Broad Sell-Off Led by Small Caps as Initial Claims are Worse Than Expected - Chaikin Analytics

Broad Sell-Off Led by Small Caps as Initial Claims are Worse Than Expected

US equities were lower in Thursday trading as initial jobless claims came in worse than expected and offset well received earnings reports. Treasuries were mixed with the curve steepening. The dollar was stronger on the yen cross but weaker vs the euro and the pound. Gold ended down 1.1%, reversing early strength. WTI crude settled up 25.1% after jumping 22% in the previous session. 

The SPDR S&P 500 ETF (SPY) continues with a Neutral Chaikin Power Gauge ETF Rating and remains an outperformer relative to the IWV (Russell 3000 ETF) but with less intensity of late. The OB / OS Indicator is in the middle of the range and Chaikin Money Flow is neutral. SPY remains below the declining long-term trend line which acted as resistance on Wednesday, lining up with the 61.8% retracement level. On the downside, initial support is in the $275 – $280 range. 

S&P futures are down 2.1% in Friday morning trading. Australia and Japan were lower overnight while most other Asian markets were closed for holiday. Most European markets are also closed. Treasuries are stronger with the curve flattening. The dollar is weaker vs both the yen and the euro. Gold is down 0.8%. WTI crude is off 1.2%. 

Key Themes and Relationships

High Yield vs. Treasuries

The relationship between high yield bonds (HYG) and intermediate term treasuries (IEF) continues to trade below the 200-day moving average and is fading from the levels of the 2016 lows. The RSI failed to leave bearish ranges during the recent rally attempt, signaling that momentum remains to the downside. Thus far, high yield has failed to build on the rally which began with the Fed’s announcement that it would be able to buy high yield ETFs.

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