It was the culmination of many months of accumulation by Wall Street firms. I’ve discussed this accumulation, or manipulation, over and over and over and indicated that it was the likely precursor to a big stock market advance. I’ve updated a chart of the QQQ (ETF that tracks the NASDAQ 100) to show how the QQQ has been accumulated/distributed throughout the trading day since its top in November 2021. Check this out:

Let me provide you the details of each phase:

Orange Bearish Manipulation Phase

This was the period where Wall Street firms were moving from aggressive stocks to defensive stocks. I discussed this at the beginning of 2022 after consumer staples (XLP) absolutely dominated consumer discretionary (XLY) during December 2021. This manipulation period was further proof that Wall Street was preparing for the type of selloff that NO ONE was talking about. Here’s how the cumulative intraday trading looked from November 21, 2021 through January 3, 2022:

Opening gap: +6.309:30-10:00am: +4.0110:00-11:00am: -19.2211:00am-4:00pm: +8.80

We were seeing opening gaps higher and early morning buying, followed by balance of day selling. That, combined with obvious rotation in “risk off” fashion spelled trouble for stocks to open 2022. There was also extreme complacency in the options world. This was the bulls’ last gasp short-term, prior to the start of a cyclical bear market.

Red Pure Distribution Phase

This was the “run for the hills” phase, when Wall Street firms were selling throughout the day to the unsuspecting public that widely remained bullish. Aggressive areas of the market were thrashed and there no signs of accumulation at any point during the trading day. Here was the cumulative intraday performance:

Opening gap: -29.689:30-10:00am: -35.0810:00-11:00am: -32.9311:00am-4:00pm: -14.59

Throughout this period, we not only saw significant gap downs from bearish media headlines, but also plenty of selling during the entire trading day. The net trading performance of every part of the trading day was negative and bearish.

Light Green Bullish Manipulation Phase

This was the period where you didn’t understand what was happening, unless you were “looking under the surface” of the major indices. It may have appeared that everything was awful. The news was horrible regarding inflation, interest rates were being raised briskly, FedSpeak kept reinforcing that inflation was a major problem, recession talk began, etc. It led to very sizable gaps to the downside and morning selling, but it was followed by a TON of intraday buying. This was a major indication that Wall Street firms were perfectly content to buy every share that the public was willing to sell. In short, Wall Street was accumulating at cheap prices. Here’s how the cumulative intraday trading performance looked for this period:

Opening gap: -44.899:30-10:00am: -33.7910:00-11:00am: +8.6711:00am-4:00pm: +42.48

Check out this CRAZY morning distribution, followed by the massive accumulation throughout the afternoon. There’s a reason why the first hour of trading is called “amateur hour”. The continuing awful headlines sent stocks spiraling lower throughout this MANIPULATIVE period at the opening bell. Then the herd kept selling and selling. The big Wall Street firms calmly sat back and waited for prices to drop in the morning hours in order to begin buying in force throughout the balance of the day. Yet, when you look at the technical picture from May 2022 through the end of the year, it provided us ZERO signs that the market was about to scorch higher. But Wall Street knew differently. They simply needed to fill their coffers ahead of everyone else – and then the fun (bullishness) would begin. I wrote and discussed all of this in real time, saying that it would lead to a bullish advance ahead. I also said the CYCLICAL bear market was over. Most scoffed at this notion. Well, it led us to the resumption of the secular bull market advance – and the bears keep fighting the market’s strength. Those remaining bearish are paying the price and, in my opinion, the price will get steeper and steeper as the year marches along.

Dark Green Pure Accumulation Phase

We’re just scratching the surface on this 2023 rally. Make no mistake about it, we’re going higher – a lot higher. I follow where the money goes and couldn’t care less about what the talking heads are saying. IGNORE THE MEDIA and FOLLOW THE CHARTS. The big Wall Street firms are betting their money on a significant rally ahead. You can do what you like, but I’m following these firms. The manipulation and ridiculous conflict of interest on Wall Street is quite apparent to me. These big firms like Goldman Sachs invest their own money and their wealthy clients’ money. Then they parade their “influencers”, err I meant to say “analysts”, out into the media to tell everyone what to buy and sell and to tell us how low the market is going to go and how poor earnings this quarter will be. Meanwhile, their market making unit does the opposite of what those influencers (oops, my mistake again) are telling us to do. It’s quite the racket. But guess what? It’s our system and it’s not going to change. So you can either be manipulated by it or you can profit from it. I choose the latter for myself and for our EarningsBeats.com members. Ready to see how the cumulative intraday trading performance looks for 2023?

Opening gap: -6.289:30-10:00am: +19.0710:00-11:00am: -4.3111:00am-4:00pm: +66.43

Hhhmmmm, a little different picture, don’t you think? The first part of the day is still the weakest part, but it’s nothing like we experienced in 2022. The manipulation is ending. Why? Because Wall Street firms have filled their stockings and they’d like to thank everyone for selling them shares so cheaply in 2022. As the QQQ set a 52-week high last week, Wall Street’s profits soar. Welcome to Wall Street’s Hunger Games!

Best Deal of the Year

We have saved or made our EarningsBeats.com members millions of dollars throughout the “Hunger Games.” Our strong conviction that January 2022 was the beginning of a cyclical bear market enabled members to either move to cash or position themselves appropriately to minimize losses during the worst part of the bear market from January through June of 2022. I also very clearly stated my belief that the mid-June 2022 low was a major bottom and repeated that belief in September 2022 when we completed a double bottom. I’ve never wavered since and I’ve been proven correct. And now I am telling you that we’re going a lot higher.

I mention all of this, because we just began our Spring Special on Thursday. We offer our members the absolute best in market guidance, research, and education. We are even offering a FREE year’s subscription for those willing to commit to a longer membership. You won’t find a better deal to join the best market guidance on the planet. If any of this resonates with you, or you’d like to consider a different direction with our proven market guidance, you should CLICK HERE to sign up for our 30-day FREE trial. If you like our service during your trial, you can use our Spring Special to extend your membership (will add on to the end of your trial period). And if our service isn’t for you, you lose nothing, and can cancel your membership prior to the end of your free trial.

I hope you’ll consider us at EarningsBeats while our prices are low – and let us help make a difference in your financial future.

Happy trading!

Tom

After rising three weeks in a row, the Indian equities took a breather, ending the week on a negative note much on the anticipated lines while resisting the key levels. There has been a slight divergence between the Indian markets and the global markets. Structurally speaking, SPX and other key European Indices like DAX look stronger than NIFTY; however, it can be said that they are perhaps playing a catchup of their relative underperformance over the past months. The trading range got wider as NIFTY oscillated in a 398-points range over the past five sessions. While continuing to resist the key levels, the headline index closed with a net loss of 111.40 points (-0.61%) on a weekly basis.

VIX, too, saw a decline. While remainin at relatively one of its lowest levels, INDIAVIX declined by 4.28%  to 12.30. We enter the expiry week of the current month’s derivative series and the markets are set to stay influenced by the expiry and rollover-centric activities. While not comparing the NIFTY chart with global indices charts and looking at them in isolation, it appears that some negative divergence in performance may stay for some more time. The derivative data shows NIFTY facing stiff resistance in the 18350-18500 zone; unless this zone is taken out meaningfully, no runaway rally can be expected in the markets.

In his speech yesterday where he was interviewed by a top US Central Bank staffer, the Fed chief Jerome Powell made highly scripted and unclear remarks, saying it is unclear if U.S. interest rates will need to rise further. He further said that the central bank would now make decisions “meeting-by-meeting,” further adding that, after a year of aggressive rate increases, they can afford to look at the data and evolving outlook to make careful assessments.

Monday is again expected to see a quiet start; NIFTY is likely to find resistance at 18350 and 18480 levels. The supports will come in at 18040 and 17800 levels. The trading range will stay wider than usual.

The weekly RSI is 57.50; it remains below 60 and neutral without showing any divergence against the price. The weekly MACD is bullish and trades above the signal line. No notable formations were seen on the candles.

The pattern analysis shows that the NIFTY is playing out well to the falling trend line that begins from 18600 and joins the subsequent lower tops. The index resisted this trendline multiple times before crossing above it and taking support on it twice. Right now, the index trades near another pattern resistance point of 18389; this makes the 18350-18500 zone a strong resistance zone for the index.

All in all, we are not yet completely out of the woods; the technical structure of the markets suggests that the ranged consolidation may continue and the markets will continue finding selling pressure at higher levels. There is no technical evidence present on the chart that suggests a steep decline; however, there won’t be any steep up-move in the markets either unless the 18350-18500 zone is taken out convincingly. It is strongly recommended to continue approaching the markets on a highly selective basis and vigilantly protect profits at higher levels.

Sector Analysis for the Coming Week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

The analysis of Relative Rotation Graphs (RRG) shows NIFTY Realty, BankNifty, Consumption, and Financial Services indices are inside the leading quadrant. These groups are likely to show relative outperformance against the broader NIFTY 500 Index. The FMCG, Midcap 100, and Infrastructure indices are also inside the leading quadrant. Some relative outperformance can be expected from these groups as well, but they appear to be giving up on their relative momentum.

NIFTY PSE Index has rolled inside the weakening quadrant. The Auto index also remains in the weakening quadrant, but shows some improvement in its relative momentum.

The Nifty PSU Bank index has rolled inside the lagging quadrant. The IT Index is also seen languishing inside the lagging quadrant. The Media, Commodities, and Metal indices are also seen placed inside the lagging quadrant.

The Energy and the Pharma Indices are inside the improving quadrant.

Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above chart, they show relative performance against NIFTY 500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

There is a compelling argument for a possible change in trend direction for VALIANTORG.IN.

The stock has a relatively brief listing history on the NSE. However, upon analyzing the weekly chart, it appears that after a significant decline, the stock might be in the process of reversing its trend.

VALIANTORG.IN became listed on the NSE in October 2020, resulting in the formation of a Symmetrical Triangle pattern in its price action. The stock broke down from this pattern and experienced a continuous decline until April of this year. From its peak at 1977 in December 2020, the stock dropped to a low of 355 in March of this year.

Several technical indicators on the chart suggest that the stock may have found a bottom. The recent phase of decline has coincided with a notable bullish divergence of the RSI in comparison to the price. While the price reached lower lows, the RSI formed higher bottoms, indicating a bullish divergence.

The On-Balance Volume has exhibited a significant spike and is currently trading near its highest point. This surge in volume suggests substantial accumulation of the stock during its recent decline. Furthermore, there has been a substantial increase in volumes near its lowest point, further indicating a potential bottom formation.

Presently, the stock is situated in the improving quadrant of the RRG, indicating a likelihood of better relative performance compared to the broader NIFTY 500 Index.

If the expected trend reversal occurs, the stock has the potential to experience significant price appreciation, potentially reaching levels between 800 and 875, especially when held for a medium to long-term time horizon. Given its current levels, it would be a favorable addition to an investment portfolio. However, if the stock slips below 355, it would invalidate this technical setup.

Foram Chheda, CMT 

And

Milan Vaishnav, CMT, MSTA | Consulting Technical Analyst | www.EquityResearch.asia | www.ChartWizard.ae

Disclosure pursuant to Clause 19 of SEBI (Research Analysts) Regulations 2014: The analyst, Family Members, or his Associates holds no financial interest below 1% or higher than 1% and has not received any compensation from the Companies discussed.

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions, and the needs of specific recipients. This may not be taken in substitution for the exercise of independent judgment by any recipient.

The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates, or any other reason. Past performance is not necessarily a guide to future performance. The usage of the Research Reports and other Services are governed as per the Terms of Service at https://equityresearch.asia/terms-of-use

The Research Analyst has not managed or co-managed the issues of any of the companies discussed and has not received any such remuneration from such activities from the companies discussed.

The Research Analyst has not received any remuneration from the Merchant Banking activities.

The Research Analyst has adopted an independent approach without any conflict from anyone. The Research Analyst has not received any compensation or other benefits from the companies mentioned in the report or third parties in connection with the preparation of the research report.

Compensation of the Research Analysts is not based on any specific merchant banking, investment banking, or brokerage service transactions.

The Research Analyst is not engaged in a market-making activity for the companies mentioned in the report.

The Research Analyst submits that no material disciplinary action has been taken on him by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country, or other jurisdiction, where such distribution, publication, availability, or use would be contrary to law, regulation or which would subject the Research Analyst to any registration or licensing requirement within such jurisdiction.

In this episode of StockCharts TV‘s The MEM Edge, Mary Ellen reviews buying opportunities after last week’s break of the markets above its six-week trading range. She also highlights leadership areas and the best ways to capitalize.

This video was originally broadcast on May 19, 2023. Click on the above image to watch on our dedicated MEM Edge page on StockCharts TV, or click this link to watch on YouTube. You can also watch on our on-demand website, StockChartsTV.com, using this link.

New episodes of The MEM Edge air Fridays at 5:30pm PT on StockCharts TV. You can view all previously recorded episodes at this link. You can also receive a 4-week free trial of her MEM Edge Report by clicking the image below.

On this week’s edition of StockCharts TV‘s StockCharts in Focus, Grayson gives you a quick tour of the StockCharts Advanced Charting Platform, ACP, and then highlights five of his favorite interactive features throughout the platform. You’ll learn how these dynamic controls can streamline your charting workflow, giving you quick access to settings and letting you customize your charts exactly the way you want them. Along the way, you’ll learn more about how the flexible charting experience in ACP can bring new power to your analysis, and you’ll see many of the platform’s advanced features in action!

This video was originally broadcast on May 19, 2023. Click on the above image to watch on our dedicated StockCharts in Focus page on StockCharts TV, or click this link to watch on YouTube. You can also watch on our on-demand website, StockChartsTV.com, using this link.

New episodes of StockCharts in Focus air Fridays at 3pm ET on StockCharts TV. You can view all previously recorded episodes at this link.

Earlier this week, I completed a “clean slate” exercise on the S&P 500 chart.

You see, my charts become pretty busy over time, because I draw lots of trend lines and put notes on the charts as well. Basically, I consider charts to be the way you have a conversation with the markets! And after a while, the conversation gets a little muddy, and you need to reset.

My normal S&P 500 chart looks like this:

Viewers of The Final Bar on StockCharts TV will probably be very familiar with this daily SPX chart, because we review it on pretty much every episode of the show!

Every line drawn on that chart comes from some moment where, in reviewing the chart, I felt that I needed to indicate a particular level or trend or pattern. Over time, the chart can accumulate quite a bit of noise!

Should we “sell in May and go away” in 2023? Join me for a free webcast on Tuesday May 23rd at 1:00pm ET called Sell In May: Trends vs. Cycles. We’ll review the history of this seasonal pattern, compare the current market environment to past cycles, and decide together whether we should indeed “sell in May!” Sign up HERE for this free event!

So I saved a new version of this chart and went with a completely clean slate. Okay, I did add back the moving averages and RSI, but other than that it’s pretty clean!

What jumps out at you as you’re looking and reflecting on the price movements and price patterns? For me, I was immediately drawn to the higher lows from October to December to March. I drew that trendline first (dashed blue line), and it struck me that my first takeaway was the bullish pattern of higher lows over time.

Next, I noticed how we were approaching the February high around 4200, so I drew a dashed pink line to indicate this important resistance level. It turns out Thursday’s close was almost exactly at this level, and then Friday’s drop pulled right back below 4200.

Finally, I noticed the symmetry around the 4100 level. The S&P 500 hit 4100 in early December of last year, and I would argue that February’s run to 4200 was essentially a failed attempt to break above that December high. We spent most of the last six weeks sitting right around 4100, so that trendline was added next.

I sat back and reviewed my trendline analysis, and realized that I was missing one of the most effective ways to identify potential support and resistance levels between two extreme prices: Fibonacci Retracements. When a market has established a significant high (SPX 4800 in January 2022) and then a significant low (SPX 3500 in October 2022), Fibonacci Retracements can help to anticipate where the market may retrace as the price attempts to push higher and regain the previous highs.

When I applied the Fibonacci ratios to the chart, I remembered why I was so focused on the 4000 level in the 4th quarter of last year. This represented a 38.2% retracement of the 2022 range and seemed to be a likely upside target on the initial rally off the October lows.

Sure enough, we hit 4000 in November and spent about four weeks chopping around that price point. When we finally saw a follow-through move above 4000 in January, that opened the way to the 50% level around 4155, which was reached in early February.

Just can’t get enough Dave Keller in your life? My newsletter focuses on behavioral investing, combining the best practices of technical analysis and behavioral finance. Check it out!

For the last six weeks, we’ve been talking about the S&P 500 hitting 4200 and whether it can eclipse the February high. This chart now reminded me that the 50% Fibonacci level was also at play here, and getting above 4155 was an important milestone as well.

So if the SPX does indeed power above the February high next week (still very much an open question in my opinion!), what’s the next upside objective?

A 61.8% retracement of the 2022 selloff would take the SPX to around 4310. That is pretty much exactly at the August 2022 high! Here, we have a “confluence of resistance” where traditional support and resistance analysis aligns with Fibonacci retracements. Based on the narrow leadership in 2023, and the anemic breadth conditions persisting through this week, I would expect a move above 4300 to be highly unlikely.

What if the S&P 500 index fails here and pushes back lower? Well, we have plenty of support levels and Fibonacci levels below the current price, including the 4150 and 4100 price points. I’m immediately drawn to 4000, which represents a “confluence of support” based on Fibonacci analysis, the 200-day moving average, and the trendline we mentioned at the beginning of this article.

There is plenty to be bullish about, with strong uptrends in many equities and our Market Trend Model remaining bullish on all three time frames. But, when markets are facing significant overhead resistance, I have to question the risk vs. reward at current levels.

Want to learn more about Fibonacci in a handy video format? Head over to my YouTube channel!

RR#6,

Dave

P.S. Ready to upgrade your investment process? Check out my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.