drift down. A major gap down would be abnormal here. Don’t predict, but interpret the market (as Bill taught). Mike would love a week of sideways action for the 21dma to catch up, but he acknowledges the market never listens to him. So now we are no longer pressing hard on the gas. Still heavily invested. (Swing trader around 100%).

2 Likes

• Webby on Daily Video 6/17/24 (Mon)
○ He noted Friday that we really did not want to see a big up day because we were already a bit extended. But that is what we got.
○ This doesn’t mean you sell, but be en garde for rotation. In the 1990s we had a long run of “extended” markets. Don’t be afraid to trim some and invest in new breakouts or upside reversals. That’s away to stay invested while reducing risk and he would spread things out into smaller positions.

6/18/24:
○ The Nasdaq composite rose fractionally, while the S&P 500 added nearly 0.3%. The Russell 2000 added nearly 0.2% after Monday’s upside reversal, but the small-cap index closed near its session low and is still stuck below its 50-day moving average.
||○ Weakening Nasdaq breadth is a yellow flag.|
||○ The IBD Market Pulse graphic recommends exposure at 80%-100%. Favoring the 80% side makes sense at this point, with Nasdaq breadth as weak as it is and the Nasdaq more than 8% above its 50-day moving average.

6/20/24: the market coughed today, but is still healthy. I saw a lot of downside reversals in leading stocks (e.g. NVDA), (or just ugly downers from the get-go like CMG, ARM). but that does not mean this is the end of this really. It does mean to watch even more closely and create your sell plans if you are a position trader vs swing trader. Breadth was poor.

The S&P and Naz each added a distribution day (4,1 respectively)

A number of non-tech SPDR Sector funds are showing Simon Sez “out of the gate” signals, might be the start of a rotation.

A reminder of the obvious: “It has been common in past cycles, as the stock market is coming into a meaningful top, that the biggest growth names are the ones carrying the load,” Scott Wren, senior global market strategist at Wells Fargo Investment Institute, wrote in an analysis Thursday.

I forgot to mention that Thursday was an “outside day” for the Naz and NVDA. TA people are wary of these and the IBD team talks about them when they happen, especially Mike Webster.
Last time, Webby talked about watching the action afterwards and that we should not feel comfortable until the price can rise back above the high of the outside day price. He will probably say that first we need so see price above the 50% retracement area of that day. Friday’s show will be good to watch.

I have marked some in the chart below. None were followed by disaster, but the one in April was followed shortly by a little correction.

1 Like

6/21/24: Friday wrap up. First real change in market health in a while. An outside day Thursday in NVDA and NAZ followed by a down day Friday (which would be the expectation). NAZ and NVDA are still extended above historical levels (vs 50dma).

IBD team talks about having position-trading exposure around the 80% level, so about 30% cash. Sometimes they hedge when they don’t want to sell a position like NVDA. That way they break even until things change.

S&P weekly closed at the 34% trading range, Bill said 40% level was a sign of support, so S&P not showing that support. NAZ finished week flat, which is at the 0% range. This is a “stalling week”, which is weakness.

Position traders sell their weak stocks first when raising cash.

Some other notes…
||○ The Nasdaq is now 6.7% above its 50-day line. That’s still extended but down from 8.3% on Monday. A little sideways action would be constructive.
||○ But it’s not an especially great time to be adding exposure, except perhaps for swing trades.|
||○ PCE coming out Friday.|
||○ NVDA is now 25.3% above its 50-day line. Back on March 7, NVDA stock closed 41.9% above the 50-day line, the most in 21 years. The next day, Nvidia stock staged a sharp reversal that marked the start of a consolidation.|
||○ AMZN has a flat base with a 191.70 buy point. Meta in a cup/handle.|

2 Likes

6/27/24 Market continues to quietly recover from its 3 day “correction”. Naz back near highs. Leading stocks show some strength. IGV (ETF for Enterprise Software) had a very strong day.

Power Trend still in place.

Friday is the end of the quarter.

||○ The Dow Jones Industrial Average gained 0.1%, bouncing further from the 50-day moving average. The S&P 500 also rose 0.1%, while the Nasdaq moved up 0.3%. Market breadth was modestly positive. The small-cap Russell 2000 jumped 1%, closing just above its 50-day line for the first time since June 13.

||○ A few days ago, the market appeared to be rotating out of Nvidia and AI plays and into financials and industrials. The former seem to be trying to find their footing while financials and industrials have backed off, slightly. Now software and megacaps are taking the lead.|
||○ PCE Friday 0830.|
||○ Investors could be making new buys, either adding exposure or swapping out losers and laggards in your portfolio. But if you are heavily invested, holding steady is a sound strategy as well.

7/1/24 - after Friday’s reversal, the expectation was for a couple more down days, maybe even more. But we had a nice bounce today. Naz got it all back, but did not yet exceed the intra-high of the Downside Reversal day.

Remember Mike said this on Friday:
Remember the downside reversal buy back rule, if you trade back above the high of the downside reversal day, which is today, and it is within 2-3 days, then it is a buy signal. But Webby expects we will test the 21dma instead

With more detail from the 5/24/24 video…

If you come back over the high of the downside day within two days, then is it a “Buyback” scenario. Of 61 qualifying downside reversals, only 11 became buyback scenarios. All 11 of those happened in a power trend like we are in now. That is, that market had been strong when the downside reversal happened. It shows the market is much stronger than you thought, because normally the DR will cause the market to continue to go down. In other words, if we go above that high Tuesday, push on the gas. (Buy back anything you sold on the DR)

Other show notes

||○ Overall, the session’s moves by broader indexes were mild. Day-to-day fluctuations might get limited by the fact that the stock market is set to close Thursday for the July Fourth holiday.|
||○ The Nasdaq composite, which led other equity indexes during the first six months of 2024, delivered a new closing high of 17,879. Its gain of 0.8% on Monday recouped all of Friday’s 0.7% loss.|
||○ After a bullish reversal back above the 21-day exponential moving average that took place on May 31, the S&P 500 has rallied nearly 5%. Over a four-week period, it has fallen in seven separate sessions. The largest drop among those down days? Just 0.4%.|
||○ Such action in this key stock market benchmark reflects an unwillingness among large investors to forcefully sell shares.|
||○ 24 of IBD’s 197 industry groups actually slid 2% or more for the day.|
||○ the Invesco S&P 500 Equal Weight (RSP) exchange traded fund fell 0.8%. RSP marked its lowest close since May 29. This confirms a lack of breadth.

2 Likes

7/2/24 - market looking strong. Power trend still in place. Naz at record highs. RSP and QQEW looking a little better (breadth may be improving). Naz 7% extended from its 50dma, which is a little high.

The Naz closed above the high of the Downside Reversal (DR) day that happened two days ago. That “activates” the DR buyback rule

If you come back over the high of the downside day within two days, then is it a “Buyback” scenario. Of 61 qualifying downside reversals, only 11 became buyback scenarios. All 11 of those happened in a power trend like we are in now. That is, that market had been strong when the downside reversal happened. It shows the market is much stronger than you thought, because normally the DR will cause the market to continue to go down. In other words, if we go above that high Tuesday, push on the gas. (Buy back anything you sold on the DR)

7/5/24 Friday Update: Webby RSI is good for S&P but showing a little hot for Naz. Naz is now 8.3% above 50dma (extended). Would like to see this mitigated with some sideways movement, or a weak open on Monday where we get near the 21dma.

7/17/24:
The market has changed dramatically in the last few days. The CPI readings were cooler than expected and the Fed-speak gave investors enough optimism to drive the probability of a rate cut to 100% in September.

This lead to a rotation that is still in progress. At first, it seemed new money came off the sidelines and small caps (Russell 2000, IWM, IJR) made strong moves. The Big Tech held up well for a couple days, but the dam broke today. Yesterday Biden hinted at more restrictions for chip makers and Trump said Taiwan should pay for its own defense. This seemed to be the straw that broke the camel’s back.

Semiconductor, software and other technology sectors led the selling. The Nasdaq plummeted 2.8% and closed below its 21-day exponential moving average for the first time since May 2. The S&P 500 sold off 1.4% but held above its 21-day line as financials, energy and some other sectors gave it some lift. The PHLX Semiconductor Index plunged 6.8% in its worst day since March 18, 2020

The Nasdaq is now 3.6% above its 50-day line, the first time it’s closed within 5% of the 50-day moving average since early June. Ideally, the tech-heavy index would move sideways or pull back modestly, perhaps to a rising 50-day. But the market is going to do what it’s going to do.

Investors should reduce their stock holdings, and right now there’s no better place to start than semiconductors and other techs. Any stock that breaks a support level or falls more than 7% from a buy point should be sold with haste.

handling the current stock market is not so much about seeking cover, but moving into the emerging opportunities.

If you have big, long-term gains in leaders like Nvidia, you could choose to hold a core position through another potential correction. That depends on what kind of trader you are.

Earnings season raises the possibility of major sector and market moves, so the next few weeks may not be orderly.

2 Likes

Interestingly, the Nasdaq Bullish Percent Index (BPCOMPQ), a breadth indicator (% of stocks that are on Point & Figure buy signals) has taken a big leap up over the past 5 trading sessions, even as the Naz has declined. This follows several weeks of the BPCOMPQ declining while the overall Naz index rose. So a disconnect both ways.

Seemingly the big boys (NVDA, AAPL, etc) have become so big that they dominate the index. But all is not necessarily lost if you’re outside of them.

I’ve casually followed the BPCOMPQ for a while now, but don’t really have a feel for its usefulness as an indicator. Will the rest of the market follow in the decline of the big boys? It seems likely, but I don’t really know.