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The Price Action Lab Report-Week of September 19, 2022 [Premium Articles]

Market analysis for the week of September 19, 2022. The analysis focuses on major market indexes, ETFs, commodities, and forex. Access to the full article requires a Premium Articles or an All in One subscription.

Announcements

  1. Recently, we introduced a section for strategy ETFs. In the last report, we also introduced a basic portfolio allocation strategy using one of these ETFs.
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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. Strategy ETFs
  7. Spot Currency Pairs.
  8. Charts to watch.

1. Weekly Summary (September 12 – September 16, 2022)

  • Stocks fell after the CPI release and report of high inflation.
  • Bond prices fell amid expectations of higher rates.
  • Commodities were down on the week.
  • Crude oil and gold spot prices were lower.
  • The US dollar moved higher against major currencies.

Large-cap stocks ($SPX) initially rose 1.3% but ended the week down 4.8% after the CPI release and signs of persisting inflation. The Dow 30 ($DJI) shed 4.1%. Tech stocks ($NDX) and small caps ($RUT) plunged 5.8% and 4.5%, respectively. The S&P 500 high beta index ($SP5HBI) lost 5.2%, while the S&P 500 low volatility index ($SP5LVI) was down 3.5%. The stock market losses were broad-based. 

US Treasury Bonds ($SPBDUSBT) fell 0.7% due expectation of persisting high rates to combat inflation. The 10-Year Note yield gained 13 basis points to 3.45%. Crude oil (@WTI) spot prices ended the week down 2%. Spot gold (@GC) fell 2.8% as yields rose. The CRB index ($CRB) lost 1.8%. The US dollar index ($USDX) gained 0.7%.

Year-to-date, the NASDAQ-100 is down 27.3% and 28.4% below its all-time highs. The Russell 2000 is down 19.9% year-to-date and 26.4% below its all-time highs. On the positive side, the CRB index is up 20% year-to-date and the crude oil spot is up 13.5%. The US dollar index is up 14.7% year-to-date.

The ensemble of our six systematic strategies is down 4.6% year-to-date, compared to an 18.7% loss for the S&P 500 index and a loss of 15.6% for the 60/40 portfolio with SPY and AGG ETFs.

Below is an excerpt from this week’s systematic trading report:

Markets are getting more sophisticated and demand careful diversification and risk management. Traders who use simple technical or macro analysis have no chance in this environment.

Volatility remains elevated, and under these market conditions, simple market analysis often fails. The S&P 500’s 21-day annualized volatility rose from 19.8% to 23.8% this week, while implied volatility, as measured by the VIX index, jumped to 26.3% from 22.8%. As we noted in the last report, the risks of left-tail events have increased, and investors are reducing exposure to stocks while looking for alternative investment vehicles, such as managed futures. In Section 6, we include an alternative to the traditional 60/40 portfolio of stocks and bonds.

Due to the rising uncertainty, a double outside-week pattern has formed in the S&P 500. Backtests of this price action anomaly are included in Section 3 for various holding periods.

2. Market Performance Recap


If you have any questions, you may contact support.

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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