Are You Feeling Vulnerable?

The chart work I do leads me to believe this is a potential "turn the plane around" moment of decision. As the market works to discover if it can go back to the prior highs, so many pieces are uncomfortably weak. Can we get the momentum to go higher, or does this market make a quick leg lower here? I've listed a few areas showing stress below.

I looked through a couple thousand charts this week to try to get a feel for the underlying conditions. As I flipped through, I was amazed the market could hold up here. But, as we have come to know, when I look at the big six, they are holding in firmly, even though they have started rolling down a little. I do notice the PPO momentum indicator rolling over on all of them.

Semiconductors

When I look at the weakness in semiconductors, it's hard to believe the market is as high as it is.

Nvidia (NVDA) is a golden name, but the chart is dropping hard. It is closing below the 200-day moving average again, down about 20% from the highs of last week.

Software

Software isn't as weak as the semiconductors, but, so far, the higher high above early March didn't hold.

Automobiles

Any new vehicle purchases are at full price and the lease rates are soaring. With the underlying car price and the interest rate calculation for lease/car payments at multi-year highs, this makes new car affordability difficult. This is a new hurdle for the extremely expensive electric car category. The used vehicle markets are still frothy, with higher selling prices for previous owners and the interest rates climbing quickly as well. It's hard for me to imagine this is good as car buyers decide spending priorities as food and energy costs soar. These rapid changes are making some vehicle clientele struggle, as they are living close to the edge of the paycheque deciding between food, energy and rent/mortgage/car payments.

For me, the market feels very vulnerable to the downside, but, as long as the world continues to buy and hold up the big six, the main indexes aren't breaking meaningfully lower. As we come into the earnings period next week, the news will be coming fast and the markets will be very fluid, reacting to each new piece of data. Stay sharp.

Lastly, the longer the credit markets move in multiples of "standard" deviations, the more stress on the system. It's not obvious that it works out positively.

Good trading,

Greg Schnell, CMT, MFTA