This week, we saw a rebound in indexes and stocks. Index SPX even managed to get to new highs intraweek, QQQ bounced sharply but finished below 10 simple moving average, ETF ARKK also bounced sharply this week but closed well below 10 SMA. Chinese stocks MCHI and stocks of emerging markets EEM underperformed this week, both closing below 10 SMA weekly. The strongest sectors remain energy XLE and finance XLF. Europe DAX and SXXP also managed to close higher this week, i.e. above 10 SMAW.
The question is whether the pullback is over and whether we are off to races again. Let’s take a look at what my models have to say.
Chart below presents indicators of Soča Investing main model.
The main model in the lower panel is still firmly bullish. No sell signal just yet. On the contrary we got another bullish signal marked as F and black triangle on chart. In uptrend this signal indicates that pullback is over and drawdown is limited. Investors must remain patient and remain invested. Putcall ratio started to rise this week after several months of extremely low values. This means that investors started to buy more puts, which means they are expecting more downside.
Last week we got a sell signal on daily chart (red label on chart) of main model which I use as backup indicator. I reduced my positions to 50 % invested in QQQ and SPX. This signal was invalidated after SPX reached new highs. This does not mean that we cannot reverse and go lower but I rather maintain bullish view for short to mid term.
Secondary model indicators improved a lot this week.
ADV/DECL indicator (black line) triggered a second buy signal in three weeks (purple cross). They usually occur after severe drawdown at the beginning of new rally and are not so common this late in the bull cycle. Also NYSE and NASDAQ volume oscillator improved a lot this week and are again in bullish territory. Trend strength of SPX remains very strong reaching levels 6/6 in 3/3.
SPY continues to over-perform defensive sectors GLD, TLT, XLU and XLP. This means we are in Risk ON mode for equities.
Gold GLD vs SPY 
20 year bond TLT vs SPY 
Staples XLP vs SPY
Two of my GEX signals triggered a buy this week. Data courtesy of Squeezemetrics.
GEX rate of change 
GEX relative strength
QQQ continues to underperform SPY along with MAGA stocks Micosoft, Apple, Amazon in Google. Both ratios are touching 50 SMA weekly, trend strength started to deteriorate this week reaching 3/6 and 2/3.
QQQ vs SPY 
MAGA vs. SPY
XLF finance and XLE energy continue to be one of the strongest sectors, along with equal weighted S&P500 ETF RSP. All of them are reaching important levels after such a strong move. Is it time for a pause?
Energy XLE vs SPY 
XLF vs SPY 
Equal weighted S&P RSP ns SPY
Also IWM is somewhat overextended and at important resistance level.
Russel 2000 
Russel 2000 bs SPY
European stocks German DAX and STOXX 600 SXXP showing some strength lately, reaching new highs. They have a long way to go before we can say that there is new SPY relative uptrend in play.
DAX vs. SPY 
German DAX 
STOXX 600
Summary: Main model and secondary model are in bull mode. Some new buy signals occurred this week, with no new sell signals. Bull market continues, rotation out of technology to finance, energy, metals is in full force. After such a big run we could see a pause in these sectors, treasury bonds and gold are very oversold at this levels which could mean we could see a bounce in defensive plays.
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