Arthur Hill, CMT

Sector Breadth Models versus a Simple Trend Following Technique

Sometimes what seems logical and helpful, is not and needs to be reconsidered. This is my conclusion with the sector breadth models. They are logical, and perhaps helpful at times, but they do not add value when it comes to timing trends in the sector SPDRs. A simple StochClose strategy performed better overall. This article will quantify signals for three breadth models using the sector SPDRs.

A Medium-term Breadth Indicator Waves the Caution Flag

The Nasdaq 100 has been on a tear the last few months with a move to new highs, but a medium-term breadth indicator is not keeping pace here in February. This indicator is simply flashing the yellow caution sign right now and we have yet to see an actual signal that would point to a correction. Here’s what to look for.

Weekend Video and Chartbook – Oil and Base Metals lead, XLI and XLF Hit New Highs, TLT Plunges with Outsized Decline

Today’s video starts with a performance overview for 14 asset class ETFs, sectors and top S&P 500 stocks. Small-caps, oil and commodity-related ETFs are leading the charge here in 2021. Financials are leading as XLF hit a new high and industrials came to life with XLI hitting a new high on Friday. Even though the long-term trends are up and the market is bullish overall, participation is narrowing within

An Industrials ETF with More Juice than XLI

Not all ETFs are created equal and the name does not always tell the entire story. One would think that the Industrials SPDR (XLI) and the Industrials iShares (IYJ) are similar in make up and performance. This is not the case because one has a clear edge over the other.

Weekend Video and Chartbook – Uptrends Extend with Small Gains, ETFs Go from Oversold to New Highs, Not Many Setups

After big gains the first week of February, stocks followed through with smaller gains the second week. A gain is a gain and new highs proliferated. SPY, QQQ, IWM and over half the ETFs in the Core List hit new highs this past week. The trends are up, the up trends are strong and the breadth models remain firmly bullish. Concerns remain with overextended conditions in IWM, the RSI over 50 streak,

Timing Models – Stall after Surge, Short-term Breadth Indications, Sector Breadth Signals

The major index ETFs are in clear uptrends with the big three hitting new highs again this week (SPY, QQQ, IWM). We also saw 52-week highs in three of the eleven sector SPDRs (XLK, XLC and XLY). These three were leading throughout 2020 and they continue to lead in 2021. XLI, XLV and XLF are close to 52-week highs so I will not read too much into this short-term non-confirmation. In any case, XLK, XLC and XLY account for well over 50% of the S&P 500

ETF Trends, Patterns and Setups – Oversold Bounces Materialize, Trend Monitoring Phase Kicks In

There were dozens of ETFs with short-term oversold conditions and short-term corrective patterns working at the end of January. With a bounce the last two weeks, we now have a slew of ETFs hitting new highs again and 27 ETFs in the Core list (119) with double digit gains here in February. Momentum is just the gift that keeps on giving. The performance since November is extraordinary. Here are some metrics since November 1st (69 days)

Seasonality Looks Weak, but Price Action is Not

The seasonal patterns over the next two months are not very strong, but price action is strong with the S&P 500 hitting a new high. Price action is more important than the seasonal pattern because profits and losses are driven by price changes, not seasonal tendencies. Seasonality becomes a force when it aligns with price action. Let’s investigate.

Weekend Video and Chartbook – Oversold Bounces to New Highs, Seasonal Patterns, Froth IWM, Flag Breakouts

The stock market went from the biggest down week since late October to the biggest up week since early November. We saw new highs in SPY, QQQ and IWM. The Russell 2000 ETF continues to show signs of over exuberance and the seasonal patterns in February are mixed at best, but price action remains strong and the correction is on hold. Treasury bonds and gold were clobbered this week as the Dollar got an oversold bounce within a downtrend. Dozens

Timing Models – Red Herrings, Big Oversold Bounces, New Highs, RSI Streak Ended and IWM Remains Extended

Stocks shrugged off a sharp decline the last week of January and rebounded the first week of February with a strong surge. This surge extends the bigger uptrends as SPY, QQQ and IWM recorded new highs. The Technology SPDR (XLK) and Communication Services SPDR (XLC) led the sector SPDRs with new highs. The Consumer Discretionary SPDR (XLY) came close to a new high on Thursday and could hit one with further strength on Friday. The Energy SPDR (XLE) led with the biggest

ETF Trends, Patterns and Setups – Oversold Bounces Materialize, Techs Lead, Energy-Related ETFs Break Out, REITs Perk Up

Dozens of ETFs became short-term oversold last week and most of these bounced this week. A combination of bullish seasonal patterns (turn of the month), short-term oversold conditions and longer-term uptrends paved the way for this bounce. Despite these bounces, stocks in general still seem ripe for a corrective period and February is historically one of the weaker months.

Seasonality for the S&P 500 – Since 1950, A Big Change the last 20 Years, Weekly and Monthly Perspectives

Today’s report will take a deep dive into seasonality. Before doing so, note that seasonal patterns are not at the top of my analytical list. The same is true for sentiment. While I am aware of seasonal patterns and sentiment, my trading decisions are based on price (trends, patterns and setups). As with most secondary indicators, seasonal patterns should be used in conjunction with other analysis techniques (trend, overbought/oversold, outsized moves, patterns).

Turn of the Month Strategy – Strong Long-term Performance, Beats Buy-Hold, Some Weak Months

The turn of the month shows a strong bullish bias with an extremely stable equity curve that really took off the last few years. This strategy, which is only invested 38% of the time, outperformed buy and hold with a higher Compound Annual Return. Overall, the eight day percentage change at the turn of the month is positive 68% of the time for SPY. Despite strong numbers overall, February is weakest month when testing over the last twenty years, and we just happen to be in February.

SOXX Follows Overbought Extreme with Outsized Decline

Last weekend’s post showed the Semiconductor ETF (SOXX) with a 10 day overbought streak and several ETFs with even bigger overbought streaks. These streaks came to an end this week as SOXX fell 6.21%, its biggest weekly decline since mid March. As measured by Normalized ROC, this is an outsized decline that argues for at least a corrective period over the next few weeks.

Weekend Video and Chartbook – RSI Streak Ends, Turn of the Month Performance, Short-term Oversold, Medium-term Correction

Today’s video covers last week’s big declines and what it means going forward, both short-term and long-term. Short-term, oversold conditions and the turn of the month strategy argue for a bounce. Looking out a month or more, outsized declines and bearish breadth thrusts argue for a correction. We will look at correction targets for SPY and what this might entail for the higher-beta IWM. The decline in stocks provided an opening for Treasury bonds, but TLT

Timing Models – Weight of the Evidence, SPY Breaks RSI Streak, ROC Shocks and Bearish Breadth Signals

The weight of the evidence for stocks remains bullish because the big trends are up, the breadth models are bullish and yield spreads are narrow. Stocks are up considerably since late October and we started seeing signs of excess in January. This week we started seeing signs that some uptrends are under threat. There were outsized declines in some key ETFs, the RSI above 50 streak ended for SPY and there were three bearish

ETF Trends, Patterns and Setups – Outsized Declines, Year-to-date Laggards, Correction Consequences

With some pretty sizable declines the last five days, a number of ETFs are now in the red for the year. 99 of the 118 ETFs in the Core list are down over the last five days and 38 are down year-to-date. This shows some pretty broad selling pressure. The biggest losers year-to-date include: Gold Miners ETF (GDX), Mobile Payments ETF (IPAY), Aerospace & Defense ETF (ITA), Airlines (JETS), Industrials SPDR (XLI) and Metals & Mining SPDR (XME).

Getting Started with TrendInvestorPro!

This page provides an overview of my philosophy, the analysis tools that I use, the commentary schedule and the offerings on the premium page. Focusing on ETFs, TrendinvestorPro offers an objective and systematic approach to the analysis process. Note that there are three possibilities when we analyze a chart

Bull Markets, Gold, Silver and Narratives

While intermarket narratives make for interesting debate over a beer, we cannot possibly know all the factors driving asset prices and their weighted influence. Well, at least I cannot. How to we factor in Fed policy, interest rates, interest rate differentials, inflationary pressures, inflation differentials, fiscal stimulus, debt, trade flows, current accounts, economic growth, internal politics and geopolitics. You get the picture.

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