Systematic Trading Strategies and Next Level Trading Setups
Overbought and oversold conditions are tricky because stocks can become overbought/oversold and remain overbought/oversold as the move continues. This is why traders need another indicator
Today’s report starts with analysis using the McClellan Oscillator. We will look at three different periods to see how the signals work in different market environments. Most recently, this indicator became overbought two weeks ago.
The Composite Breadth Model is bullish at +5, but there are splits when looking at the percentage of stocks above the 200-day SMA for the different indexes and yield spreads. Small-caps are underperforming and the CCC spread shows stress at the low end of the bond market.
Stocks surged from mid March to early April and this created short-term overbought conditions for SPY, XLK and QQQ. Large-cap tech and high-quality stocks led the rally. Small-caps and high-beta stocks lagged the market during this advance, but
Breadth is holding up for Nasdaq 100 stocks, but deteriorating for S&P 500 stocks and I view this as a warning sign for the stock market. Breadth indicators measure the degree of participation. For example, the percentage of S&P 500 stocks
Waning Participation within a Key Benchmark Could Spell Trouble (Free) Read More »
The Composite Breadth Model is bullish and at +5, but I would characterize this as a fragile +5. Today’s video will dive into the five inputs that make up the model and show why the +5 looks fragile. SPY and QQQ are in uptrends and continue to lead, but the equal-weight S&P 500 and IWM are in downtrends
It remains a tale of two markets. Large-caps and large-cap techs are leading, while small-caps are lagging. The chart below shows QQQ exceeding its early March high in mid March and SPY exceeding this high last week. IWM remains some 7% below this high. The performance differentials since March 1st are also large. QQQ is up 9%, SPY
Impulse signals offer the chance to catch a trend as soon as it starts, but in-state signals give traders the opportunity to add momentum to their strategy. Today’s article compares a strategy using impulse signals for the Trend Composite against one that uses in-state signals. The latter
Trend Composite Impulse Signals versus In-State Signals with Momentum Read More »
The stock market is mixed, very mixed. The tape is bearish because the Composite Breadth Model is negative, but large-caps are holding up because the 5-day SMA for the S&P 500 is above the 200-day SMA. Yield spreads remain elevated and show stress
Strength in the stock market is narrow, which means a handful of stocks are keeping the market afloat. Put another way, weakness within the stock market is broad-based, which means the majority of stocks are under pressure. We can see this in the breadth indicators and the small-cap ETFs. SPY and QQQ are
Small-caps are leading the way lower and breadth indicators are showing some serious deterioration under the surface. Large-caps are holding up for now, but keep in mind that weakness in small-caps foreshadowed the
Will the Generals follow the Troops? (Free) Read More »
Today’s report will dive into the market filter, which is used to define bull and bear markets. Market filters are an important part of trend-following and momentum strategies that trade stocks and stock-based ETFs. The Composite Breadth Model has not worked well over the last 15 months, but this is a relatively short timeframe in the grand scheme
The technical picture shows a split market and the fundamental picture is also split. Large-cap techs are leading and the 5-day SMA crossed above the 200-day SMA for the S&P 500. However, small-caps remain weak and the Composite Breadth Model is at -3. The Fed came to
The market went through some serious rotations over the last few months. The Finance sector led the market off the October low and then fell apart over the last four weeks. Healthcare and the defensive groups led the market from early October to
Sometimes markets trend, sometimes they oscillate and sometimes they simply frustrate. I would venture to guess that trading since 2022 falls into the frustration basket. Trend following and momentum strategies are suffering because big moves
A Risk-off Alternative Turns Up as Stocks Falter (Free) Read More »
The weight of the evidence is bearish for stocks. The Composite Breadth Model turned negative on Monday, yield spreads widened significantly over the past week and SPY broke wedge support. Risk for stocks and stock-based ETFs is above average right
Recent events in the banking world jolted stocks. This jolt was enough to push the Composite Breadth Model into negative territory and widen yield spreads. The Regional Bank
Chartists considering a trend-following strategy can use the Trend Composite to identify trend signals and then turn to the ATR Trailing Stop for an exit strategy. A bearish Trend Composite signal could also be used as an exit strategy, but these signals
Trend Signals and Trailing Stops Examples using XLF and SOXX (Free) Read More »
Stocks fell sharply on Tuesday as the market reacted to testimony from Fed Chairman Powell. The Dollar surged and gold fell, but the 20+ Yr Treasury Bond ETF actually advanced on the day. Based on
The S&P 500 SPDR (SPY) fell back to its 200-day SMA in February and then surged with a sharp advance the last few days. This advance triggered breakouts in several ETFs that were featured in last week’s report and video. Today’s report will update these charts and set the
