Stranger Things: Markets Behaving In Unusual Ways

Stranger Things: Markets Behaving In Unusual Ways

Stocks were mostly weaker, led by the and the which were both down about -0.8 % on the week.

Several things are looming over the market… like the debt ceiling needing to be raised, which is no sure thing considering the bickering on Capitol Hill.

Another longer-term issue that was revealed last week was that members of the Federal Reserve have potentially been trading their stock portfolios ahead of major policy decisions.

Although not illegal currently, it could dent the Fed’s sacred credibility which is crucial to the stability of the markets, the economy, the dollar, and the United States in general. Does this make decentralized digital currencies look like a serious replacement for fiat currencies and even gold?

Possibly, as a result of all the political chaos, markets behaved in some unusual ways, diverging from classical patterns we’d expect to see during a selloff.

First, underperformed stocks on weakness. Next on the list of weirdness was that High Yield Debt (AKA…) outperformed US Long Bonds, with Junk debt flirting with multi-year highs.

We were watching the 210 level in iShares ETF (NYSE:) (Grandpa Russell /Small Caps) as a line in the sand to hold and keep the long-term bull trend in equities intact.

Market Outlook Chart

Market Outlook Chart

The week’s market highlights

  • Risk Gauges moved back down to neutral readings with the week’s selloff
  • The traditional flight to safety is to switch from stocks and high-yield debt into US Treasury Bonds and Utilities which did not occur
  • SPDR® S&P 500 (NYSE:) was down 1.54% on Friday, closing beneath the 50-DMA for the first time since June 18
  • SPY and SPDR® Dow Jones Industrial Average ETF Trust (NYSE:) on both price and Real Motion starting to get frothy on the downside
  • Market internals remained weak across the board
  • The Hindenburg Omen indicator increased to its highest level since last March
  • IWM bounced off oversold levels, closing above both its 50 and 200-DMAs, back into bullish mode
  • Last week saw some of the worst volume patterns since March of 2020, with only 1 accumulation day in each of the major indices over the past two weeks indicating major institutional selling
  • Growth—Vanguard Growth Index Fund ETF Shares (NYSE:) continued to outperform Value (Vanguard Value Index Fund ETF Shares (NYSE:)
  • High-Yield Debt—iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:)—should be underperforming bonds—iShares 20+ Year Treasury Bond ETF (NASDAQ:)—during a selloff, however, HYG outperformed TLT on the week and moved into a buy signal on a relative basis
  • Volatility—iPath® Series B S&P 500® Short-Term Futures™ ETN (NYSE:) was at the upper end of its trading range that was established in June
  • Transportation—iShares Transportation Average ETF (NYSE:) was in a distribution phase, while Retail—SPDR® S&P Retail ETF (NYSE:)—bounced off oversold conditions and stopped at its 50-DMA
  • Biotech—iShares Biotechnology ETF (NASDAQ:)—had good volume and held its ground above the 10 and 50-DMAs
  • Energy—Energy Select Sector SPDR® Fund (NYSE:), Consumer Discretionary Select Sector SPDR® Fund (NYSE:), and Retail (XRT) were the only sectors with positive performance this past week
  • Technology—Technology Select Sector SPDR® Fund (NYSE:) and VanEck Semiconductor ETF (NASDAQ:) were down on the week, but less than the indices
  • (NYSE:) broke down hard and was in a bearish phase partly due to strength in the —Invesco DB US Dollar Index Bullish Fund (NYSE:)
  • Bonds (TLT) got overbought on both price and momentum the week before last and was back to testing its 10 and 50-DMAs
  • Sloppy market action was partly the result of Triple-Witching on Friday

CryptoPulse Highlights

  • moved into bullish breakout mode on Tuesday, as the 50 Day Moving Average climbed above the 200-DMA, forming a golden cross pattern
  • Bitcoin continued to consolidate between $44,500 and $50,000 as institutional buyers continued to gobble up BTC and reducing circulating supply
  • Layer-1 Decentralized Finance platforms continued to outperform the remainder of the cryptocurrency market, with Solana (), Avalanche (), and Chainlink () all up over 500% over the past 60-days
  • Meme-coin Shiba Inu () saw a 25% 1-day price increase after being made available for trading on the Coinbase Global (NASDAQ:) platform
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