Risk Gauges Head South of the Border

March 10, 2019

Weekly Market Outlook

By Keith Schneider


U.S. Equity markets reversed their relentless climb up this year and dropped between -2 to -4% for the week.

Risk Gauges flipped 100% negative by the end of the week, despite the rally into the close on Friday.

So, I’m not sure what my favorite piece of tabloid news was this week, but certainly, David Dukes support of Omar Ilhan was a top contender.

Seems like a merger is in the making and we will be able to economize on words. We can modify the term “Alt Left” or “Alt Right” to just Alt. Consider this the new normal.

Meanwhile, as the bickering on Capitol Hill ratchets up, the jobs report was very weak, China didn’t happen and added pressure to an already wobbly market.

Oh, and insider selling hit decade level highs. Do these people know something?

This week’s highlights are:

  • All our Risk Gauges reversed and turned negative
  • US Stocks sold off hard this week with both the IWM and QQQ breaking down under their 200 DMA
  • Weakening Market Internals turned into full-fledged sell signals mid-week
  • Sentiment (VXXB) indicators jumped from their lower Bollinger Bands to just under their 200 DMA which if breached, will mean much greater weakness ahead
  • Gold and Gold Miners got oversold and reversed direction and closed positive on the week
  • Most Modern Family members retreated even harder than the Benchmark SPY
  • Biotech (IBB) sold off hard and retreated to a recovery phase
  • Equities hit the upper bounds of negative weekly momentum and sold off as expected.

Our IWM Alpha Rotation model (excellent at market timing) which is based on 5 key inter-market relationships (gauges above) finally exited the last of its long positions after hitting new equity highs.

It is currently mostly in cash awaiting the next signal.

For more information about the Alpha Rotation trading system go here.

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