Weekend Video – Participation Broadens as Mid-caps, Industrials and Banks Perk Up

Even though the current advance is getting quite extended, the broad market environment remains bullish and the medium-term uptrends rule. Tech-related ETFs and stocks drove the market higher from late March to late June. Even though the tech surge slowed, participation broadened over the last six weeks as other groups picked up the slack. The Industrials SPDR (XLI) is the top performing sector since July 1st

There are still a lot of uptrends out there in ETF land, and this includes some key stock-related ETFs. Nevertheless, we are seeing some rotation at work the last few weeks. The tech-related ETFs slowed their advance and some even failed to hold their breakouts. Meanwhile, ETFs related to consumer discretionary continued higher and are leading the pack. However, some of these new leaders are getting extended (XLY, XHB).

Today’s video starts with the medium-term indicators and the overall trends for the S&P 500 SPDR, S&P 500 EW ETF, S&P MidCap 400 SPDR and Russell 2000 ETF. These are the broadest index ETFs out there and money moved into mid-caps and small-caps this week. The advance since April is marked by falling volatility and we will look at two indicators to monitor volatility.

The chart below shows year-to-date performance for the top 20 stocks in the S&P 500. Overall, the year is mixed with eleven up and nine down. Amazon is up over 70%, Apple is up over 50% and Microsoft is up over 30%. Facebook and Home Depot are dragging their feet with gains greater than 20%. As strong as the stock market seems, strength is clearly concentrated in a few stocks. Moreover, these few stocks are up big, really big.

After some volatility and big moves in March, April and May, trading has turned downright boring the last few weeks. Nevertheless, the majority of breakouts are holding and there are plenty of leaders. Tech, housing, retail, precious metals and Healthcare continue to lead. ETFs related to Finance and Energy continue to lag. Industrials and small-caps perked up this week and extended on their breakouts, which were looking rather feeble just last week.

Today’s video starts with the medium-term uptrend and key indicators for the S&P 500 because they hold the key as we move into August. The bulk of the evidence remains bullish, but fewer stocks participated in the July advance and the market took a more defensive tone. The breakouts in IWM and XLI were not inspiring, XLF continues to lag and XLU was the top performing sector in July. I will also review the excesses in QQQ, the seasonal patterns, the breadth models, the ChartBook, the Fed balance sheet and yield spreads.

There are times for setups and signals, and there are times to wait. The waiting game is either waiting for the next setup/signal to materialize or monitoring the current signal in play. At this stage, we are in the monitoring stage for several signals that triggered in the first half of July.

The slow rotation continues in the stock market. Tech and biotech related ETFs lagged over the last five days with declines, while ETFs related to housing, retail, banks and small-caps picked up the slack. Note that SPY is down .53% the last five days and the S&P SmallCap 600 SPDR (IJR) is up 1.94%.

QQQ and tech stocks took a breather this week, but the Consumer Discretionary sector, Housing and Retail picked up the slack. SPY and IWM were down fractionally, while QQQ fell around 1.5% on the week. Today’s video starts with a new signal in the S&P 500 breadth model. Despite this signal, the medium-term uptrend remains the main focus and we will cover the key indicators.

My current focus remains on the medium-term up trends, which began with the surge in late March. The bulls are still in control of these medium-term trends and we saw several short-term breakouts in July. Some breakouts were strong as price exceeded the June high (SPY), while some were feeble as price remains well below the June high (RSP). Strong or feeble, the breakouts are still holding and have yet to be proven otherwise.

After a dip in June, stocks and ETFs bounced back in July with several breakouts occurring over the last few weeks. In addition, groups that were lagging from April to June are leading over the last two weeks. It is positive to see some of these laggards play catch up and it is also positive to see the advance broadening.

Today’s video starts with the long-term trends, which reflect strength in large-caps, and the breadth models, which show a mixed market overall. I will review the medium-term uptrend and indicators because these hold the key right now. We will then turn to the Bollinger Band and consolidation breakouts working in SPY and RSP. What would it take to proven them otherwise? Seasonality gets interesting in August and September so we will cover these patterns for stocks, small-caps, gold and bonds.

The stock market remains mixed, which means it is a stock picker’s market. As the broad breadth measures suggest, this is not a bull market that lifts all boats and makes everyone look smart. This is a relatively narrow bull market with tech, healthcare and communication services leading the way.

The leading ETFs took a breather over the past week and the laggards picked up the slack. The Nasdaq 100 ETF and Technology SPDR are down slightly, while the Regional Bank ETF and Metals & Mining SPDR are up sharply. Even though the rotation into the lagging groups may seem healthy, keep in mind that the Technology sector is still the biggest driving force in the S&P 500.

The cup remains half full for the S&P 500 SPDR, but half empty for the S&P 500 EW ETF. This could change as RSI firms in a potential reversal zone with a Bollinger Band contraction. Bearish candlesticks are not slowing down QQQ and even IWM could be ripe for a breakout.

The mixed market is reflected on the ETF charts with tech-related ETFs hitting new highs and underperforming ETFs testing support levels. Will the leaders pull the laggards up or will the laggards drag the leaders down? Or, do we just need to analyze each chart on its own merits? Probably the latter. Several ETFs are at a moment of truth as their medium-term breakdowns collide with short-term support and reversal zones.

The stock market remains mixed overall with pockets of serious strength and pockets of weakness. The Technology and Healthcare sectors continue to lead, while the Finance and Energy sectors lag. QQQ hit a new high and is leading SPY, while large-caps are leading small and mid caps.