Breadth remains bullish overall. Some 80% of S&P 500 stocks are above their 200-day SMAs and High-Low Percent expanded to +17.82% this week. This means some 18% of stocks in the S&P 500 recorded 52-week highs this week. While the percentage of stocks above the 200, 150 and 100 day SMAs is not as high as it was in April, far more stocks are above their respective SMAs than below and this is enough to support a bull market.
- Large-caps continue to lead with SPY, QQQ and the S&P 500 EW ETF (RSP) hitting new highs again this week.
- Small-caps (IWM) and micro-caps (IWC) bounced off support zone, but remain stuck in trading ranges that extend back to March. The S&P SmallCap 600 SPDR (IJR) triggered bullish on StochClose after an 8% bounce since mid July and the Russell 2000 ETF (IWM) triggered bullish on Thursday.
- New trend signals suggest more of a risk appetite. Of the 112 stock-related ETFs on the core chartlist, 77 (69%) are in uptrends and 35 (31%) are in downtrends (based on StochClose signals). There were new uptrend signals in small-caps (IJR, IWM), clean energy (QCLN, FAN), the ARK ETFs (PRNT, ARKF, ARKG, ARKQ, ARKK, ARKW), space (UFO) and Japan (EWJ).
- The Composite Breadth Model (CBM) remains bullish and has been bullish since May 2020 (see Market Regime page for charts covering the CBM, yield spreads and Fed balance sheet).
- Investment grade and junk grade corporate bond spreads narrowed from late September 2020 to late June 2021 and then flattened out at low levels the last two months. There are no signs of stress in the credit markets.
- The Fed balance sheet edged higher this week and recorded another all time high.
- The Composite Breadth Model (CBM) remains bullish and has been bullish since May 2020 (see Market Regime page for charts covering the CBM, yield spreads and Fed balance sheet).
- Investment grade and junk grade corporate bond spreads narrowed from late September 2020 to late June 2021 and then flattened out at low levels the last two months. There are no signs of stress in the credit markets.
- The Fed balance sheet edged higher this week and recorded another all time high.
- The 20+ Yr Treasury Bond ETF (TLT) remains with a bull flag as the employment report looms on Friday morning. The reaction to this report often rattles the bond market, the Dollar and gold, and sometimes even stocks.
- The Dollar failed to break above the March highs and remains stuck in a long consolidation.
- Gold edged above the upper line of a falling wedge and further strength would trigger a resistance break.
- Oil got a big oversold bounce off support and is challenging channel resistance, a break of which would signal a continuation of the bigger uptrend.
- Seasonally, September is the weakest month of the year for the S&P 500, but price action remains strong for large-caps (click here for full report on seasonal patterns).
TLT Forms Bull Flag above 200-day
There is no change for the 20+ Yr Treasury Bond ETF (TLT). The ETF is in a long-term uptrend as StochClose triggered bullish in early July and price moved above the 200-day SMA in mid July. After a strong advance from mid May to mid July, TLT corrected a little with a falling flag, which is typically a bullish continuation pattern. Technically, the falling flag means the short-term trend is down until a breakout. RSI dipped into oversold territory in mid August and there was a StochRSI pop on August 18th. As such, expectations are for a flag breakout and continuation higher. A break below 147 would call for a re-evaluation.
The 10-year Yield is pretty much a mirror image of the 20+ Yr Treasury Bond ETF (TLT) and 7-10 Yr Treasury Bond ETF (IEF). The 10-yr yield is battling the rising 200-day SMA with a possible bear flag. A break below 1.24 would argue for a move lower. The short-term bias is up as long as the flag rises.
And Now for the Crop Report
This scene from Trading Places seems to never get old and I always think of it when non-farm payrolls are reported at the first of every month. A little fun for Friday.
Gold Battles 200-day
The Gold SPDR (GLD) chart is getting interesting as price breaks above the falling wedge line and challenges the 200-day SMA. Gold is often more trouble than it is worth and I am not sure if indicators are much help. The chart in the upper left shows lower highs since mid 2020, but we have a possible higher low from March to August on the bar chart (green line). A big falling wedge formed and GLD broke the upper line with a big surge last Friday. Follow through above the red resistance zone would fully reverse the decline and signal a resumption of the March-May advance. Note that a falling wedge is typical for a correction after a big advance. A breakout might also be enough to turn StochClose bullish because it is at 57 now. A GLD close below 166 would throw cold water on the bullish case.
Dollar Backs off Resistance
The Dollar Bullish ETF (UUP) fell sharply the last two weeks and this affirms resistance from the March high. Overall, big double bottom could be taking shape and a break above the March-August highs would confirm this bullish reversal pattern. StochClose is bullish since late June, but the ETF is clearly in a big trading range and could still go either way. The smaller charts on the left show resistance (red lines) for the Euro ETF (FXE) and Yen ETF (FXY). Upside breakouts in these two would be negative for UUP.
Oil Challenges Channel Line
Oil got a strong oversold bounce off support the last two weeks and is challenging channel resistance. The apex of the triangle (March-May) represents an active trading zone with lots of buys, sells, longs and shorts. This makes it a support zone and oil held this zone with the recent bounce. Notice that the Momentum Composite hit -3 two days before the big surge off support. Oversold setups are not always this timely, but it is nice when they are. Medium-term, the channel is viewed as a correction within the bigger uptrend and a breakout would signal a continuation higher.
