Systematic Trading Strategies and Next Level Trading Setups

Timing Models – Going for Short-term Breakouts, Split Market with Enough Strength, Composite Breadth Model (Premium)

Trend/Signal Summary

SPY and IWM recorded new highs this week and continue to lead the broader market. Even though QQQ and XLK are underperforming this year, the old school sectors held strong and propped up SPY. After short pullbacks into early March, stocks caught a bid this week and we are seeing flag breakouts in the big three. We will focus on these breakouts because they hold the short-term key going forward. Long-term, the bulk of the evidence remains bullish and we are in a bull market.

Trend/Signal Summary

  • SPY: long-term uptrend and short-term uptrend.
  • QQQ: long-term uptrend and short-term uptrend.
  • IWM: long-term uptrend and short-term uptrend.
  • S&P 500: 5-day SMA crossed above 200-day on May 29th (uptrend).
  • Composite Breadth Model: bullish since May 29th (bull market)
  • Leading Sectors: XLF, XLC, XLI, XLE, XLB
  • Lagging Sectors: XLK, XLV, XLY, XLP, XLU
  • TLT and GLD are in strong downtrends.
  • The Fed Balance sheet expanded a little this week.
  • Yield spreads ticked up, but remain narrow overall.

Commodities, Bonds and Separate Ways

IWM Leads the Long-term Uptrend

Short-term Breakouts Across the Board

Old School Sectors and XLC Stand Out

Composite Breadth Model: Bull Market

Even though I analyze the weekly charts, follow yield spreads and am aware of the Fed balance sheet, the Composite Breadth Model (CBM) is the final arbiter when it comes to the broad market environment (bull market or bear market). As detailed in Wednesday’s commentary, this model aggregates the Trend and Thrust Breadth Models for the S&P 500 and S&P 1500, along with the long-term trend for the S&P 500. The Thrust Models are more reactive to ensure nimbleness, while the trend models capture the big trends and lag. The trend for the S&P 500 is added because this is the alpha index when it comes to the broad market.

The next charts show the S&P 500 Trend and Thrust Models with indicators.

You can learn more about the methodology and
historical performance for these breadth models in this article.

Yield Spreads and Fed Balance Sheet

Thanks for tuning in and have a great day!

ETF Trends, Patterns and Setups – Energy, Banks and Industrials Lead, Tech ETFs Try to Find Footing after Normal Retracements (Premium)

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There are a lot of pullbacks to deal with today. Some pullbacks are shallow, some are deep and some are in between. Often, the bigger the advance, the deeper the pullback or retracement. Despite some big percentage declines, most of the pullbacks are normal in retracement terms (33 to

ETF Trends, Patterns and Setups – Energy, Banks and Industrials Lead, Tech ETFs Try to Find Footing after Normal Retracements (Premium) Read More »

Weekend Video and Chartbook – Split Market, S&P 1500 Breadth Signals, Short-term ETF Leaders, Treasury Yield Distractions (Premium)

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Despite an increase in intraday volatility the last few weeks, the recent pullback is actually quite tame, especially for the Russell 2000 ETF and S&P 500 SPDR. QQQ bore the brunt of selling pressure and the Nasdaq 100 Breadth Thrust Model turned bearish. I am not concerned with this signal because the S&P 1500 Thrust Model remains bullish. Today’s video will show backtest results

Weekend Video and Chartbook – Split Market, S&P 1500 Breadth Signals, Short-term ETF Leaders, Treasury Yield Distractions (Premium) Read More »

Timing Models – QQQ Leads Short-term Pullback, but Long-term Evidence Remains Bullish (Premium)

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The long-term evidence remains bullish, but the major index ETFs have moved into corrective mode of varying degrees. The S&P 500 SPDR and Russell 2000 ETF are in the midst of shallow pullbacks, while the Nasdaq 100 ETF is leading the way lower with a sharp pullback. Downside participation was so strong in the Nasdaq 100 that the Breadth Thrust

Timing Models – QQQ Leads Short-term Pullback, but Long-term Evidence Remains Bullish (Premium) Read More »

ETF Trends, Patterns and Setups – Finance, Industrials and Energy Hold up as Tech, Healthcare and High-Flyers Correct (Premium)

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Even though ETFs related to small-caps, mid-caps, industrials, finance and energy are performing well and not part of the correction process, a big portion of the core ETF list are in some sort of pullback or correction over the last few weeks. 48 of the 119 ETFs in the core list are down over the last 22 trading days (since January 29th) and 22 are down more than 5%.

ETF Trends, Patterns and Setups – Finance, Industrials and Energy Hold up as Tech, Healthcare and High-Flyers Correct (Premium) Read More »

Secondary Downtrends in Primary Uptrends Create Opportunities (IBB Example) (Free)

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With a pullback led by QQQ and the high flyers, several ETFs have become short-term oversold in a longer term uptrend. In Dow Theory terms, the primary trend for these ETFs is up and the secondary trend is down. A secondary downtrend within a primary uptrend is considered a correction within that uptrend and a possible opportunity.

Secondary Downtrends in Primary Uptrends Create Opportunities (IBB Example) (Free) Read More »

Weekend Video and Chartbook – QQQ Leads Lower, SPY and Oversold Conditions, Turn of the Month, Selling Climax in TLT (Premium)

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Stocks corrected over the last two weeks with QQQ leading the way. IWM held up the best and RSI moved into the oversold zone for SPY. Today we will look at previous instances when RSI became oversold for SPY. Some indicators are pointing to a multi-week correction (NDX %Above 50-day), but we also have the turn of the month upon

Weekend Video and Chartbook – QQQ Leads Lower, SPY and Oversold Conditions, Turn of the Month, Selling Climax in TLT (Premium) Read More »

Timing Models – QQQ Reverses Short-term Uptrend, 3 Big Sectors Weigh, Medium-term Participation Wanes within SPX (Premium)

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The long-term evidence (primary trend) is bullish, but we are seeing some short-term weakness (secondary trend). This is especially true in the Nasdaq 100 and Technology sector. SPY is holding up better because the Finance, Industrials and Communication Services are picking up the slack. The table below summarizes the broad market environment using the

Timing Models – QQQ Reverses Short-term Uptrend, 3 Big Sectors Weigh, Medium-term Participation Wanes within SPX (Premium) Read More »

ETF Trends, Patterns and Setups – Cyclical ETFs Lead, Tech ETFs Pullback, High-Flyers Correct Hard (Premium)

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February is turning into a big month for cyclically oriented ETFs. These include: Copper Miners ETF, Metals & Mining SPDR, DB Base Metals ETF, Oil & Gas Equipment & Services ETF, Oil & Gas Exploration & Production ETF, Airline ETF, Transports ETF, Industrials SPDR, Regional Bank ETF, S&P SmallCap 600 SPDR, S&P MidCap 400 SPDR and Semiconductor ETF. The lists below shows ETFs with big gains over the last 17 trading days (February).

ETF Trends, Patterns and Setups – Cyclical ETFs Lead, Tech ETFs Pullback, High-Flyers Correct Hard (Premium) Read More »

Sector Breadth Models versus a Simple Trend Following Technique

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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.

Sector Breadth Models versus a Simple Trend Following Technique Read More »

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

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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

Weekend Video and Chartbook – Oil and Base Metals lead, XLI and XLF Hit New Highs, TLT Plunges with Outsized Decline (Premium) Read More »

Timing Models – Commodities Lead in 2021, SPY Extends Uptrend, Extended Conditions Extend, Fed Balance Sheet Pops (Premium)

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Stocks and commodities are leading in 2021 (risk on). Small-caps took a breather this week, but the Russell 2000 ETF (IWM) is still the second best performer among 14 intermarket ETFs. The DB Energy ETF (DBE) is the top performer with an 18.9% gain and the DB Base Metals ETF (DBB) gets third place with a 7.5% gain. QQQ is holding its own with a 6% gain and the

Timing Models – Commodities Lead in 2021, SPY Extends Uptrend, Extended Conditions Extend, Fed Balance Sheet Pops (Premium) Read More »

ETF Trends, Patterns and Setups – Big Gains Since November, Big Months for Finance and Energy, A Few Corrections Underway

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Making money in the stock market has been pretty easy since November. And not just stocks. Oil, base metals, agriculture and silver are also up. Gold, the Dollar and bonds are down as money moved out of stock-alternatives and into riskier assets. As shown below, dozens of ETFs are up more than 40% since early November and many are up more than 20%.

ETF Trends, Patterns and Setups – Big Gains Since November, Big Months for Finance and Energy, A Few Corrections Underway Read More »

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

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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,

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

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

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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

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

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

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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)

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

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

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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

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

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