Market Breadth Continues Recovery; Watching the NVDA Effect on QQQ as Oil Heats Up

The dog days of August are mercifully over. And as Wall Street gets back to work, new trends are emerging which could influence what the stock market does for the rest of the year.

Here are the macro crosscurrents to sort through:

  • The Fed is on the bubble as some Fed governors want to pause the rate hikes, while others want to push rates higher;
  • The jobs market seems to be cooling;
  • The bond market is focused on inflation, but is off its worse levels as it ponders what the Fed will do next, whether the job market is going to get weaker, and whether the price of oil will upset the apple cart;
  • Stocks are working on putting in a credible bottom; and
  • The oil market looks set to erupt.

Altogether, these variables suggest the fourth quarter has the potential to be a potentially profitable quarter for investors who can discern where the smart money is flowing and successfully follow it.

Bond Volatility Increases as Data Shifts Rapidly

The bond market’s inflation fears eased over the last few weeks ,but the most recent round of purchasing manager data (ISM and PMI), suggesting festering inflation in the manufacturing sector, erased the glee generated by the apparent cooling of the jobs market via lower-than-expected JOLTS and ADP data, which was boosted by the rise in the unemployment rate and a tame payrolls report.

The U.S. Ten Year Note Yield (TNX) reversed its downward move toward 4% in response to the purchasing manager’s data, which was interpreted as a picture of stagflation. The yield is nervously trading between its 20- and 50-day moving averages.

Smart Money Roundup: Watching NVDA Effect on QQQ

Calls for the death of the so-called AI bubble may have been premature, although the jury is still out for the sector in the short-term. Certainly, the action in AI bellwether Nvidia’s shares (NVDA) is an important metric to keep an eye on.

The stock’s recent volatility suggests that investors are thinking about what comes next, although the company continues with its bullish guidance. On the other hand, the slowly developing downslope in the Accumulation/Distribution (ADI) line is cautionary, as it suggests short sellers are starting to bet on lower prices for the stock.  

On Balance Volume (OBV) is in better shape, which suggests that a sideways pattern or a steady uptrend is the most likely path for the stock after the consolidation. You can see the NVDA effect reflected in the shares of the Invesco Nasdaq 100 Trust (QQQ) which is also consolidating. Support for QQQ is at $370.

Oil is Getting Hot

Tech is consolidating, but the smart money is moving into oil. You can see that in the bullish breakout of West Texas Intermediate Crude (WTIC), which is now above $85. Recall my May 2023 article, titled “Never Short a Dull Market,”, where I predicted that tight oil supplies were in the works and that the odds of higher prices were better than even.

And that’s exactly what’s happened. In the last three weeks, the U.S. Energy Information Agency (EIA) has reported a nearly 30 million barrel drawdown in U.S. oil inventories. Moreover, there are two coincident developments unfolding, which are likely to further decrease supplies:

  • OPEC + is likely to maintain its current production cuts in place for at least another month; and
  • The U.S. is quietly refilling its Strategic Petroleum Reserves.

These two factors, combined with stable-to-possibly-rising consumer demand for gasoline, and perhaps a rise in demand for heating oil as the weather turns cooler, are likely to keep prices on an upward trajectory for the next few weeks to months, and perhaps longer.

Expressed in more investor-accessible terms, you can see the shares of the U.S. Oil Fund ETF (USO) have broken out above the $75 resistance level, with excellent confirmation from a rise in the Accumulation/Distribution (ADI) and On Balance Volume (OBV) indicators as short sellers step aside (ADI) and buyers move in (OBV).

The bullish sentiment in oil also includes the oil stocks including the Van Eck Oil Services ETF (OIH), which is nearing its own breakout. This is due to the rise in global exploration, which has been steadily developing over the last twelve months, but which the market has mostly ignored, despite CEO comments of an oil service “super cycle” unfolding.

Things are happening fast. Oil, tech, housing, bonds, are all making their move. What’s your plan of action in this market? Join the smart money at Joe Duarte in the Money Options.com. You can have a look at my latest recommendations FREE with a two week trial subscription. You can also review the supply demand balance in the oil market and what the future may hold here. And if you’re a Tesla (TSLA) fan, I’m reviewing some interesting developments in the stock, which you can review free of charge here.

Breadth Recovery Shows Staying Power

Last week, I noted the worst may be over in the short term for stocks, as the market’s breadth is showing signs of resilience. This bullish trend is showing some staying power, as the New York Stock Exchange Advance Decline line moved above its 50-day moving average while maintaining its position above the 200-day moving averages. Another bullish sign is that RSI is nowhere near overbought, which means the rally still has legs.

On the other hand, the Nasdaq 100 Index (NDX) ran into resistance at the 15,600 area, where there is a moderate size cluster of Volume-by-Price bars (VBP) offering a bit of turbulence, as investors who bought the recent top are trying to get out “even”. Accumulation/Distribution (ADI) and On Balance Volume (OBV), may have bottomed out, but are showing some short-term weakness.

The S&P 500 (SPX) is acting in a similar way, although it remained above 4500, but above 4350, and it its 20-day and its 50-day moving averages. ADI is flat, but OBV is improving as investors put money to work in the oil and related sectors.

VIX Remains Below 20

VIX has been a bright point in the market for the last couple of weeks, as it has failed to rally above the 20 area. This is good news, as a move above 20 would be very negative, signaling that the big money is finally throwing in the towel on the uptrend.

When the VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures. This raises the odds of higher stock prices.

Liquidity Remains Stable

Liquidity is stable. The Secured Overnight Financing Rate (SOFR), which recently replaced the Eurodollar Index (XED) but is an approximate sign of the market’s liquidity, just broke to a new high in response to the Fed’s move. A move below 5.0 would be more bullish. A move above 5.5% would signal that monetary conditions are tightening beyond the Fed’s intentions; that would be very bearish.


To get the latest information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options


Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.asp.

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The Smart Money Changes Gears; As Tech Weakens, New Leaders Appear

The Fed is flying trial balloons about the end of the interest rate hike cycle, but the technology sector is ignoring them as the smart money move to energy continues.

Last week, Philadelphia Fed Governor Patrick Harker, in a Philadelphia speech, suggested the central banks should pause their rate hikes. Moreover, even though the CPI inflation numbers were relatively tame, markets seemed to focus on the more negative details inside the report, such as persistently high rents and car insurance prices.

Interestingly, producer prices (PPI) rose as well, but much of the climb was due to an increase in fees by money managers – hardly a widespread expense as compared to gasoline and food. Meanwhile, consumer confidence is flat and inflation expectations are improving.

Still, money flows in bonds and stocks suggest otherwise. That’s not a good turn of events, if not reversed, especially when the Fed is trying to gauge the market’s response to a potential extended pause on its rate hikes.

As Tech Weakens, New Leaders Appear

Last week in this space, I noted “short sellers are starting to smell blood in the water in the tech sector.” This week, the evidence piled up further as the bloom is wearing off the AI rose, at least for now. You can see that sellers have gained the upper hand as the Invesco QQQ Trust (QQQ) has broken below its 50-day moving average, as both Accumulation/Distribution (ADI, increasing short sales) and On Balance Volume (OBV, buyers turning into sellers) have also rolled lower.

But QQQ is not alone. A more focused picture of the selling in AI and robotics-related stocks can be seen in the shares of the ROBO Global Robotics and Automation ETF (ROBO), which has fallen back to what may be long-term support near $54. If ROBO fails to hold in this general area, which features two very large Volume-by-Price bars (VBP) and the 200-day moving average as key markers, the decline will likely accelerate.

A stark example of how rising costs are impacting emerging technology companies was the collapse of solar tech company Maxeon Solar Technologies (MAXN), whose shares cratered after the company missed its earnings estimates and lowered forward guidance, citing “falling demand” for its products while partially blaming the situation on higher interest rates.

Meanwhile, shares of energy stocks, such as refiner Valero Energy (VLO), continue to power higher as the fuel supply and demand balance is steadily tipping toward the energy patch. This view is supported by the steady downward pace in the weekly oil rig count. There are now 125 fewer active rigs in the U.S. compared to the same period in 2022.

VLO is emerging above a stout resistance shelf, marked by a large cluster of Volume-by-Price (VBP) bars extending back to the $107 area. A move above $140 would likely lead to higher prices in a hurry. I recently discussed how to spot the smart money’s footprints and how to turn them into profits; you can check out the video here.

Over the last few weeks, I’ve asked whether it’s time to sell the tech rally. What should you do with your energy holdings? And what about the homebuilder stocks and the REITs? The answers are in the model portfolios at Joe Duarte in the Money Options.com, updated weekly, and via Flash Alerts as needed. You can have a look at all of them and my latest recommendations on what to do with each individual pick FREE with a two week trial subscription. And, for an in-depth review of the current situation in the oil market, homebuilders and REITS, click here.

Bonds, Oil, and Stealth Inflation

The lack of enthusiasm from bond traders about the CPI numbers, quirky PPI numbers and a Fed governor suggesting the central bank may stop raising rates soon suggests there is more going on than meets the eye. The answer may be future inflation related to limited supplies of products and services, which are not likely to increase anytime soon, along with the unknowns about the future of global energy prices.

The U.S. Ten-Year Note yield (TNX) briefly dipped below 4% on the CPI news. But the rally didn’t last. And by week’s end, yields were once again moving toward the higher end of the trading range, which has been in place since October 2022.

More concerning is the lack of interest from bond traders regarding deflationary news from China a day earlier, which suggests the bond market is not a believer in the notion that inflation is slowing to the point where the Fed can stop raising rates.

In the present, you can blame their disbelief on the oil market, where volatile supply data and demand news, combined with ongoing reports that U.S. oil production is being curtailed, is moving prices higher.

Moreover, as evidenced by the action in MAXN, above, it’s becoming evident that the ongoing transfer from traditional energy to renewable energy will be more expensive than initially thought. All of which suggests that inflation is becoming stealthily embedded into the system. When you factor in the expected rise in U.S. Treasury bond issuance by the U.S. Treasury and the increasing budget deficits, the indifference from bond traders makes sense.

In other words, even though CPI may have slowed its gains for now, the bottoming of PPI may be a prelude to the near future. Thus, forward-looking bond traders may be considering future shortages of key minerals, the energy to fuel the transition to clean energy, and tight labor.

Specifically, along with poor demand for solar technology, the bond market may be quietly worried about the ongoing problems in the wind energy industry, where costs are reportedly out of control, to the tune of having climbed 20-40% since February 2022. Meanwhile, reports of major technical problems with turbines continue to plague the industry, while governments are beginning to evaluate how much more money they’re willing to put into subsidies.

NYAD Struggles, Major Indexes Extend Losses

The long-term trend for stocks remains up, but the short term is weakening further. The New York Stock Exchange Advance Decline line (NYAD), has broken below its 20-day moving average and may be headed for a test of its 50-day, and perhaps the 200-day, moving averages.

The Nasdaq 100 Index (NDX) has broken below its 50-day moving average and looks headed for a test of the 15,000 level. Accumulation/Distribution (ADI) and On Balance Volume (OBV), remain weak, as short sellers are active and sellers are overtaking buyers.

The S&P 500 (SPX) remained below 4500, and its 20-day moving average, as it approaches a test of its 50-day moving average. Both ADI and OBV are nowhere near uptrends. Support is now around the 4400 area.

VIX Struggles at 20

I’ve been expecting a move higher in VIX, and it seems to have arrived as the index finally moved above the key 15 resistance level. The good news is that the index has yet to break above 20. A move above 20 would be very negative, as it would signal that the big money is finally throwing in the towel on the uptrend.

When the VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures. This raises the odds of higher stock prices.

Liquidity Remains Stable

Liquidity is stable, but may not remain so for long if the current fall in stock prices accelerates. The Secured Overnight Financing Rate (SOFR), which recently replaced the Eurodollar Index (XED), but is an approximate sign of the market’s liquidity, just broke to a new high in response to the Fed’s move. A move below 5.0 would be more bullish. A move above 5.5% would signal that monetary conditions are tightening beyond the Fed’s intentions. That would be very bearish.


To get the latest information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options


Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.asp.

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Momentum is Back, Breadth Rallies; It’s Truth Time for OPEC and Crude Oil

The week of June 5 should be momentous as the bears who have been left behind consider whether to fully capitulate.

The stock market is back in rally mode as seasonal tendencies for a summer rally, especially in the third year of the presidential cycle, assert their influence. Especially comforting is the recovery in the market’s breadth, as measured by the NYSE Advance Decline line (see below). The US economy is showing signs of slowing, as the rate of rise in inflation is flattening.

Of course, things could change instantly, especially if, as I discuss below, OPEC does something dramatic at its June 3–4 meeting. Moreover, it’s all about whether the Fed leaves rates unchanged in June in order to see if the current flattening out of inflationary pressures is a prelude to an actual decline and what that does to bond yields.  

I’ll have more on bonds below. First, a few words about the oil market.

OPEC’s Credibility is on the Line

Last week, I suggested that shorting a dull market is not a good idea. I was referring to the nearly complete lack of bulls in the oil market and suggested the energy sector was ripe for a bounce.

As I went to press on this post, rumors were circulating that OPEC was considering a 1 million barrel per day production cut, to be announced at the conclusion of its June 3–4 meeting. This cut, if it happens, will be in addition to production cuts previously announced, which are starting to make their way through the system and could reduce global oil supply meaningfully.

Crude oil ($WTIC) rallied on June 2, 2023, on the OPEC rumors and signs that oil production is already being reduced. For example, the US Rig count fell for the fifth consecutive week. Meanwhile, Canada’s oil sands giant Suncor announced 1500 job cuts. There are also rumors that job cuts are coming in the fracking sector in the US, as the number of active crews finishing wells is also shrinking. 

Here’s the bottom line:

  • The US oil industry is dialing back production, and OPEC seems to be on a similar course.
  • If OPEC flakes out, they risk losing their ability to influence the price of oil, at least for the foreseeable future.

Watch the market’s response to OPEC’s announcement. If WTIC’s price rises above $75 decisively, then current market relationships, especially bond yields, stock prices, and what the Fed does at its upcoming FOMC meeting (June 13–14), will likely be affected.

I’ve recently recommended several energy sector picks. You can look at them with a free trial of my service. In addition, I’ve posted a Special Report on the oil market, which you can access here.

Bond Yields Test Resistance

The latest monthly payroll numbers were well above expectations, but the bond market is focusing on other signs that the economy is slowing. As I noted last week, bond yields are likely to fall once the economy shows signs of slowing and the Fed admits that it must at least stop raising rates. Here are some signs that perhaps we’re not too far from that point:

  • Dallas Fed Survey crashes, falling for the 13th consecutive month; one respondent noted: “There is nothing encouraging on the horizon.” Other notable quotes: “orders canceled,” “order volume has stalled recently,” and “seeing a massive slowdown.”
  • Dallas Fed services survey fell for the 12th straight month. Comments worth noting: “Businesses are preparing for a recession by looking for ways to cut back, which in some ways, works to create a self-fulfilling prophecy.”
  • Chicago PMI Collapses—new orders, prices paid, production, inventories, and employment fell.
  • China manufacturing PMI fell below 50, signaling contraction.
  • U.S. PMI and ISM surveys fell again.
  • China’s economy is showing signs of slowing.

Beige Book Confirms Slowing U.S. Growth

Confirming the negative news above, the Fed’s most recent Beige Book offered the following:

  • Prices are rising but are doing so more slowly.
  • New York and Philadelphia registered slowing economic activity.
  • Boston, Cleveland, Richmond, Chicago, St. Louis, and Kansas City reported flat activity.
  • San Francisco, Dallas, and Minneapolis reported slight growth.

The bottom line is that inflation seems to be rising at a slower pace and that the US economy is slowing, as eight of eleven Fed districts reported slowing or flat economic activity. The three that reported growth described it as slight to moderate.

Bond Yields Test Resistance. Mortgages Follow. Homebuilders Perk Up.

The most predictable relationship in the stock market currently is the one that connects bond yields, mortgage rates, and homebuilder stocks. When bond yields fall, mortgage rates follow. Increases in home sales register and homebuilder stocks rally.

The crucial point on the 10-Year US Treasury Yield ($TNX) is 3.85%. If yields remain below this level, the environment should remain stable.

Moreover, if I’m right and the economy continues to slow, bond yields will roll over, and mortgage rates will drop as demand for new homes again picks up.

As things stood last week, the S&P 500 Homebuilding Subindustry Index ($SPHB) seems to have made a short-term bottom as traders begin to factor in the scenario above. 

If $TNX remains below 3.7%, it’s a sign that bond traders are less worried about inflation. This should be bullish for homebuilder stocks.

For an in-depth comprehensive outlook on the homebuilder sector, click here.

NYAD Rallies; SPX Joins NDX’s Breakout; Liquidity is Stable; VIX Hits New Low.

It was quite the week for the market’s technical picture.

The New York Stock Exchange Advance Decline line ($NYAD) rallied back above its 50-day moving average, signaling stocks are back in an uptrend.

The Nasdaq 100 Index ($NDX) extended its recent breakout, closing the week well above 14,500. The current move is unsustainable, so some pullback and consolidation are likely over the next few days to weeks. On the other hand, it could take some time for a consolidation or pullback to develop, as both accumulation distribution line and On Balance Volume (OBV) are in solid uptrends, signaling lots of upward momentum.

The S&P 500 index ($SPX) finally broke out above the 4100–4200 trading range, decisively confirming the trend in $NDX. OBV continues to improve, while the Accumulation Distribution line remained in an upward trend.

VIX Breaks to New Lows

The Cboe Volatility Index ($VIX) broke to a new low as call option buyers overwhelmed the market. This is probably a little too much bullishness all at once, so we’ll see how long it lasts.

When the VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures. This raises the odds of higher stock prices.

Liquidity is Still Limited

The market’s liquidity may have bottomed out, but it’s not particularly bullish. The Eurodollar Index ($XED) failed to rally above 94.50, a bearish development. For now, it’s good enough to keep the rally from imploding. A move below 94 would be very bearish.

A move above 95 will be a bullish development. Usually, a stable or rising XED is very bullish for stocks.


To get the latest up-to-date information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options


Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.asp.

Joe Duarte

About the author:
Joe Duarte is a former money manager, an active trader and a widely recognized independent stock market analyst going back to 1987. His books include the best selling Trading Options for Dummies, a TOP Options Book for 2018, 2019, and 2020 by Benzinga.com, Trading Review.Net 2020 and Market Timing for Dummies. His latest best-selling book, The Everything Investing Guide in your 20’s & 30’s, is a Washington Post Color of Money Book of the Month. To receive Joe’s exclusive stock, option and ETF recommendations in your mailbox every week, visit the Joe Duarte In The Money Options website.
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