April 18, 2022
Good morning,
Let’s look at the 1yr chart of the S&P 500 Index and talk perspective today. The 14% decline in the first 2½ months is stark. But so is the 11% rally that closed out the quarter and left the Index off ~4 percent for the year at the start of April. So far the start of the second quarter feels uncomfortably like the beginning of the first quarter. In only 10 trading days, month-to-date, the Index has straight-lined down about 4% from those late March rally highs, leaving the Index down ~8% from its Jan. 4th all time high.
Another chart observation worth noting is that the long-term bullish uptrend (higher highs followed by higher lows) was violated in Q1. As we’ve mentioned a few times in the past few months, a downtrend (bear market) does not necessarily follow a broken uptrend. Trendless, sideways tapes are not uncommon after a lengthy uptrend.
Following a very high level of pessimism in mid-March, deeply oversold signals, two very good positive breadth signals, and a good historical picture from a crisis events study; the market rallied. However, the rally has not broadened enough yet to generate longer term confirmation.
Today, we seem to have a market characterized by a number of offsetting bullish and bearish indicators – a possible trading range market. The weight of the indicators on a trend basis are neutral at the present time.
Be well,
Mike