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The Price Action Lab Report-Week of July 25, 2022 [Premium Articles]

Market analysis for the week of July 25, 2022. The analysis focuses on major market indexes, ETFs, commodities, and forex. Access to the full article requires a Premium Articles subscription or an All in One subscription.

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Report contents

  1. Weekly summary.
  2. Market performance recap.
  3. Major market indexes.
  4. Equity index and fixed income ETFs.
  5. Commodity ETFs and ETNs.
  6. Spot currency pairs.
  7. Charts to watch.

1. Weekly summary

  • Stocks finished higher after a four-week consolidation.
  • Bonds yields fell and bond prices gained.
  • Commodities were mixed on the week amid growing uncertainty.
  • Crude oil spot prices were lower, but natural gas prices rallied.
  • The US dollar fell and precious metals were higher on the week.

Recap (July 18, 2022 – July 22, 2022)

Large-cap stocks ($SPX) ended the week up 2.5%. Tech stocks ($NDX) gained 3.4%. The Dow 30 ($DJI) added 2%. Small caps ($RUT) rose by 3.6%. The S&P 500 high beta large-cap index ($SP5HBI) surged 6.1%. The S&P 500 low volatility large-cap index ($SP5LVI) was up 0.5%. In the last five weeks, the S&P 500 has recovered from the bear market territory and is down 17.4% from all-time highs. 

The gains in total return equity indices from the lows of June 17, 2022, are shown in the table below.

The High Beta large caps and the NASDAQ-100 total return indexes have gained 12.7% and 11.5%, respectively. The S&P 500 High Growth and Small Caps total return indexes have gained 11.3% and 9.7%, respectively.

Last week I wrote:

The odds of a “summer rally” are higher. Investors have started focusing on “good news,” or interpreting news as having a positive impact on equities.

The summer rally is in progress, but risks are still high, and another bull trap is possible. The main drivers of this summer rally appear to be articles in financial media about the possibility of lower rates in 2023. The fund industry, and especially passive index funds, is in a deep drawdown and would like to see a strong rebound to take advantage of the liquidity. However, it is still early to call the end of the current downtrend in equity markets, and regardless, if that is the case, the risk/reward ratio is still high for long positions.

US Treasury Bonds ($SPBDUSBT) gained 0.9%. The 10-Year Note yield fell 15 basis points to 2.78%. Crude oil prices fell 1.8% amid speculation about supply and price normalization. The CRB index ($CRB) was up 1.3% after a mixed performance in commodities. Spot gold (@GC) gained 1.8%. The US dollar index fell 1%, but it is one of the few assets with a positive return this year at +11.6%.

Year-to-date, the NASDAQ-100 is down 24% and 25.2% below its all-time highs. The Russell 2000 is down 19.5% year-to-date and 26% below its all-time highs. On the positive side, the CRB index is up 21% year-to-date and the crude oil spot is up 29.7%.

The ensemble of our six systematic strategies is down 3.9% year-to-date, as compared to a 16.9% loss for the S&P 500 index and a loss of 13.1% for the 60/40 portfolio with SPY and AGG ETFs. The allocation of the six strategies will be 22.2% next week, while 77.8% will be in cash.

2. Market Performance Recap


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Specific disclaimer: This report includes charts that may reference price target levels determined by technical and/or quantitative analysis. No updates to charts will be provided if market condition changes occur that affect the levels on the charts and/or any analysis based on them. All charts in this report are for informational purposes only. See the disclaimer for more information.

Disclaimer:  No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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