Market Radar11. January 2023


From high to high, from low to low – stock market can be so easy!

The overarching trend in the S&P 500 continues to be on the downside. We see this particularly impressively when we look at the S&P 500 on the weekly chart instead of the daily chart. Lower highs were followed by lower highs. Lower lows were followed by lower lows. The ETF on the S&P 500 would have to rise sustainably above 408 points to leave the latter lower high upwards – at yesterday’s closing price ($390.58), the bulls now need about 4.5% to give the bears the “mercy shot”.

And what about the ETF for the Euro Stoxx 50 (EPZ)? The bears have not been an issue since 9 November. On this day, the last lower high in the weekly chart was overcome and the bears were killed.
Things are now getting exciting in the ETF for the Emerging Markets (EEM). Possibly there will be on Friday at the closing price of the mercy shot for the bears. The last lower high point in the EEM is $40.58, which was reached on August 11. Yesterday, the EEM closed above it for the first time at the end of the day ($40.66).

Stock exchange can be so easy!
Charles Dow knew this as early as 1900, when he wrote his editorials for the Wall Street Journal to lay the foundations for technical analysis as we know it today. Since then, we have been paying attention to highs and lows, which can be higher and lower.

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What do we see under the radar of the major stock indices?

If you drink a Coca-Cola, you have to brush your teeth in the evening
Yesterday, I was struck by the relative strength of consumer discretionary (XLY) versus consumer staples (XLP). The consumer staples ETF that includes stocks such as Coca-Cola (KO) or Colgate (CL)
lost 0.13% yesterday. The consumer discretionary ETF, which includes stocks like Tesla (TSLA) and Nike (NKE), gained 1.26% yesterday. So far, the gap has widened in favor of Coca-Cola and Colgate. If we see a shift in the risk-on (XLY) / risk off (XLP) logic in favor of XLY (Nike and Tesla), then that would be a bullish sign for the overall market. But we still assign the day stamp “Buy the dip” for XLP and the day stamp “Under observation” for XLY. A change of the precursor is currently only recognizable in the early stages. But exactly to be able to see this early, I write the market radar!

By the way, the ETF XLP has recently formed a lower low. Thus, swing entries on the long side do not seem to be advisable. A recent lower low is more likely to cause another lower low during a setback than a higher low, which favors a faster termination of the downward movement.

By the way, Coca-Cola’s stock has recently reached a lower low. Colgate’s stock, on the other hand, is at a higher low. Currently, the motto: “Brush your teeth more, but consume less soft drinks” could at least also apply to stock market participants if they had the choice between buying Coca-Cola or Colgate shares.

Bearish flag in oil
In the Oil Future (CL)
with March decay, we see a bearish flag. We award an entry stamp on the short side for this future for today. We currently see similar flags in the charts of Marathon Oil (MRO) or Devon Energy (DVN). In the shares of both oil producers, we also see a hammer below an interim high. Such hammers lying in the air invite me to short, it would be possible to set a stop-sell order under the low of the hammer for an entry.

India and Vietnam now with countercyclical buying opportunities?
The ETFs of India (INDA) and Vietnam (VNM) both reached higher lows on Tuesday. With a stop loss just below, it could now be speculated that the emerging trend strength in the world markets will now spill over again to India and Vietnam, whose stock markets have recently shown the weak side.