Trends, Signals, and What They’re Suggesting Now

1) NYSE – There are plenty of ways to define an uptrend. Markets are not simple, but there are a few “simple” ways of quickly looking at something and seeing if it is trending higher or lower. From an intermediate-term perspective, where is the stock trading relative to its 200-day moving average? If a stock or index is below its 200-day, it's probably not in an uptrend. If a stock or index is above its 200-day, it's probably not in a downtrend. Using that simple framework, the percentage of stocks on the NYSE in uptrends is approaching 70% this week (chart credit TrendLabs). What does this tell me? That there are a lot of stocks on the NYSE that are NOT likely in downtrends. An important distinction is that the NYSE gives you far more exposure to cyclical sectors and far less exposure to American mega-cap technology. On the NYSE, think financials, industrials, materials, and health care. Another important factor when considering uptrends and downtrends is the NYSE Advance-Decline Line. This is one of the most important measures of market breadth. It tracks the cumulative difference between advancing and declining stocks on the exchange. Each day, the net number of advancing stocks is added to the prior total. Over time, this tells us whether participation across the market is expanding or contracting. Right now, participation is expanding to levels we've never seen before. These are not bad developments for markets. Nothing is broken. Nothing is failing. Leadership simply looks like it is changing some.

2) U.S. DOLLAR – I’d bet a lot of money that lots of people have no idea what just changed in USD terms. In our Macro Process, the most important things are the particular Signals that change at particular points in Cycle Time (business, economic, and market cycle). We now have a confirmed Bullish TRADE & TREND Breakout in USD with immediate-term TRADE USD Correlations doing things consistent with a Goldilocks economic environment. Positive USD Correlations are currently in place for Bitcoin at +0.59, Gold at +0.71, and +0.72 for the S&P 500 proxy SPY. So USD movement becomes more of a tailwind for these assets as the Dollar rises and a headwind when it falls. Remember too, TRADE and TREND are not just “levels” from a single factor like a moving average, but they are the Rate of Change of Price, Volume, and Volatility over a time series of less than one month for TRADE (that’s momentum) and more than 3 months for TREND. So what’s this all likely mean? We likely see a US Dollar moving Sideways to Up, and Rates moving Sideways to Down…in other words…Goldilocks.

3) VIX – There are certainly some geopolitical issues (i.e. Iran, Venezuela, Greenland, SCOTUS decision on tariffs, crypto legislation) that could cause VIX to move higher.  But right now does not look like that time.  Tomorrow is monthly option expiration too, so that could help.  What is and what should happen doesn’t always follow an easy path.  But the signals are reasonably clear right now.  Yesterday VVIX (volatility of volatility) failed near its trend level.  That level is 115 and it reversed after hitting 111.80.  On that VIX also failed near important resistance at 17.21.  VIX hit 18.10 and reversed.  The implied volatility premium on SPY is now at a massive +121%.  What does that tell me?  The market is very well hedged and that these people must be in geopolitical panic mode.  That’s good.