There's no getting around that March was a wild month for the markets...
The situation got dire enough that the Power Gauge sent us warnings about two of the major indexes.
Regular readers will recall that I shared this warning on March 31.
At that time, both the State Street SPDR S&P 500 Fund (SPY) and the Invesco QQQ Trust (QQQ) got "bearish" ratings from the Power Gauge. We use these funds in the Power Gauge to measure the broad market S&P 500 Index and the tech-heavy Nasdaq 100 Index, respectively.
And only a few weeks prior to that, the Roundhill Magnificent Seven Fund (MAGS) had turned "bearish" in the Power Gauge. On March 25, I had also warned readers about this group of stocks.
Of course, investors know this wasn't without cause. We have the conflict in the Middle East to thank for this weakness.
But on Tuesday evening, the news emerged about a two-week ceasefire...
And the next day, we watched the markets rally hard.
SPY surged more than 2%. And QQQ soared by about 3%.
By now, SPY is up about 8% since its recent low point on March 30. And QQQ is up roughly 9% over the same time frame.
The Power Gauge has also changed its view on the major indexes. Both SPY and QQQ now get "neutral" ratings from our system.
But of course, we're not out of the woods yet...
Investors Need to Remain Cautious
Folks, I hope the ceasefire manages to end the war. The markets could continue their upward march if that happened.
But the ceasefire is on shaky ground. It's a tense situation. And Iran already accused the U.S. and Israel of violating the agreement.
Of course, that means Iran isn't in a hurry to fully open the Strait of Hormuz.
I'm not an expert in the geopolitics behind this war, folks. But the Power Gauge offers critical insight on what could happen to the markets if war flares back up...
As I mentioned, both SPY and QQQ have "neutral" ratings right now – and there's good reason for that.
Late last month, both funds' Chaikin Money Flow went negative.
As longtime readers know, the Chaikin Money Flow is an indicator I built during my 50-year career on Wall Street. It tracks the activity of the so-called "smart money" on Wall Street.
In both SPY and QQQ, the smart-money activity dipped to its lowest point in six months. And even after the ceasefire news emerged, the smart-money activity remained in the red.
Put simply, the big institutions on Wall Street don't seem to believe the ceasefire will lead to peace. They're not piling into the major indexes.
At the same time, Wednesday's big rally pushed both SPY and QQQ right around overbought territory. If hostilities suddenly restart, we could see the market turn lower again. The overbought funds could see amplified losses without the smart money behind them.
I'm hoping for a peaceful resolution to this geopolitical mess. But I'm still cautious. And I'll continue to follow the Power Gauge for cues.
And even if you don't have a paid subscription to one of our Chaikin Analytics products, you can follow along with our Power Gauge system, too...
Enter These Tickers Into the Power Gauge Yourself (for Free)
Earlier this week, my colleague Vic Lederman shared the exciting news.
Now, all our Chaikin PowerFeed readers can access our Power Gauge system – regardless of having a subscription to our paid publications.
All you have to do is click this link and enter the e-mail address that you use to receive daily issues of the PowerFeed.
You'll receive an e-mail link that takes you into the free version of the Power Gauge. There, you can check the overall rating of three different tickers – like SPY or QQQ – every day.
To be clear, you can only see the full version of the Power Gauge with full ratings breakdowns and extra data if you're a paid-up subscriber...
But PowerFeed readers can access this limited version of our system with the overall ratings. The system will also show the smart-money activity, plus whether a stock is currently overbought or oversold.
If you haven't already, I encourage you to explore the system for yourself.
And as I said, here at Chaikin Analytics, we'll continue to use it to help navigate this tricky market environment.
Good investing,
Marc Chaikin
