DJIA: 40,752

If half of your brain is technical and half fundamental… you probably have a migraine. Chaos seems the order of the day fundamentally, disruption to be a bit more kind. When companies stop forecasting or when like Delta they forecast with or without tariffs, that says a lot. Uncertainty may be the word which describes things best, and we all know how the market feels about uncertainty. The technical side has a different look. After all, 20% corrections don’t come along because everything is peachy. The tariffs came along against a weakened technical background, but news somehow always seems to follow price. In any event, the decline has resulted in stocks above their 200-day dropping below 20%, while the VIX spiked and has significantly reversed – panic and an end to the panic. This is the backdrop typical of and needed for a viable low.

When conditions for a low seem in place, the next step is to look for evidence of that in the character of the rally which follows. The late Marty Zweig was a well-regarded technical analyst, perhaps best known for his indicator development. Among those was one involving unusually positive Advance/Decline numbers. The indicator measures NYSE advancing issues as a percentage of advancing and declining issues, to which a moving average is applied. Particularly interesting is the six-month timeframe, with 20 uninterrupted gains since 1938. A bit less complicated momentum reversal was apparent last week when on Monday fewer than 8% of S&P stocks advanced on the day and Tuesday some 98% advanced. Since the financial crisis swings like this have occurred near the end of the declines.

Assuming we have a credible low, the question next is how far it might carry. Someone knows, but they’re probably living in the south of France and aren’t telling. We will stick our neck out to say we won’t go up every day as we have since last Monday. And we will even go on to say the S&P 50-day around 5700, pretty much where we are now, is a logical stalling point – even bull markets don’t go straight up. Like the rally into mid-February and like all rallies they end when they do something wrong. Wrong in this case is the opposite of what we just saw at the recent low. Stocks above their 200-day average will stall and/or turn down, Advance/Decline numbers will do the same. We haven’t said this in a while – beware of the bad up days, up in the averages and flat let alone negative A/Ds.

Gold, you might say, has been as good as gold. It may, however, be deserving of a rest, in this case not a euphemism for a big correction. Barrons featured Gold on its cover last weekend, not a perfect contrary indicator but there’s little denying Gold is no longer a secret. Also, May and June are seasonally weak periods. Meanwhile, we once noted that just as you never see Clark Kent and Superman together, rarely do you see Gold and Bitcoin move together. Some of the reasons that have made Gold appealing are true as well for Bitcoin – primarily uncertainty.  Bitcoin ran up following the election to the point that it was much like Gold now. The tipping point for Bitcoin seemed to be the announcement of the strategic reserve when, as we recall, bitcoin failed to rally. It now seems to have righted itself chart wise.

It seems even some technical analysts are leaning brain fundamental – thinking the rally will be of limited duration. That’s a bit surprising but we get it, after all we’re writing about it. It’s not hard to look at the dark side, but as a colleague pointed out the same was true in March 2009. It’s human nature to want answers but as Thomas Hobbes once wrote, the best prophet is the best guesser. New bull market or bear market rally? The only real answer is that time will tell. As an observer rather than a prophet – they look higher. Meanwhile, if Tech you must, software (IGV – 97.07)   looks better than the semis (SMH – 212.30). Stocks like Netflix (NFLX – 1133.47), McDonald’s (MCD – 313.50), GE (GE – 203.57) and Walmart (WMT – 97.39), the ETFs ARKK (50.71) and MTUM (211.49), also seem attractive.

Frank D. Gretz

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DJIA: 40,093

A test of the low… Or a test of human nature. Declines of 20% happen, they’re no big deal, the proverbial buying opportunity. They are even called healthy, which we understand, but can’t quite come to grips with losing money being healthy. The euphemisms/explanations are all true, but corrections are not so easy when you’re in them. News follows price, in both directions but obviously now with most of it bad or worse. There’s always something to take markets down, but we would argue it’s the technical background that is to blame. The market rallied Tuesday because Powell won’t be fired, is that a reason to rally? It is if the technical background is in place – the selling for the most part out of the way. The seeming washout low of 4/7 saw a decent rally, but these big volume/volatile lows typically come with their so-called test, meaning a revisit of the low. In doing so recently 12-month lows, volume, and stocks above their 200-day all were less than back on 4/7. It’s not about the averages it’s diminished selling that makes a test successful – so far so good.

The recent action in Walmart (WMT – 95.85) is interesting. Like the S&P, the stock was washed out back on 4/7, but since then has had a more impressive recovery than the S&P though hardly immune to tariffs. Granted WMT will survive while many small retailers will not, but survive or prosper? The recent action suggests the latter, based not on any retail insight but given the chart already is back above its 50-day, something Costco (COST – 975.48) is yet to accomplish. The monthly chart here shows one of those sleep at night patterns. Meanwhile, a good but hardly sleep at night monthly pattern is that of Philip Morris (PM – 170.99). What we find intriguing is a so-called defensive stock like PM performing as you might have expected in the weakness, but so far more than good in the recent updraft. For many and obvious reasons PM is not an easy stock to embrace, making it all the more intriguing.

Frank D. Gretz

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DJIA: 39,225

He said Xi said … down by the school yard. It almost seems to have come to that, a spat more than policy making. The result is uncertainty has come to dominate, wreaking havoc on planning. We pity the poor fundamental analysts, though the technical analysis side is not without its trauma. Still, supply and demand are the market’s drivers, and washed out is still washed out – and how the market seems. Historically, when stocks above the 200-day drop below 20% and the VIX spikes above 30, stocks are higher a year later virtually every time. Meanwhile, the recent low in stocks perhaps has bonds to thank, and the corresponding spike in something called the SKEW – said to measure the likelihood of a Black Swan event. Such was the extent of last week’s worry. Panic of course begets selling and selling not buying makes lows. The positive for Wednesday’s market was diminished selling, arguing for a “test” rather than a new leg down.

Happy Easter, watch a movie – Netflix (NFLX – 972).

(Prices as of midday 4/17/25)

Frank D. Gretz

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DJIA: 39,593

We have seen one part of what makes a low…and now maybe the other. Lows are made by sellers, not buyers. Get the sellers out of the way and it doesn’t take tremendous buying to lift prices. Last Friday we saw enough selling to say washout. Volume is one measure; it was 90% on the downside. Advance/Declines are another measure, they were 10-to-1 down. The problem is that at lows we sometimes see multiple such days. The proof of a washout is in what follows. If the sellers indeed are accommodated, stocks should move up with relative ease. After a 10-to-1 down day Advance/Declines should follow with at least a 5-to1 up day, not necessarily on consecutive days. That’s the second part of making a low, something we may have seen on Wednesday.

The VIX also seems important here for a couple of reasons. Everyone knows the VIX as the fear index, a measure of panic and a contrary indicator. When there’s panic, there’s selling – the important ingredient for a low. While a spike in the VIX is therefore important, history here isn’t helpful – spikes can vary greatly. What is important is a reversal of the spike. You don’t want to be buying into a panic, you want to be buying when the panic seems over. Following the VIX’s recent intraday move into the 60s, Wednesday’s close was back to the mid-30s seems positive. This idea of a panic that now is over adds to the rally’s credibility, particularly if it the VIX continues to fall.

At a low, whether now or later, the issue becomes what to buy. At the low in 1974, when asked, the technical analyst Edson Gould quipped “buy every third stock on the New York Stock Exchange” – meaning everything would rally. When the selling is out of the way, that’s the way it works. To add to that, at the lows those stocks down the most turn to up the most – what we call the rubber-band effect. Typically, this would mean the high beta techs, but the weakness has been such that you could include stocks thought to be stable, names like GE (181.49), McDonald’s (MCD – 306.81), IBM (229.32), insurance and others. Overall, these are not down like tech is down, their weakness has come about only recently. These stable names usually come back to lead in the recovery.

When it comes to turns like this, follow-through is always important. As we have said before, the good rallies don’t look back and the good rallies don’t give you a good chance to get in. Keeping that in mind should be helpful in the days ahead. Certainly Wednesday had that look but obviously it was just one day. And not to rain on the parade, some of the best one-day rallies happen in bear markets. Meanwhile, considerable damage has been done, technically and fundamentally, that will take time to resolve. Trade negotiations usually take a couple of years, the stock market not that long. Still, the market recovery after Lehman didn’t last, and the history of the Brexit mistake is even worse. We have seen the rubber-band effect, so to speak, time to see what comes next.

If this is a viable turn, it wouldn’t be without its symmetry. Well before tariffs turned to the problem they have become, we pointed out there was considerable technical deterioration – stocks above their 200-day moving averages had dropped from 70% to 40%, while the large-cap averages were continuing higher. This kind of divergent action invariably leads to problems. When the market did take its downward direction, we suggested tariffs were more the excuse than the cause of the weakness. Now we have come full circle. By virtually any technical measure the market has looked ready for a rally. The good news Wednesday of a pause, which most believe is more than that, is again an excuse or catalyst for a market that was ready to rally.

Frank D. Gretz

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DJIA: 40,545

Rip up that script…anything you wrote or thought on Wednesday afternoon. The market isn’t always right, but rarely is it as wrong as it was to rally on Wednesday. We understand the logic, which we toyed with ourselves, ‘sell the rumor, buy the news.’ It worked when Russia invaded Ukraine, but it’s not looking good right now. The history of tariffs simply isn’t a good one. And while there’s always the possibility of some rollbacks, it’s hard to roll back uncertainty. The market hates uncertainty, and the current backdrop reeks of it. History could have proven helpful here. Failed rallies after 10% declines often yield to another 10% decline, and quickly. History also suggests we need what we did not get a few weeks ago – a spike in the VIX and oversold levels of 20% or less in stocks above their 200-day average. In a market like this, it’s best to let the dust settle, but only after you have sold down to the sleeping point.

We have liked IBM (243.55) for a while, though that “international” aspect is not what we want for the moment. Staples and other defensive names acted well Thursday, despite many of them having international exposure as well. Utilities are about as domestic as you can get, including AT&T (T – 28.58), and Verizon (VZ – 45.62). Insurance shares may also fit in here, IAK (136.57) is the ETF there. It is somewhat amusing to see Buffett and Berkshire (BRK.B – 530.68) outperforming Musk and Tesla (TSLA – 267.28). Gold may need a rest, but still makes sense, and there’s the ultimate flight to quality, Treasuries.

Frank D. Gretz

DJIA: 42,299

You can’t always get what you want… but if you try, you just might find you get what you need. We don’t usually think of the Rolling Stones at a time like this, but we pretty much agree with the concept here.  The 10% correction didn’t end in much of a washout, so the numbers a week or so ago didn’t exactly match those of prior lows.  Stocks above their 200-day only fell to 32% versus a preferred level of 20% or less, and the VIX or fear index as it is called, barely budged. Yet there seemed considerable fear. The Investors Intelligence survey recently showed more bears than bulls, the first negative reading in a year. When mildly negative as it is now, annualized returns are quite positive. Then, too, you might say this is a survey of market letter writers and what do they know? We couldn’t agree more.

Surveys like investors intelligence never have been our favorite measure of sentiment or investor psychology. Sentiment itself is never a timing tool, but when it comes to sentiment, we prefer what investors or traders are actually doing, rather than just what they say they are saying.  In almost any social gathering people might say they are bearish, ask if they own stocks and they invariably say yes. That is not being bearish.   Put buying, the Put/Call ratios are useful as a measure of sentiment, though Put buying can be just a hedge. Equity only P/Cs, however, have done an excellent job over the last year.   They are now at their highest level over that span. Over time we have noticed some indicators work in some markets and not others, and vice versa. An Interesting point here, everyone looks at the VIX, few at the equity only P/Cs.

They say 5 will get you 10, in this case 10 may yet get you 20. If the 10% drawdown is about to morph into 20%, it should be happening soon.  Meanwhile 10% only declines don’t look back.  If 10% was it, how far can the rally carry? Recognizing turning points is one thing, how far they may go is quite another. Robert Prechter was good at it, the rest of us not so much, not that most don’t try. We find the answer is always when things change – a peak in stocks above their 200-day, a low level in the VIX and disappearing put buying. Where this recovery ends is hard to say, when is about the indicators. Part of it, too, of course, is about the average stock, the advance/decline numbers. Even if it is no longer the leadership, you don’t want to see Tech falling as it did Wednesday.

Although there was not a washout sort of low, arguably many Techs came close. Typically, at market lows those down the most turn up the most, simply by virtue of a rubber band sort of effect. Tech hasn’t fared too well since then, leaving their leadership somewhat in doubt. Leaders or not their participation is important – a house divided, and all that. Meanwhile, what you might call retro tech names like IBM (246) and Cisco (61) have held together well, as have names like McDonald’s (313), Fastenal (78) and GE (206). Most find insurance stocks boring, which is to say making money is boring – IAK (137) is the ETF there. Precious metals have good reasons to rally, energy not so much.  Don’t tell that to Chevron (167) and Exxon (118).

Market lows are made when the selling is out of the way. Wednesday didn’t exactly have that look, Thursday was a bit better to damn with faint praise. These are only two days of course, and we’re still well above the recent lows. This seems important since if we fall back again to the 10% correction level, the next 10% could come quickly. We are surprised and disappointed that the market continues to react to tariff news. Good markets don’t typically keep discounting the same bad news. How the market reacts to the likely bad news this weekend could be insightful. When Russia actually invaded Ukraine, the market rallied, the bad news has been priced in. Much like then, a rally on bad news would be a positive change.

Frank D. Gretz

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DJIA: 41,953

If they don’t go down … it’s likely they will go up. Actually, that’s a bit more profound than it would seem. A 10% correction was in place last Thursday, the technical backdrop for a turn was not. Stocks above their 200-day average on the NYSE had only reached 32%, versus a more significant level of 20%. As we all know, life in the stock market isn’t about perfection, sometimes you get what you need. One plus we haven’t looked for was a spike in the equity only P/Cs to a level in keeping with that of recent previous turning points. So, will 10% do it, or did 10% start it? In the most simple terms, both the 10% only and 10% plus lows have sharp initial rebounds. The 10% only corrections pretty much don’t look back. The 10% plus corrections give up their gains relatively quickly.

If at their start both the good and bad rallies look similar, there’s little to distinguish them other than their longevity. However, there may be a couple of things worth noting. Last Thursday’s selloff marked a 10% decline in the S&P, as well as a five-month low.  It was followed by a 2% rally on Friday, a specific pattern that has in the past led to higher prices. A more subjective positive of late has been the trading in stocks like IBM (243), McDonald’s (307), GE (204) and Deere (477). Certainly a diverse group, and not the Tech names like Nvidia (119) where most of the focus lies. The former, however, are important stocks which could lead as Tech continues to struggle. The patterns here are a bit strange in that they spiked up recently only to give up the strength in last week’s selloff. Then, too, the strong stocks usually get hit at the end of declines.

Aside from the stocks above, other areas that look attractive include Insurance, companies in our experience that find a way of turning pain, including their own, into gain. Then, too, Insurance stocks are not exactly Nvidia. You’re not going to go to your friends bragging about your Insurance stocks – maybe AJ Gallagher (335) if they’re Irish.  Sometimes you just have to ask yourself, do you want to be cool or do you want to make money?  The short-term patterns are fine, and the pull back Wednesday in Progressive (275) leaves them a little less stretched. For those with an investment versus a short-term perspective, the monthly charts are what we call sleep at night patterns. These are the sort of patterns where you not only don’t fear weakness, if you have cash you hope for it.

Then there is Gold.  Up a lot you might say, but that’s what they said about every big move half the way up. In this case, despite Gold’s stellar performance, the Gold/SPX ratio is once again just crossing an esoteric moving average which in the past has led to higher prices still.  And then there’s China, until just recently termed uninvestable – a term worthy of a Business Week cover. The bear market there seems over, Tech is no longer the political bad guy, DeepSeek and instant battery charging have renewed attention. Most important here seems the washout, as per our proposed cover story. And money seems leaking out of the US for now, for better performance elsewhere including China. Tariffs somehow seem more of a worry for us than for them.

As usual, there are a few possible outcomes here. One not much thought of is a decent recovery, but one without Tech. Speaking on behalf of the charts, this seems a real possibility. You can summon the witches of the deep, but we’ve noticed they don’t always respond. Perhaps Nvidia and the rest of Tech have stopped going down, but could fail to respond, at least as leaders. To the fore could be the stocks outlined above, or stranger still, have you looked at Exxon (116) or Chevron (165) lately?  As for the market, it’s a case of time will tell. Important again is the average stock, daily advancing versus declining issues. The pattern is almost surprisingly good in that there are bad days, but no bad up days – up in the Averages with poor A/Ds. We wouldn’t want to see that change.

Frank D. Gretz

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This week there will be no regular market letter.  Instead, please find a few thoughts from Frank on the recent action.

It’s not about where or when … it’s about the selling. Sellers, not buyers make lows. The selling is done, not based on the misused term oversold, but when markets are sold out. The percentage of stocks above their 200-day moving average is an indicator with a long history. Over time it has consistently fluctuated between 70% or more at market peaks, to 20% or less at market lows.  Just below 40% earlier this week, it’s hard to call this market sold out. This also seems unlikely based on the lack of a spike in the VIX, which would have indicated a give-up sort of phase. Meanwhile, the S&P is approaching the garden variety correction number of 10%, and the average S&P stock is down 20% – tech stocks of course much more. There was little special in Wednesday’s market numbers, and no follow through Thursday. Still, even bear markets have their counter trend respites.

It’s important to remember stocks are not companies, and what affects stocks often has nothing to do with those companies. We are thinking here of a company like Netflix (890), seemingly doing well and importantly these days, one untouched by the political drama of tariffs.  Yet the stock is off some 15% from its peak and broke the 50-day just this week. Part of the problem is that it’s a weak market, and studies suggest 70-80% of the movement in any stock is a function of the overall market trend. Often more important these days are the ETFs which concentrate on areas like AI, the MAG 7 and in this case FANG stocks. When one of these ETFs is bought or sold, each stock is affected regardless of the company’s merits, good or bad. This was all well and good on the way up, not so good now.

Frank Gretz

DJIA: 44,176

It’s the market that makes the news … thank goodness. Tariffs now seem almost a common event, DeepSeek has threatened the market’s most prized stock, Nvidia (140) and AI itself. The government is in chaos and so too governments around the world in this new fend for yourself environment. There have been a few downdrafts including Thursday’s – the others have proven brief, leaving one to question how the market has held together as it has. An impromptu answer would seem you have to know markets. They hear a different drummer, the one of supply and demand. The market hasn’t gone down so far apparently because its not ready to go down, this despite multiple opportunities.  You can learn a lot about markets by what they do, and sometimes you can learn a lot about markets by what they fail to do.

The market has been in a trading range on two fronts. The first and most important, the level of stocks above the 200-day average has ranged between 50 and 60%. As this measure pretty much defines a stock’s trend, it’s more than a little disconcerting to see the S&P at a new high, while almost half of NYSE stocks remain in downtrends. This kind of divergence typically ends badly. On the positive side, rather than continue to drop from 70% to a more typical 20 – 30%, the mid-50s has held.  The second aspect of the trading range obviously has been the S&P, which for the second time in the last two months finds itself trying to break out. Historically these trading ranges, when within 5% of a high, have positive outcomes more than 70% of the time, according to SentimenTrader.com.

It’s interesting that A/Ds have steadily improved, always important, and yet the improvement hasn’t been enough to push more stocks above their 200-day. Our suspicion is that it’s likely due to the underperformance of most commodities, and even the dichotomy within Tech. Not that long ago Software led, and Semis lagged, now it is pretty much the opposite. Meanwhile, there may be a light at the end of the tunnel for commodities, the light being China. China is the world’s largest consumer of copper, and if copper goes the rest usually follow. The Hang Seng has seen 60% of its components move above their 50-day average, and 8% of shares reach a12-month high. Both typically lead to higher prices.

An ETF we’ve come back to recently is Momentum Factor (MTUM – 225), which recently made a new high. It is dynamic in the sense there is a formula for adjustment, and at least for this market the top 10 holdings seem a bit of genius. The success here seems not just about winning stocks, but its peculiar diversification. Indeed, who or what AI program would own both Palantir (106) and Philip Morris (152)? When it comes to the latter, you might ask if they got the symbol wrong, but not when you look at the chart. And then there’s JP Morgan (267), one of the best of the much needed Financials, given this market’s propensity to switch between Financials and Tech.

It’s a bull market but a strange one, not one that leaves you feeling all warm and cuddly. Slamming Palantir Wednesday, arguably the leading AI stock, and Walmart (97) Thursday may be part of it. For Palantir, the weakness is a flesh wound, but the leader of your cult is not supposed to be selling, though he sold almost the same amount last year. For Walmart it has been so long since it has taken a hit most have forgotten it happens. It’s on the 50-day, which has held for quite a while, and if you need further consoling, look at a monthly chart. In both cases, however, they didn’t exactly ignore bad news. Meanwhile, Gold doesn’t quit, once again Bullion (GLD – 271) more than the Miners (GDX – 42). Farmers have been hurting and killing USAid makes things worse. Yet Deere (496) acts well!.

Frank D. Gretz

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DJIA: 44,747

It’s a house divided … but still standing. From the Bible to Abe Lincoln, to basic technical analysis, divided is not a good thing. The divide is most clear in a simple indicator, the percent of stocks above their 200-day average. The idea of 200-days versus the often used 50-days is that it gives you a perspective of an overall rather than short-term trend. Depending on your database, the S&P has trended higher while NYSE stocks above their 200 are close to 50–50. Of course everything is relative, among other things it’s all relative to what the large-cap averages are doing. It’s a house divided. Another take here is a look at what small and mid-cap stocks are doing, as well as the Equal Weight S&P.

The other important factor in looking at stocks above the 200-day is the direction itself. We have mentioned that there is a rule of sorts that when the number drops below 60% it continues to around 20% before regaining the 60% level. There is a logic here that when markets lose momentum it’s not typically regained without a correction to rebuild the liquidity. Obviously talking about rules in the stock market is bit of a stretch. Over the last few weeks the number has been stable, and we’ve come to think it could simply remain that way. After all, Tech has had a good run and deserves a consolidation.  Meanwhile, Financials and Healthcare could very well pick up the slack, leaving the market itself in a technical standoff of sorts.

Adding to the idea of stability rather than correction is that there are strong stocks. Call us old fashion, but when we see stocks like GE (206) and IBM (253) breaking out, we can’t help but think how bad can things be? And Disney (112), even the mouse tried to escape Wednesday with only dubious success, but is in any event a much better chart these days. The real lift for the market, however, seems the financials. Visa (347) and Mastercard (567) are hovering around highs, American Express (318) seems poised to do the same. Particularly attractive are the broker-dealers, an ETF here is IAI (158). This runs from exchanges to Fintech, Goldman (658), and so on.

The China charts are much improved, and BABA (100) even more than that. Meanwhile, we have thought to avoid Starbucks (112) because of China, but it’s hard to avoid that chart. Among the FANGs, Google (193) has gone from first to worst short-term, but even there is sitting on its 50-day average. By way of overall perspective, we’ve used a monthly rather than a daily chart of the stock making clear it can withstand this weakness and more, not that we’re anticipating that. Speaking of avoiding problems, streaming seems likely to avoid tariffs.  Netflix (1016) gapped higher a couple weeks ago, and the stock has a positive history when it comes to following through to this pattern.

Markets are never easy. Then, too, a smart guy once told us this is the best game in town. So here is one of those times that is vaguely positive, that is short-term, against an overall imperfect backdrop. It’s amusing to consider that’s how markets get you. There’s always one more trade to be squeezed out. Then, too, we trade more than invest – we have no qualms being gone tomorrow. For investors, look for long-term growth, something like garbage. Sure we’re mocking garbage as growth, but we’re not mocking garbage stocks as growth stocks. Just look at those long-term charts – the short-term charts aren’t bad either. The three we are familiar with are very similar, Waste Management (226), Waste Connections (189), and Republic Services (222).  It’s about making money, not so much how you make the money.

Frank D. Gretz

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