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

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

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,

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

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

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

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

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

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.

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

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?