Systematic Trading Strategies and Next Level Trading Setups

Measuring the Balance of Power in the Equal-weight Sectors

The 200-day SMA is a long-term trend indicator that chartists can use across the equal-weight sectors to measure the balance of power in the broader market. The more sectors trading above their 200-day SMAs, the more bullish the market. The more sectors trading below their 200-day SMAs, the more bearish the market.

Today I am going to use the eleven equal-weight sector ETFs and put them into two groups. The first group contains the five biggest sectors and the five offensive sectors. Healthcare is the fourth biggest sector, but it is not part of the offensive group. Communication Services is part of the offensive group, but is actually the smallest sector in the equal-weight S&P 500. Industrials, Technology, Finance and Consumer Discretionary are the other offensive sectors. They are “offensive” because these are the sectors we want to see leading during a broad market advance.

The chart above shows each of these sectors with their 200-day SMAs. The sector name is red if below the 200-day and green if above. Currently, four of the five offensive sectors are below their 200-day SMAs and four of the five largest sectors are below their 200-day SMAs. This is not what we would expect to see in a bull market. Also notice that not one of these sectors recorded a new high in June. All fell short of their February highs.

The picture deteriorates even further when we look at the defensive sectors, Materials and Energy. All five are below their 200-day SMAs. Utilities and Energy did not even get back above their 200-day SMAs in June.

Looking at the eleven sectors overall, the picture is clearly not bullish. Nine of eleven are below their 200-day SMAs. The Technology and Healthcare sectors are the only two above their 200-day SMAs and they are the leaders. Even though tech is an important sector, I do not see how we can call this a bull market when nine sectors are below their 200-day SMAs and not one hit a new high in June.

This week on TrendInvestorPro I examined the dud bottle rocket candlestick in SPY, the bearish failure swing in QQQ and the bearish wedge in IWM. In addition, I updated breadth models for the $NDX, $SPX, $MID and $SML. Subscribers who are also members of StockCharts also receive the core ETF chartlist, the master ETF chartlist and the essential breadth indicator chartslist. Note that I am on vacation the second week of July (5-11) and there will not be any reports that week.

 

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Weekend Video – Weighing the Evidence Breadth Models, EW Sectors and Medium-term Indicators

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Today’s video starts with the four long-term breadth models, of which three are in bear mode. We then turn to the three dynamics at work in the stock market: the broad market environment, the medium-term trend and the short-term condition. I will review the weight of the evidence with the equal-weight sectors and intermediate-term indicators. And finally, we will finish with the Fed, yield spreads, the ETF rankings and the ChartBook.

Weekend Video – Weighing the Evidence Breadth Models, EW Sectors and Medium-term Indicators Read More »

Timing Models – Large-cap Techs Continue to Lead, but Breadth Indicators Weaken Elsewhere

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The rock and the hard place is back. The major index ETFs are in medium-term uptrends that started in late March and have yet to reverse. These uptrends, however, are hitting resistance as the 200-day SMAs come into play for SPY and IWM. QQQ left its 200-day in the dust a long time ago.

Timing Models – Large-cap Techs Continue to Lead, but Breadth Indicators Weaken Elsewhere Read More »

ETF Ranking and Grouping – Tech ETFs Holding Up, but other Groups Breaking Down

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QQQ, XLK and some tech-related ETFs moved to new highs again this week, but these new highs were not matched elsewhere and non-confirmations are building. For example, QQQ forged a higher high from June 10th to June 24th, but SPY and IWM did not. QQQ and techs have been leading for some time, and they continue to lead. However,

ETF Ranking and Grouping – Tech ETFs Holding Up, but other Groups Breaking Down Read More »

Weekend Video – Breadth Models, Supports, Wedges, Bullion, Bonds and Biotechs

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The weekend video starts with long-term and short-term breadth models for four major indexes: Nasdaq 100, S&P 500, S&P MidCap 400 and S&P SmallCap 600. Only one of the four long-term breadth models is bullish – and no prizes for guessing which one. This week’s bounce established uniform support levels in dozens of ETFs to watch next week. There are ominous wedges in

Weekend Video – Breadth Models, Supports, Wedges, Bullion, Bonds and Biotechs Read More »

Timing Models – Nasdaq 100 Breadth Model Carries the Day as Intermediate Uptrends Dominate

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Today we will dive into long-term and short-term breadth models using the same indicators for four different indexes. These models cover the Nasdaq 100, S&P 500, S&P MidCap 400 and S&P SmallCap 600. Looking at a market of 1500 stocks, the evidence is mixed, at best. Three of the four long-term models are net bearish and all four short-term models are net bullish.

Timing Models – Nasdaq 100 Breadth Model Carries the Day as Intermediate Uptrends Dominate Read More »

ETF Ranking and Grouping – Intermediate Uptrend Dominates the Charts – Focus on GLD and TLT

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The intermediate trend is the dominant force at work for most stock-related ETFs and this trend is up. This is basically the uptrend from late March to mid June. The bears fired a shot across the bow last week with a sharp decline, but the bulls answered with a reversal day on Monday and pop on Tuesday. Most importantly, price action on Monday-Tuesday affirmed support for several ETFs and established a reaction low for others.

ETF Ranking and Grouping – Intermediate Uptrend Dominates the Charts – Focus on GLD and TLT Read More »

SPY Update and the
Preferred Moving Average Combo

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This is just a short update for SPY and a decision on the preferred moving average combo for the S&P 500. After a plunge on Thursday, stocks firmed on Friday and forged an intraday reversal on Monday. This firmness is occurring near short-term support for many ETFs and the major index ETFs held their intermediate uptrends, which have been in place since late March. Small-caps, housing, biotech, gold miners and corporate bonds led the advance.

SPY Update and the
Preferred Moving Average Combo Read More »

Weekend Video – Breadth Model Indicators, the SPY/TLT Reversals and the ChartBook

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Today’s weekend video starts with the indicators that make up the breadth model and their individual signals. We then add some basic market timing and show the model signals over the last 20 years. I will also provide a preview of a short-term breadth model. Attention then turns to potential reversals in SPY and TLT, the rising wedges in RSP and IWM, the StochClose rankings and the ChartBook

Weekend Video – Breadth Model Indicators, the SPY/TLT Reversals and the ChartBook Read More »

Timing Models – Here we Go Again – Models Flip as Outsized Declines Hit Key Areas

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Stocks took it on the chin Thursday with the biggest weekly decline since declines began (March). Once again, small-caps and mid-caps led the way lower with outsized declines. Even more disconcerting, we saw outsized declines in some key large-cap sectors as the Consumer Discretionary SPDR fell over 5%, the Industrials SPDR fell over 8% and the Finance SPDR fell 7%.

Timing Models – Here we Go Again – Models Flip as Outsized Declines Hit Key Areas Read More »

ETF Ranking and Grouping – Volatility and Risk Remain High as Bonds and Gold Perk Up

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The broader environment for stocks is technically bullish, but risk remains well above average. The S&P 500 moved above its 200-day SMA and the 5-day SMA moved above the 200-day SMA. The %Above 50-day SMA indicators surged above 80% to trigger bullish and the Index Breadth Model based on StockCharts data triggered bullish on June 5th with five of nine indicators on bullish signals. That’s the bullish part.

ETF Ranking and Grouping – Volatility and Risk Remain High as Bonds and Gold Perk Up Read More »

Knowing When to Add Risk and When to Reduce Risk

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The S&P 500 is the most widely used benchmark for the US stock market and the 200-day SMA is perhaps the most widely used moving average. These two came together again in late May as the index crossed back above on May 27th. Today we quantify the performance of prior signals and show how a little smoothing can go a long way. Furthermore, a simple market timing mechanism can tell investors when to add risk and when to seek alternatives to stocks.

Knowing When to Add Risk and When to Reduce Risk Read More »

Models and Weekend Video – Breadth Model Flips as Participation Widens and Yields Spreads Plunge

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It was a big week on Wall Street as stocks surged with the biggest weekly gains since the initial lift off started (late March and early April). Small-caps and mid-caps led the way with gains exceeding 8%. Large-caps lagged as SPY gained a measly 5% and QQQ advanced a paltry 2.71%. These moves triggered

Models and Weekend Video – Breadth Model Flips as Participation Widens and Yields Spreads Plunge Read More »

Testing a Medium-term Breadth Thrust Strategy and Adding a Timing Mechanism to Soften the Blow

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The market is a forward looking beast and we are seeing some pretty strong signals from short-term and medium-term breadth indicators. The long-term breadth indicators, however, are still lagging and have yet to trigger. Today I will put a medium-term breadth model to the test and show how to improve results with a simple timing mechanism.

Testing a Medium-term Breadth Thrust Strategy and Adding a Timing Mechanism to Soften the Blow Read More »

Weekend Video – Short-term Breadth Indicators to Watch, ChartBook and Yield Spreads

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Today’s video will start with a 16+ year backtest of a slightly modified version of the Index Breadth Model. These results will be compared to buy-and-hold and a 5/200 cross for the S&P 500 SPDR. I will then review the current signals in the StockCharts breadth indicators. The upswing since late March dominates right now so

Weekend Video – Short-term Breadth Indicators to Watch, ChartBook and Yield Spreads Read More »

Market Timing Models – Backtesting Breadth Signals and Focusing on the Big Swings

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Today we will dive into breadth indicators and test a modified version of the Index Breadth Model here at TrendInvestorPro. First, however, I will review the S&P 500 SPDR as it toys with its 200-day SMA here at month end. In particular, I am monitoring upswings in four key major index ETFs. After the breadth dissertation

Market Timing Models – Backtesting Breadth Signals and Focusing on the Big Swings Read More »

ETF Ranking and Grouping – Rotation Takes Hold as Flag Breakouts Extend

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We are seeing some rotation in the market as the leaders stall and the laggards get in gear. The leaders from mid March to mid May lagged over the last two weeks, while the laggards from this period led. ETFs related to bonds, gold, healthcare and technology led the market during the rebound period and were the first to move back above their 200-day SMAs

ETF Ranking and Grouping – Rotation Takes Hold as Flag Breakouts Extend Read More »

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