A Friday rally moderated the losses, but the large-cap benchmarks and Nasdaq Composite index recorded their biggest weekly drops since February and rounded out the worst monthly declines since the onset of the pandemic, seemingly weighed down by inflation and interest rate fears.
The major benchmarks overcame an early sell-off to end the week flat.
The small-cap Russell 2000 Index managed a small gain, but most of the major equity indexes ended the week modestly lower, as investors weighed some encouraging economic data against worries about supply chain challenges, elevated valuations, and concerns over how stocks would respond to an eventual tightening in monetary policy.
The major indexes retreated over the shortened trading week—markets were closed on Monday in observance of Labor Day
The major indexes ended the week mixed after the S&P MidCap 400 Index joined the S&P 500 and Nasdaq Composite indexes in reaching new intraday highs on the Thursday.
Stocks gained last week as the Food and Drug Administration (FDA) gave full approval for the Pfizer-BioNTech vaccine, which supported sentiment towards an ongoing economic recovery.
Stocks pulled back for the week but not before the S&P 500 Index reached a new record high of 4,480 on Monday afternoon. This is more than double the low seen on March 23, 2020.
Last week, we had bullish breakouts around the world. We also had agriculture trying to break out. This week, literally every breakout was rejected. Commodities were bludgeoned. Steel and copper broke their uptrends. Crude fell below support. Commodity countries are rolling over as a group. Some declines were more subtle than others as the damage in Asia was large again. Japan traded at 2021 lows. South Korea broke down. The breakouts in Europe reversed. The NYSE market composite breakout failed. The emerging market ETF broke down to new lows for 2021, whereas the $SPX is up 19%. The semiconductor breakout of two weeks ago failed. Currencies around the world fell below the 65-week moving average, while the US dollar soared higher.
I think one of the most important things kicking up right now is the dollar. Why is it breaking out? I don’t know, but the rest of the world is worried about something and moving to the dollar.
The Commodities chart ($CRB) included in this newsletter points to an area of resistance and it coincided with a breakout in the dollar. This should not be ignored.
The newsletter is titled ‘charting the pain’ but the indexes barely moved. Below the index surface, it was a complete smackdown, much like last weeks. Almost 1000 stocks in North America had declines of more than 5%, whereas 140 had up moves of 5 %. It was the same ratio for the major moves over 10%. It’s hard to make money or even stay flat when the riptide is emptying the account. The indexes didn’t budge, but the selling was broad.
What really concerns me are the Bullish Percent charts and the percentage of stocks above the 200 DMA charts. These current levels are associated with big multi month moves down after the indicators weaken, and we haven’t even started the decline. Much like the glaciers in the picture, the big indexes are still up there, but the majority of the stocks are moving lower.
The McClellan Summation indexes are telling us we have big declines coming.
Summary: Commodities seem so oversold already, that they are due for a bounce. But the technical damage is done to the charts. Ignoring a downturn in commodities is rarely a good idea. The number of strong groups continues to dwindle. For me, this is a full retreat. It is a very frustrating market to analyze to have such weakness underneath, but the indexes making new highs. This is how major tops are formed.
The video covers a lot more information, and I expect a big increase in the swings as downtrend typically have wider price moves both up and down.
To continue reading click the link below….
Charting-the-Pain-August-21-2021
The U.S. market gained ground with the market shrugging off the renewed spread of the coronavirus and its possible implications for future economic activity.
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ClearWater Market Commentary as of October 8th, 2021
Most of the major benchmarks recorded gains, with the S&P 500 Index recovering a portion of the previous week’s losses.