Weekly market review Nov 6 - 10 Part 1(Latest on CTA Equity Positioning indicates more big institution buying flow, market likely consolidate before breaking out further)
Broad market overview
Market had an unexpected broad based rally on Friday, with Nasdaq 100 leading and outperforming everyone, rose by 2.25%, S&P 500 & DJIA rose by 1.56% and 1.15% respectively. Equal-weighted counterpart, Mid&Small cap also had a rally of more than 1%.
Weekly entry will be written in 2 parts to be published separately,
Part 1: CTA positioning, market over view, market internals, and various sectors overview
Part 2: Review of relevant macro charts
Latest info on CTA positioning
Latest CTA equities positioning chart (Source : Goldman Sachs , dated Nov 10) above shows that they have covered shorts/started buying( sharp turn from bottom ). FYI this chart is an overall chart, so it’s a aggregation of all their positions in various indices and various sectors. Therefore, most likely they have covered shorts is lagging/underperforming sectors, started buying in Leading sectors.
CTA turn in positioning have inspired me to build/research further short, Mid&Long term trend following model to observe the progression/sustainability of Market rally.
Because after the market bottom, Short term trend following model would have given the go-ahead signal first, followed by go-ahead signal from mid & long term trend model at the middle stages of bull market rally.
NAAIM exposure index
Latest info on NAAIM exposure index = 61% mark ( from 29 in previous week ), this sudden jump showed that institution were the buyer behind the big surge last week. ( Nov 2, 3 breadth thrust and huge up volume day ). Therefore, big guys have vested interest in the continue progression of this rally, so dips are extremely buyable
The challenge now is assessing how deep/shallow the pullback goes.
Now let’s review S&P 500
Just when we thought the consolidation&retracement was starting and might have a while to go, SPX rallied on Friday to close the September breakaway gap. The rally was likely due to some big guys who missed out the earlier reversal and started chasing the market. ( Commodity Trading Adviser , CTA who employ various trend following model )
Retracement scenario 1 & 2 may or may not apply( details are stated in the chart ), we will monitor how shallow/deep the retracement goes in the coming days.
Anchored VWAP is a popular tool among institutions & most recently price bounce from AVWAP line from Dec 2021 high and Oct 2022 low. If we anchor the recent highs and lows, price has blown past all the AVWAP line. Market likely to consolidate/pull back in shallow manner ( backing and filling ) before breaking up higher.
Nasdaq 100
Broken out of downtrend line decisively, likely may not pull back/retest at all, as big guys re-risk for yearend rally. But still, I would like market to prove me wrong and retrace deeper to allow me to accumulate more.
Price is firmly above all the AVWAP line. Market likely to consolidate/pull back in shallow manner ( backing and filling ) before breaking out further
Bollinger band 63Day-MA + 2SD
Rationale for this model is explained in previous blog entry (Weekly market review Oct 31 - Nov 3 part 2) if new readers would like to know more.
SPX might potentially consolidate before deciding breaking up again.
NDX stay above 63day-MA for 6 days in a row. ( likely to consolidate before breaking up further )
Probability of pulling back for both SPX and NDX is getting lower.
MOVE index
MOVE index closed at around 116.80, would like to see it closing below 120 consistently and move closer to 100 in the coming days.
10Year Yield (TNX)
10Y yield still hover around 50day-MA and resting at 2nd Uptrend line, perfectly possible for 10Y yield to retest 4.7-4.8 level further before breaking down further. ( US Indices might retrace if 10Y yield retest 4.7 – 4.8 ) A break below of 2nd downtrend line and 50Day-MA will provide further fuel for rally.
NYSE market internals
Thursday Nov 9, 2.82 to 1 NYSE Decliner to advancer ratio (2126/754)
Friday Nov 10, 2.77 to 1 NYSE Decliner to advancer ratio (2095/755)
lower volume compared to previous weeks, so there’s nothing significant at the moment.
% of SPX stock above 50days and 200 days MA
Breadth is consolidating from previous week jump. Would like to see further improvement. ( getting above 50% for both )
percentage of SPX-Stock above 50days-MA, currently at 49.4% .
percentage of SPX-Stock above 200days-MA, currently at 41.4% .
Sector performance over 1 week, 1 month and 3 month basis
1 Week and 3 months basis
Offensive sector ( Technologies, Communications , Consumer discretionary), financials, industrials are outperforming Defensive sector (Utilities, consumer staples) on a 1-week and 3-months basis.
1 month basis
Technology is above Defensive sector (Utilities, consumer staples) on a 1-month basis. Given enough time, Communication and Consumer discretionary will likely outperform defensive sectors going forward
Industrials
Industrials rose above 200Day MA for the first time in a long while. The longer it stays above the more significant it becomes.
Financials , homebuilder and Transportation
These 3 charts are in consolidations.
As always, we will continue to monitor the charts, assess the bullish/bearish evidence day-by-day to make appropriate capital allocation and investment decisions.
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