Market Regime Report – RSP Lags – Breadth Weakens – 10-yr Yield Extends on Breakout

Large-caps remain strong with SPY forming a bullish continuation pattern and QQQ holding its recent breakout. Small-caps, in contrast, are struggling with their breakouts and lagging. There were lots of wedge breakouts in mid January and these are holding. I am raising my re-evaluation levels on several ETFs. More recently, I am seeing short-term breakouts in ETFs related to industrials and utilities. We also cover ETFs related to AI, blockchain and managed futures.

The weight of the evidence remains bullish for stocks, but small-caps and mid-caps continue to lag. We are watching a bullish pattern in SPY and a breakout QQQ. Several tech-related ETFs extended on their mid January breakouts and hit new highs. Elsewhere, short-term bullish patterns formed for ETFs related to industrials, infrastructure and defense.
The Finance SPDR (XLF) and Communication Services SPDR (XLC) are leading the sectors with new highs here in February. The Technology SPDR (XLK) is holding up as it surged off support

The long-term trends are up for the major index ETFs and their respective breadth indicators are net bullish. Long-term breadth indicators deteriorated sharply in December and rebounded in January, but the rebounds were not that strong. Around 60% of S&P 500 stocks are above their 200-day SMAs, which means 40% are below

There were many wedge breakouts in mid January and most of these breakouts are holding. Chartists must now set the level that proves these breakouts wrong. Today’s video starts with an example using the Software ETF. We then show the re-evaluation levels for several ETFs with wedge breakouts. Elsewhere, the Technology SPDR is lagging, the Healthcare SPDR is rebounding, the Biotech ETF is going for a breakout and the Gold SPDR is leading with a new high.

The weight of the evidence remains bullish for stocks, despite an uptick in volatility and a wild news cycle. We are seeing upside leadership from finance, communication services, defense, medical devices, pipelines, cloud, cybersecurity and gold. We are also seeing lots of wedge/channel breakouts and most are holding. Here is the leading ETF symbol list

There are six stock setups today and these setups come from strong areas of the market. These include cloud computing, software, medical devices and broad retail. There is also a biotech stock in the mix. All stocks are in long-term up trends with

The long-term trends are up for the major index ETFs and their respective breadth indicators are net bullish. Long-term breadth indicators deteriorated in December, but rebounded in January. Over 60% of S&P 500, Nasdaq 100 and S&P 1500 stocks above their 200-day SMAs. New highs also rebounded as

Wait a week and the narrative will change. In mid January, our reports were featuring strength in the middle of the market and in the more mundane sectors, such as industrials, finance and utilities. Last week we saw breakouts in many tech-related ETFs as Stargate was announced. This week we are seeing AI

Today’s report covers the sell off in AI infrastructure stocks and related ETFs. Monday’s decline were excessive, and perhaps an over-reaction, but they did some damage on the charts. NVDA broke its 200-day SMA and the two semiconductor ETFs broke support. Despite a big decline in NVDA, MAGS is holding support with help from other components. We will then look at three ETFs that represent different areas of AI (infrastructure, physical, software).

The major index ETFs fell on Monday, but breadth actually improved as the average stock held up well. This strength under the hood, and this is positive for stocks outside of the AI infrastructure trade. Today’s report will show advancing stocks outpacing declining stocks and an increase in the percentage of S&P 500 above their 200-day SMA. In short, the broader market is still in good shape.

The breakouts are expanding as tech-related stocks surged this week. Last week we saw breakouts in some of the more mundane groups (industrials, finance, utes). Today’s report will focus on ETFs related to tech, the Mag7, AI, cloud, cybersecurity, semiconductors and biotech. With the exception of biotech, many of these ETFs led the market from September to November and then corrected into January. Their corrections ended with surges and breakouts over the last six days.

The long-term trends are up for the major index ETFs and their respective breadth indicators are net bullish. Long-term breadth indicators deteriorated in December, but rebounded sharply in mid January. Over 60% of stocks are above their 200-day SMAs. Nasdaq 100 breadth is leading with 64% of its stocks above

There are eight stock setups today. All stocks are in uptrends of varying degrees and sport bullish continuation setups. These setups occur when there is a pullback or bullish continuation pattern forming. If they have yet to break out, I am marking the resistance level to watch (pink line). The re-evaluation level is a support level (blue line) to watch for signs of a failure.

Stocks moved sharply higher last week with several ETFs breaking out of corrective patterns. In particular, there are several falling wedge breakouts so I will detail this pattern using XLI as an example. I will show the prerequisites (uptrend), the Bullish Setup Zone, the pattern signal and the re-evaluation level. After this section, I will link to a PDF report that highlights these breakouts and sets the re-evaluation levels going forward.

After rising sharply from mid December to mid January, Treasury yields fell sharply on benign CPI numbers. The 10-yr Treasury Yield remains in a long-term uptrend with a breakout, but short-term yields are still trending lower and more reflective of Fed policy. The decline in yields sparked a buying binge on Wall Street with leadership coming from the middle of the market (mid-caps). Broad strength in mid-caps triggered a breadth thrust for this group. We are also seeing leadership in ETFs related to finance, industrials and utilities. Seven feature in today’s report. The Gold SPDR and DB Base Metals ETF are also going for breakouts, as is IBIT.