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 gain this week and a flag breakout, but XLE has yet to clear its January high, much less its June high. The Industrials SPDR (XLI) and Finance SPDR (XLF) gained 5% and 7% this week, respectively.

Overall, stocks were oversold at the end of January with RSI in the oversold zone for dozens of ETFs, including the sectors listed above. Pretty much everything bounced this week and most bounces were big. The turn of the month strategy (seasonal pattern), which covers the close from January 25th to February 4th, eked out a .47% gain (call it a push).

The major index ETFs are strong with new highs in the big three. Sector confirmation is a bit mixed because only XLK and XLC hit new highs (as of Thursday). The breadth models remain bullish with over 80% of S&P 500 stocks above their 200-day SMAs. However, we still saw some deterioration in the short-term breadth indicators (%Above 50 and %Above 20 Day SMAs). I am also concerned for a correction because RSI ended its streak above 50 in late January. Price action in SPY begs to differ for now. With new highs this week, the correction targets become moot, even though the major index ETFs are quite extended after big gains since late October.

SPY, QQQ and IWM Hit New Highs

RSI: Consecutive Days Above 50

Trend and Thrust Breadth Models

Trend Models

Thrust Models

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

SPX Sector Breadth Model

Sector Breadth Model charts can be found on the Art’s Charts ChartList.

Yield Spreads and Fed Balance Sheet

Thanks for tuning in and have a great day!

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.

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

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.

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

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.

SOXX Follows Overbought Extreme with Outsized Decline Read More »

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

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

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

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

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).

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

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.

Bull Markets, Gold, Silver and Narratives Read More »

SOXX and other ETFs with Extended Overbought Conditions

The Semiconductor ETF (SOXX) and several other ETFs are on a serious roll in 2021. For the fourth time since 2009, 14-day RSI was above 70 for ten or more days. This is an exceptional streak, but SOXX is not alone and there are even longer streaks. The following list shows some ETFs and the number of days RSI has been above 70: ROBO (39), DRIV (25), ARKQ (13), EWT (13), MOO (12), XRT (11), SOXX (10), YOLO (10). Note that these numbers are based on Thursday’s close.

SOXX and other ETFs with Extended Overbought Conditions Read More »

Weekend Video and Chartbook – RSI Milestones, Tight Channels, GLD and TLT Firm, XLU and REZ Trigger Signals

Today’s video starts with the post-breakout extensions in SPY, QQQ and IWM. The latter looks extended, while the breakout extensions in SPY and QQQ look pretty normal as the tight rising channels hold. We have two different milestones to cover: consecutive days above 70 for RSI and the 52-week lows in junk bond spreads. GLD, TLT and UUP are in downtrends overall, but firming and could be poised

Weekend Video and Chartbook – RSI Milestones, Tight Channels, GLD and TLT Firm, XLU and REZ Trigger Signals Read More »

Timing Models – Broad Strength Remains, Breakouts Extend, QQQ Returns, Yield Spreads Narrow Further

Just when you thought it could not get any better, we are seeing fresh new highs in SPY, a resurgence in QQQ, new lows in the yield spreads and a new high in the Fed balance sheet. Over 90% of stocks in the S&P MidCap 400 and S&P SmallCap 600 are above their 200-day SMAs and 150-day SMAs, while over 85% of stocks in the S&P 500 are above these moving averages. Breadth and price action are strong so what could go wrong?

Timing Models – Broad Strength Remains, Breakouts Extend, QQQ Returns, Yield Spreads Narrow Further Read More »

ETF Trends, Patterns and Setups – New Highs Galore, Techs Still Leading, Bond-Proxies Pop

Stocks as a whole remain overextended and strong. The big three (SPY, QQQ, IWM) are setting the tone for the overall market as they remain with tight rising channels and steady short-term uptrends. Some ETFs look quite ripe for a pullback (SOXX, PBW, TAN), but there are also ETFs that sport fairly fresh breakouts (XLI, KIE, XLU and REZ). In fact, we are seeing some money move bond-proxies with the breakouts in XLU and REZ

ETF Trends, Patterns and Setups – New Highs Galore, Techs Still Leading, Bond-Proxies Pop Read More »

A Top or a Mere Correction?

Visual chart analysis is prone to subjectivity and biases. While we cannot completely remove subjectivity, we can approach chart analysis in a systematic fashion and increase objectivity. This commentary will show an example using the Home Construction ETF (ITB) because the ETF has traded flat since mid October. Is this a top or merely a correction?

A Top or a Mere Correction? Read More »

Weekend Video and Chartbook – Holding the Uptrend as RSI Gets Frothy, Bonds and Dollar Get Oversold as Utes Firm

Today’s video starts with the weekly charts showing a pretty normal post-breakout extension for SPY, but an overextended advance for IWM. We are also seeing signs of excess in the number of ETFs with RSI readings above 80 this year. Despite overbought conditions, two medium-term breadth indicators are holding strong and have yet to show any deterioration within the S&P 500. We then turn to the ETF

Weekend Video and Chartbook – Holding the Uptrend as RSI Gets Frothy, Bonds and Dollar Get Oversold as Utes Firm Read More »

Timing Models – Weight of Evidence, Not Everything is Overextended, Yield Spreads Narrow Further

Stocks are in the middle of a strong advance with small-caps leading the charge. The middle, in this instance, refers to a point after the beginning because I do not know where the end will be. IWM appears quite extended after a 39% advance the last eleven weeks, but the price charts for SPY and QQQ do not look that extended. The latter two broke out in early November and continue to work their way higher. Even though small-caps, micro-caps and mid-caps are getting most of the attention right now, SPY and QQQ are holding their own just fine.

Timing Models – Weight of Evidence, Not Everything is Overextended, Yield Spreads Narrow Further Read More »

ETF Trends, Patterns and Setups – Breakouts Hold and Uptrends Extend as RSI Reaches New Extremes

There are not a lot of setups this week because most equity-related ETFs moved higher the last two to three weeks. Most, but not all. There are still some setups working in XLU, REZ and ITB, but these three are lagging over the last few months. We are also seeing some relatively fresh breakouts in XLI and XAR, as well as hard throwbacks in GLD and SLV. These four are still in setup territory. All charts are covered below.

ETF Trends, Patterns and Setups – Breakouts Hold and Uptrends Extend as RSI Reaches New Extremes Read More »

Treasury Yields, Inflation, Real Yields and Gold – Setting Stops to Filter Out Noise

Bonds and gold were spooked last week as the 20+ Yr Treasury Bond ETF (TLT) fell 4% and the Gold SPDR (GLD) fell 2.81%. Note that GLD surged over 2% on Monday’s open and then fell over 5% the last three days of the week. Wow! Today we will look at the 10-yr Yield, Inflation, the Real Yield and gold. There is an interesting narrative at work, as always, but we are usually better off focusing on the chart of the underlying and ignoring the narrative.

Treasury Yields, Inflation, Real Yields and Gold – Setting Stops to Filter Out Noise Read More »

Weekend Video and Chartbook – Breakouts and New Highs Proliferate, Bonds and Gold Get Slammed, ETF Ranking Table

The post-breakout moves in SPY and QQQ look pretty normal, but the 10-week surge in the Russell 2000 ETF looks downright frothy. What else is new. Even so, two S&P 500 medium-term breadth indicators are holding strong and show no signs of deterioration that would suggest a correction. In the ETF Chartbook, we saw lots of consolidation breakouts this week and new highs (closing prices) in seven of the nine sector SPDRs. Bonds took it personal this week as the TLT fell 4%,

Weekend Video and Chartbook – Breakouts and New Highs Proliferate, Bonds and Gold Get Slammed, ETF Ranking Table Read More »

Timing Models – Small-caps continue to Lead, Leadership Broadens, Junk Yields Narrow Further

The rally is gaining steam (momentum), the leadership circle is broadening (new highs) and the riskiest stocks are leading (small-caps). We are also starting to see stories suggesting that this rally is unstoppable. Maybe it is, maybe it isn’t. There will be a pullback at some point, but it is much harder to time “overbought” pullbacks than oversold bounces. The big trend and bull market are the dominant forces at work in the

Timing Models – Small-caps continue to Lead, Leadership Broadens, Junk Yields Narrow Further Read More »

Exit Indicators – Trend Reversal, Chandelier, Parabolic SAR and ATR Trailing Stop – Resources

Chartists trading oversold bounces and short-term bullish continuation patterns have two basic choices when it comes to an exit: trailing stop or trend reversal. Trailing stops are used initially as stop-losses and then trail price if/when it moves higher. Trend reversal exits are used to accumulate during an uptrend and exit when the longer-term trend reverses. This article will cover the trend reversal exit and three trailing stop alternatives.

Exit Indicators – Trend Reversal, Chandelier, Parabolic SAR and ATR Trailing Stop – Resources Read More »

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