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The stock market’s late rebound on Friday was accompanied by a drop in the 10 Year T-Note yield below the June lows. As pointed out last week (see chart) the technical indicators did suggest that yields had topped out. Earlier in the year, rising yields pressured the stock market but so far lower yields and lower crude have not had much of an impact.
I was looking for more positive action last week but the stock market now has to prove itself in the coming week. The strong close last Friday was not enough to turn the tide to positive. As discussed below it will take several days of strong advance/decline numbers and a move in the averages above the recent highs.
It was another rough week for the Nasdaq 100 as it dropped 4.3% which was almost twice the 2.2% decline in the S&P 500. The iShares Russell 2000 ETF (IWM
The Dow Jones Utility Average was the only positive market gaining 4.1% in a likely reaction to falling yields which made its stocks more attractive. The other Dow Averages were lower for the week as the Dow Jones Transportation was down 1.9% while the Dow Jones Industrial Average lost 1.3%.
There are pretty dismal numbers in terms of year-to-date (YTD) performance as only the Dow Utility Average is higher YTD as it is up 1.2%. In contrast, the SPDR Gold Shares are down 1.5% YTD.
Last week I discussed the somewhat rare bullish divergence in the weekly Nasdaq 100 Advance/Decline Line where data is only available since early in the bull market. Last week there were more declining than advancing stocks on the Nasdaq 100. Therefore, the A/D line was lower as it dropped below its WMA but the bullish divergence is still intact. That could change if the numbers this week are negative while positive numbers are needed to increase the odds of a near term low.
The Spyder Trust (SPY
The S&P 500 A/D line is in a short-term uptrend, line c, and closed Friday above its WMA. A strong move above the resistance at line b, is needed to signal a stronger rally. A drop below last week’s lows will indicate a further stock market decline.
Four sectors were higher last week led by the Utilities Sector Select (XLU
XLV was one of the sector ETFs that interested me at the start of the week and it was up 1.1% Friday to close at $129.68. That was just below the new QPivot at $130.46 and a weekly close above it would be a positive sign for the intermediate trend. The is further chart resistance at $133.47, the May high.
The weekly relative performance (RS) has surged to further new highs after overcoming resistance, line a, early in the year. This was a sign it was a market leader but it is important to remember that the RS analysis only tells you only how an ETF or stock is performing against the SPX. Positive RS analysis does not mean a market will not decline. For example, over the past three months, XLV was down 5.8% while $SPX was down 15.9%.
The weekly on-balance-volume (OBV) dropped below support, line c, in early MA and is still below its declining WMA. The close was well above the new monthly pivot at $126.57 and the rising 20 day EMA at $127.03 which should provide support. The daily indicators closed the week positive.
The decline in Bitcoin
BTC then dropped to a low of $25,800 and then moved sideways until mid-June when there was another wave of selling. The daily MACD-His started to deteriorate in early June and then turned negative as BTC was dropping again. While the daily is positive but the weekly MACD-His is negative so the recent sideways pattern does not yet suggest a bottom is in place. I will try to do a full review of BTC before the middle of July
Follow me on Twitter for a Tuesday update on the stock market after the long weekend as the futures market action will be important heading into Tuesdays open.