Rotation Report: Thesis Refuting

The first thing that stands out this weekend is daily charts and weekly charts are conflicting in many cases, at least from a momentum standpoint.  Last week staged a key reversal on weekly charts.  What's more impressive, is how many groups and various country ETFs have held up well.  

There just aren't a lot of bear markets out there, which is interesting considering news flow.  Instinctively, that seems very bullish.  I'm still a fan of sticking to MACRO trading and patience as we've not yet seen signs of improved breadth.  Let's dig in..

Looking at the S&P 500 we see the notable bounce off the 40 week moving average area.

And on the daily chart we see falling 20 and 50 day moving averages.  The 50/100 DMA around SPX 2095 will be a very interesting area this week.

MACRO

As I've documented time and again, the recent high area remains the strongest, most obvious level for a potential correction since the bull market began.  With that in mind, I try to continually search for evidence that's refutes that thesis as we move along.   

Jason Goepfert points out smart money is continuously removing hedges in 2015, and now at an accelerated pace.

Dana Lyons notes the extreme rush to protection of late.  It's another bullish piece of evidence.

One thing i'm watching is the Smoothed Arms Index to see if there is a true change in market posture.  For the past several years it's been stuck in this range, while bear markets tend to push this reading even higher.

More MACRO

Tuesday Night I noted a couple of go to indicators flashed buy signals..  

The put call ratio reached an extreme that has led to meaningful bottoms.  Note that the 100 day moving average 2095 on the S&P 500 is key.

The Stock Only Advance-Decline line has flashed numerous signals of late.  Too much for my liking, but we're still seeing bounces when things move too far and too fast.

  
Yeah stocks jumped Friday, but breadth worsened and hit new recent lows.  This is still a 'buy the big boys' kind of market.

Group Action

Biotech is compressing.  Note it didn't make new lows with the market last week.  Bulls want to see this lead again and it just might be able to.

Into earnings season the Consumer Discretionary stocks are standouts.  Plus, they've seen the biggest cuts to earning expectations in the last quarter per FactSet.

Other Markets

Brent Crude continues to work it's way lower out of the falling channel.  If this market is the next leg of the bear and as weak as it was late in 2014, you probably won't get a chance to short up at the falling 50 DMA.

Treasuries couldn't hold a bid last week.  That will happen when you have a touch of the falling 50 DMA.  Daily momentum indicators appear to be working off major oversold conditions.  

Soybeans have had a nice run of the lows like most ag commodities, but seasonal strength drops off a cliff for the next quarter.  It'll be interesting to see how that powerful looking chart reacts.

Trade 'em well!