Retail sales numbers failed to impress traders on Tuesday, although once automobiles were stripped from the equation the overall report looked better than expected.
Home Depot's (HD) disappointing results sent its shares lower by 2% Tuesday, which really isn't significant. However, with the stock now trading around $282 after hitting $339 early in the year, it's approaching so-called "bear market" territory. Truthfully, I don't put much stock in the arbitrary 20% lower classification of a bear market. However, with Home Depot shares almost 17% off their 2023 high in less than four months, it is safe to say investors and traders are bearish on Home Depot right now.
Most of the stocks on my screen yesterday bled red, but the Invesco QQQ Trust (QQQ) refused to join them. The ETF continues to be a safe haven for investors. The big question is, how long can it continue?
Energy, long-dated US Treasuries and precious metals are all breaking lower. Small-caps failed to rally with the QQQ yesterday. Even the S&P 500 tailed off hard at the end of the day.
My concern for equities comes back to the iShares 20+ Year Treasury Bond ETF (TLT) . There has been a strong correlation in 2023 between the performance of TLT and the performance of the SPDR S&P 500 ETF (SPY) .
Yesterday, TLT dipped below support and essentially filled the March gap. It did rally before the close to get above support. Will that be enough?
TLT bears now have had a taste of downside over the past three trading sessions. We see a series of lower highs basically since the beginning of April. The 21-day exponential moving average (EMA) fell below the 50-day EMA for the first time in two months, and everything from the 10-day EMA to the 21-day EMA to the 50-day EMA is heading lower.
If buyers don't step up today and tomorrow, then I'll be looking for a test of $100 on TLT. I suspect the SPY would follow lower and test the $403 to $404 level as it now trades below its 10-day EMA and 21-day EMA. Again, a breakdown appears imminent if traders don't begin hitting the buy button soon. We've spent too many days trading along this flattening 21-day EMA. If bulls get too comfortable, I anticipate a rude awakening before the end of the month.
