Weekly S&P500 ChartStorm - 2 April 2023

This week: technical check, seasonality, small and micro caps, tech stocks, financial conditions, the monetary wall, pivot possibilities, 200-day moving average, and GICS changes...

Welcome to the latest Weekly S&P500 #ChartStorm!

Learnings and conclusions from this week’s charts:

• The market has ticked another box for bulls by recapturing its short-term uptrend line (along with retesting the breakout vs downtrend line and failed breakdown vs its 200-day moving average).

• Seasonality is historically excellent in April (one of the best months for stocks).

• Small & Micro cap stocks are so far holding onto key support levels (big for bulls in that a breakdown would have confirmed bear market: but still a big ol’ trading range to clear).

• The sustainability or otherwise of any new bull is going to depend bigly on whether the market can clear the incoming monetary tightening wall.

• The March GICS changes have shuffled a few more stocks out of the Tech sector and into a new category within Financials (payments).

Overall, the resilience of the market in the face of various threats and headwinds is something to pay attention to, and in the short-term it looks like the bulls are in control. But as noted below, when debating bull vs bear market, a reminder is due that neither (aka trading range) is also an option!

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ALERT: in case you missed it, I just published the Q1 update to the “10 Charts to Watch in 2023“ (macro-market outlook and risks/opportunities ahead).

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1. Trends vs Ranges:  We’re not quite ready to retire that chart… last week the index managed to close back above that nascent uptrend line — and this comes after retesting that downtrend line and a failed breakdown vs the 200-day moving average. But don’t get too excited just yet: there is still the matter of overhead resistance to deal with (~4200), and again, it’s worth pondering: when everyone is asking “bull market or bear market?“ — “neither“ (i.e. range trade) is always an option.

Source:  Topdown Charts @TopdownCharts

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2. April Rules:  Something to keep in mind — historically April has on average been one of the best months of the year. So a breakout vs resistance has seasonality in its favor.

Source:  @RyanDetrick

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3. Tech Test:  A key driver of the rebound in stocks since The Great Bank Run Crisis of 2023 (sarcasm) has been tech stocks. There has been a rapid rotation across sectors (well, basically Tech surging on lower yields and QE/pivot narratives… and financials plunging), this has placed the Nasdaq 100 vs S&P 500 relative performance line at a key juncture — brushing up against a major overhead resistance point (former support). This is going to be a useful simple rule in terms of market regimes: a breakout means back to business for tech stocks, while a failure to launch will be more in line with the tech unwind bear scenario.

Source:  @the_chart_life

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4. Macro-Test for Micro-Caps:  Another corner of the markets facing a key test is the micro-cap microcosm. If it is going to be a new bull market then these guys need to hold support and ideally rally (and ideally get out of the trading range rut). Equally, if it truly is a bear market then bears would want to see support get taken out.