Just when you thought things couldn’t get much better… they didn’t.  And Wednesday’s 800-point Dow loss and a close to 10-to-1 down day wasn’t exactly a subtle change. Rising bond yields have been a potential problem for equities, but like most potential problems, they don’t matter until they matter. Why it should have been Wednesday’s auction is something of a timing mystery. We’ve likened the bond problem to the tariff problem back in February. Granted, the tariff news worsened, but tariffs didn’t matter until the technical background had shown obvious deterioration. That’s hardly the case now, with the A/D index having just made a new high and outperforming the market averages – not just a positive, a rare one. The market’s problem is a good one – it has been too good. Many stock patterns are stretched.  The weakness strikes us as a swipe at complacency and a chance for the winners to reset.

The deficit has never been this deep outside of a recession. Now we sit on the brink of more tax cuts with minimal attempts at cost cuts, meaning still deeper deficits. Moody’s only finally got to what the other two had gotten.  What matters, of course, is that the most important rating agency seems to have gotten it, the one called the bond market. Meanwhile, it has been a while, but bad days happen. Bad down days don’t kill uptrends it’s the bad up days – those when the stock averages mask weakness in the average stock. We have seen a couple such days, but a couple of days don’t kill an uptrend. We had a V-bottom – down to up in a flash. Market tops are about distribution and that takes time.

Frank D. Gretz

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DJIA: 42,323

Chase the bear or chase the bull…the Algos chase both.  Sharp and quick declines ending in so-called V-bottoms have been more common since the 2008 Financial Crisis. And they do fit the somewhat contradictory mantra of this bull market – buy the dip, and chase strength. What is particularly positive about this market is that the chase has been true of the average stock as much as the stock averages. In someways even more so. An Advance/Decline index simply adds a day’s net advances to a previous cumulative total. Such an index for the 30 Dow Industrials, the S&P 500 and the NASDAQ 100 all reached new highs last week while the respective indexes themselves were below their highs. That’s quite rare and speaks to what you might call the market’s internal or underlying strength.

If history is a guide, when it comes to markets it is only just that. Sadly, it’s no longer the likes of Jesse Livermore driving markets, it’s more Jesse.Algo – Things have changed. Still, human nature remains the same, as does momentum from whatever its origin. All this is to say the rally has impressive credentials, even for the longer term. What will lead to its demise is pretty much the opposite of what we just saw. While the stock averages will continue higher, the average stock will begin to lag.  The A/Ds will narrow, worse still, turn flat in up markets. Similarly, stocks above their 200-day will stall and roll over. These would be signs the money is running out, and less money means less participation. One caveat in these numbers would be a move in stocks above the 200-day back above 70%, typically indicative of a new bull market. That in turn would take even longer to unwind.

So, the Saudi’s are investing. We know little of their track record here, other than some long ago venture into Citigroup. We suppose they have been good shepherds of their oil, but that’s not exactly something they invented. What is a bit worrisome is the history of foreign investing, thinking of Japan’s untimely purchase of Rockefeller Center back when they were on top. Just saying – Not predicting. Meanwhile, the AI contingent with Nvidia (NVDA – 135) in the lead, has come storming back as has pretty much all of Tech. More than 40% of Tech recently were at new highs relative to the S&P. For some of the Semis, this was quite a feat. Software meanwhile is more than holding its own. And then there’s Tesla, the car company/battery company/autonomous driving company/meme stock/cult stock.  Whatever it takes, Tesla (TSLA – 343) finds a way higher. As CNBC’s Mike Santoli cleverly quipped, “a stock that doesn’t show its work.”

When it comes to oil, the news is like a country and western song. Maybe that’s a good thing – it can’t get much worse. This makes it all the more intriguing that the stocks have held together reasonably well. Credit the breadth of the market or do better times lie ahead?   At a scant 3% weighting in the S&P, things wouldn’t have to get a lot better to have an impact on those stock prices. For oil and other commodities, helping in part is likely about a better look from China. And then there’s Walmart (WMT – 96), with a long-term chart that is the envy of many Tech stocks. Despite the obvious impact of tariffs and the market’s 20% drawdown, Walmart held together almost surprisingly well.  Yet in some ways it shouldn’t be a surprise. During uncertain times, when consumers pull back, Walmart has proven an unlikely beneficiary.

With tariff worries almost a memory and the market rallying, seems like nothing but blue skies. That’s a bit surprising considering the long bond is near 5% again – a good excuse for a setback were one to come along. Fortunately, bad news seems to follow rather than lead price – sufficient unto the day is the evil thereof.  Monday saw a great rally in the averages and a good rally in the market. Any day with 1000-point gain in the Dow has to be called a great day, even with only three-to-one up rather than five-to-one up.  There are no bad three-to-one up days.  Keep those coming and we’re all great traders. Meanwhile, let’s just stay away from the bad up days— up in the averages with flat or negative A/Ds.

Frank D. Gretz

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DJIA: 41,608

As we predicted… there is no predicting.  For the Semis the news broke positively on Wednesday evening.  Of course, this comes after Nvidia’s (NVDA – 117) recent write-off when news broke the other way. It’s a difficult way to go about investing but as they say, deal with it – it’s not going away. How best to deal with it is to focus on the basics. In the end it’s the market that makes the news and a technically healthy backdrop is the key. News follows price. In good markets the news is good and bad news is temporary, if not altogether ignored.  The market has put together a rather remarkable recovery not just in terms of the averages, but the average stock and that’s the key to a healthy Market. When most days most stocks go up, the news will take care of itself.

Numbers like the Advance/Declines and stocks above the 200-day moving average, participation in other words, are the key to judging any rally. Rallies that have it will endure, without those, the rally will fail. The structure of a rally sometimes also can offer an insight as to its quality. In this case, that structure is V-shaped, a fast decline and a fast recovery. The more of a decline that is retraced and the quicker it occurs, the more bullish for future returns, according to Sentimentrader.com. So, in this case, it should be a good sign that the S&P has retraced half of its losses, and it did so in 18 days. Much has changed over the last 20 years, decimalization, the proliferation of ETFs and so on, making these V-shaped lows more common.  Still, it’s one more thing that increases the probability of a credible low.

This rally, of course, is about more than just Tech. Indeed, what speaks to the quality of the rally is as we’ve said its breadth.  Remember the excitement a while back around infrastructure? The spend was always just around the corner. The stocks finally gave up to drift lower, and then some. You don’t hear much about infrastructure in these days of cutting everything, but stocks like Vulcan (VMC – 268), Sterling Infrastructure (STRL – 179), Martin Marietta Materials (MLM – 541) and Quanta Services (PWR –326) have acted particularly well of late. And when is it not a good time to look at what we sometimes call the “sleep at night stocks”, those stocks in relatively consistent long-term uptrends. Insurance certainly is one area that fits here, and the waste management stocks another – names like Waste Management (WM – 233), Republic Services (RSG – 249), and Waste Connection (WCN – 196).

There are companies, and there are the stocks of those companies. The two are typically equated, but they are hardly the same. Stocks are pieces of paper, and those pieces of paper are subject to forces of supply and demand well beyond corporate prospects. We’re thinking here of Palantir this week, the company versus the stock. Palantir, the company is easy enough to like, Palantir (PLTR – 119) the stock is a different story. Similarly, the company’s earnings this week were easy enough to like, the stock’s reaction to those earnings not so much. As last week’s Barron’s pointed out, at some 60x sales there’s not much good news that has not been priced in. To look at the chart of Palantir, you might say the same. This seems more about the market, where Tech had become a bit suspect, but this too could be changing.

Ignoring bad news is good, so too is responding to good news. The market did respond to the trade deal and chip news, it did not respond to news from the FOMC that the risk of stagflation is rising. The actual words were quite bleak, “the risk of higher unemployment and higher inflation have risen.” For all the hoopla that surrounds the Fed and its meetings, stocks care more about tariffs and Tech than monetary policy, at least for now. Meanwhile, forget Gold as a safe haven, bring on the speculative Bitcoin. Bitcoin is about to break out on this news while Gold is taking a well-deserved rest.  Both seem attractive given that throughout history governments have dealt with massive debt by inflating their way out of it.

Frank D. Gretz

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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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