Sunday, April 10, 2016

Week In Review (4/4 - 4/8)

The S&P 500 finished down just over 1% for the trading week which marked the first time since the February bottom where the market did not make a higher high on the weekly chart.

The pullback brought the index back to just about flat for the year while the Dow is up nearly 100 bps in 2016 and the NASDAQ and Russell 2000 continue to toil in the red.

In addition to failing to make a higher weekly high, there are a number of conditions present that suggest the market may be opting to digest some of this 6-week rally here in the near-term.  And as we work further into earnings season, money managers are likely to get the evidence they need in determining how to put further capital to work.  We've laid out some of these conditions below:
  • The S&P sold off as it ran into trendline resistance.
  • RSI working off overbought conditions
  • Negative Divergence in Stochastic and Breadth (% of stocks Above 10 and 20 day ma)
  • Our indicators show that buying breadth peaked in early March but since then there has also been a huge lack of selling
  • Financials remain a drag on the market 

  • Europe and Japan remain in downtrends
  • However with the 4% rally in Italy on Friday it shows that global markets are still hostage to government intervention and central bank speak
  • Italy rallied on reports of a bad bank fund being introduced
  • Big up move in the Yen which is a risk off bet
  • The VIX term structure is coming off areas associated with flat to down markets going forward

Happy Masters Sunday!

Ryan Worch is the Managing Director of Worch Capital LLC. Worch Capital LLC is the general partner of a long/short equity strategy that operates with a directional bias and while emphasizing capital preservation at all times.

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