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Weekly Market View
Open Interest Alerts
Chart
Set-Ups
Market
Talk
Flow Recap/ Highlights

Weekly
market
View

The S&P 500 (SPX) closed lower for the sixth straight week – the first such instance since May/June 2011 – as concerns over growth, high inflation, and the Fed continue to weigh on sentiment. Since 1980 there have been thirteen weekly losing streaks of six weeks or more and the average four-week returns afterwards have been 4.15%. The weekly candle put in a long tail with strength on Thursday and Friday off the 3900 level and channel bottom from the recent highs. The longer timeframe broke down out of balance to start the week and a move higher runs into significant resistance from that range. The 8-EMA is just above Friday’s high and a move above can shift the near-term trend higher with upside to the 21-EMA at 4165 while the mid-point of the channel is at 4175. If we do get a 4% move off this recent losing streak that would be near 4185.  Failure to follow-through back up to this zone creates two scenarios: first, we chop between the 4100 and 3950 zone and former a smaller balance; or two, we reverse through last week’s lows and move back towards 3800. The 3950-3900 zone will be important support to hold in the week. Momentum is showing signs of inflecting higher with MACD improving and RSI near a downtrend break.

Market Sentiment/Breadth

AAII sentiment for the week ending 5/11 saw bullish responses fall to 24.3% from 26.9% prior while the bearish responses fell to 49% from 52.9%. Neutral sentiment rose to 26.6% from 20%. NAAIM Exposure dropped again to 24.31 from 31.76 and now at its lowest level since the pandemic lows in 2020. Lipper Fund flows had $8.6B in outflows from stocks, the sixth straight week of losses. As of Friday’s close there were 25 new highs versus 352 new lows, continuing to be weak overall but not as bad as prior weeks. NYSI closed at -856 and NASI closed at -1116 and both remain in a bearish trend below the 8-EMA. Cumulative AD closed slightly higher on Friday but remains overall in a bearish trend. NYMO closed at -12.56 on Friday after hitting an extreme this week at -68. VIX:VXV ratio is at 0.96, a neutral reading. CNN Fear and Greed is at 12, down from 16 a week prior, and remains in ‘extreme fear.’

Open
Interest
Alerts

Resolute Forest (RFP) nice looking small cap breakout and 1250 July $15 puts selling to open for $1.30, name with 11,250 January $15 calls in OI form a 1/27 buyer at $2. The RFP weekly chart also looks great in a one-year coiled consolidation range. RFP a name we featured in March noting:

"The $955M company trades 4.5X earnings, 0.26X sales, and 8X cash. RFP is a forest products company with exposure to pulp, tissue, wood products and paper production and the leading Canadian producer of wood products east of the Rockies. They have exposure to products like newsprint, books, and mailers as well as, consumer products, lumber and more. RFP is benefitting from higher lumber prices which have more than doubled off the August lows. RFP has been shifting more focus towards wood products and pulp as demand for paper wanes and they see a significant opportunity to capitalize on housing demand with plenty of high-return projects in the pipeline. They have some of the largest-scale and capital-efficient operations in the region as well as significant harvesting rights in Canada that position them well to be a leader in the coming years. RFP has also been deleveraging the balance sheet and could pursue M&A to build out those higher-growth businesses. Analysts have an average target for shares of $17.25 with a Street High $19. CIBC upgrading recently to Outperformer citing a forecast for significant free cash flow generation in a stronger lumber market. Scotiabank positive on the name recently, as well, noting that the outlook for the U.S. housing market remains supportive of elevated oriented strand board and lumber demand which will give RFP better pricing power in 2022. Short interest is 2.5%. Hedge fund ownership  fell modestly. Point72 a new buyer of stock. Insiders have been active in the name recently too including a director buying 13,300 shares in mid-February at $11.80 to $15. "

Chart
Set-Ups

Exelon (EXC) strong trending name that has pulled back to the 55-EMA and based for the last couple weeks. EXC has been a relative strength name and above $48 could spark a nice run back at the prior highs. A measured move on the breakout targets $55. MACD has pulled back to zero and nearing a bull cross as momentum starts to inflect higher.

Market
Talk

 

 

 

The SPX was down about -3% for the week but it was a wild week yet again with early strength into the Powell speech Tuesday up to 4100 rejected before sellers drove things back to lows. Friday options expiration day was met with an opening gap higher that faded all day until the closing hour saw a massive short covering rally to close slightly green on the day. Likely some dealer flows that pushed things lower into OPEX and then the unwind released some selling pressure. Potentially a short term low in place as these big monthly OPEX days tend to mark turning points and in a bear market has been a good signal for a short term low. The environment undoubtedly is staying unstable as long as VIX is above 25 but the VIX continues to lack a real concern on selling days it’s just not surging to hgihs like some would expect. This doesn’t mean it cannot occur but it will take a real rush for panic put buying for the VIX to get over 35. That is the risk in this market, if 1-2 day bounces cannot follow through it can eventually lead to that VIX pop but it doesn’t have to. Breadth and internals continue to show weakness from a swing timeframe and need to see NYSI turn up for anything to stick. The only positive seen this week is the decreasing amount of New Lows on the NYSE compared to last week while the SPX retested those same levels. Lots of divergences piling up and sentiment in the tank but need to see at least a close above the 8 EMA for QQQ and SPY to confirm any character change.

The sector leaders for the week were Solar +8.9%, Gold Miners +3.8%, Biotech +2.2%. Laggards included Retail -9.5%, Staples -8.1%, Consumer Discretionary -7.8%. Friday’s strongest relative strength groups included Software +1.2%, Healthcare +1.2% and Real Estate +1.2%.

The market will look ahead next week to Durable Goods and GDP numbers with inflation data on Friday. Overall not a lot as June FOMC meeting the next big catalyst is about 4 weeks away. Earnings slow down as well but some reports from NVDA, BABA, COST, MDT, DG, SNOW, BIDU, ADSK, DLTR, DELL, ZM, ULTA, ZS, BBY, DKS, TOL, M. 

Flow
Recap/
Highlights

Options flows for the week saw early week large call buys for Aug/Sept in Fertilizer names CF, MOS. Midweek saw a surge in put buying across Retail with the weak reports from WMT and TGT. There were overall larger put buyers in many names related to the consumer. December put buyers also in F, GM. Thursday saw some bullish call buys and put sales in casino names like MGM, CZR, WYNN, LVS. Also opening put sellers in cyber security names for Aug/Sept potentially calling for a bottom in some higher growth software stocks. Friday saw more weakness early and put buys in Medtech names like STAA, TXG.

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