Recent Commentary and Analysis
Breadth Extremes in Consumer Discretionary, Energy Breadth Triggers Net Bullish and Two Tech Laggards Return to Leaderboard
Today’s report is a bit of a hodge-podge. There are signs of extreme in some breadth indicators, but signs of extreme are not very good when it comes to timing because indicators can remain near extremes for a few months. I will then turn to the new breadth signal in the Energy SPDR (XLE) and the breakout on the chart. Even though Energy and Banks are leading the last three months, let’s not forget about the tech-related ETFs, which are breaking out to new highs and truly leading.
The ETF Ranking tables provide a comprehensive performance overview for over 100 ETFs in the Core list, which includes dozens of high octane names. These tables can be used in several ways. First, chartists can track StochClose signals for trend-following strategies. Second, chartists can use the StochClose rankings to focus on performance leaders and avoid laggards. Third, chartists can find ETFs that are in long-term uptrends and short-term oversold for mean-reversion opportunities.
The weekly high-low range for the Nasdaq 100 ETF (QQQ) was the narrowest of the year this past week and the ETF is battling triangle resistance. A narrowing range shows indecision and a volatility contraction. Even though this is just one weekly bar, QQQ is at a moment of truth. Will we see a triangle breakout and continuation higher or a failure at resistance and extended correction?
Weekend Video and Chartbook – Breakouts Holding, Breadth Strong, Techs Turn Dull, Bonds Surge and Oil Holds Breakout
Today’s video starts with the current weight of the evidence, which is bullish. We then turn to some signs of excess, which could be just noise to keep us on our toes. Most importantly, SPY is holding its triangle breakout and QQQ is on the verge of a breakout. The technicals remain bullish until they aren’t (proven otherwise). Outside of the technicals, yield spreads continue to narrow and the Fed balance sheet continues to expand. We will also look at a weak Dollar, the downtrend in Gold and the resistance challenge in TLT, as well as the charts in the ETF ChartBook.
Timing Models – Concerns Versus Evidence, Breadth Models, %Above 200-day, AAII Bull-Bear and Yield Spreads
The weight of the evidence remains bullish, but there are some concerns with excesses in the S&P 500 and underperformance in prior leaders. The excesses are a result of the recent rotations as money moved into the lagging groups: finance and energy. This pushed many of their component stocks above their 200-day SMAs. Money did not exactly move out of the leading groups because they simply consolidated, as
We never know if a consolidation will mark a top or a bullish continuation pattern. Three out of four times (guesstimate), a consolidation within an uptrend is a bullish continuation pattern that resolves to the upside. Sometimes, however, a consolidation is resolved on the downside and results in a reversal. This is the concern going forward for several
Chartists trading oversold bounces and short-term bullish continuation patterns have two basic choices when it comes to an exit: trailing stop or trend reversal. Trailing stops are used initially as stop-losses and then trail price if/when it moves higher. Trend reversal exits are used to accumulate during an uptrend and exit when the longer-term trend reverses. This article will cover the trend reversal exit and three trailing stop alternatives.
Even though the Biotech ETF (IBB) and the Biotech SPDR (XBI) represent the same industry group, their composition is very different and one is clearly outperforming the other. Nevertheless, the laggard still has a big bullish continuation pattern and this group looks bullish as a whole.
Weekend Video and Chartbook – Weight of the Evidence versus Signs of Excess, Breakouts and Gaps Holding, Bonds and Gold Underperforming
Today’s video starts with the bullish evidence because we are clearly in a bull market. SPY (large-caps) and IWM (small-caps) hit new highs, the last ROC shock was bullish, the breadth models are bullish and a array of ETFs broke out of bullish continuation patterns this week. Even though the bulk of the evidence is bullish, we cannot let our guard down because there are some signs of excess that could hamper the
The bulk of the evidence remains bullish, but signs of excess and above average volatility are creeping into the picture. In addition, QQQ did not confirm this week’s new high in SPY and large-cap techs are dragging their feet. Today we will review this week’s unusual price action and quantify excesses with %Above 200-day SMA.
ETF Trends, Patterns and Setups – Lockdown-Tech ETFs form Bullish Continuation Patterns, Reflation ETFs Break Out
Don’t like the current rotations in the stock market? Wait a week and it will change. Tech stocks led the market higher immediately after the election with big moves last Wednesday, Thursday and Friday. The reflation trade then took over this week as some of the worst performing groups surged (finance, defense, banks, energy). Money moved out of tech and lockdown related ETFs to fund this rotation.
New highs and a fast growing industry group make for a powerful combination. Today’s article will focus on two ETFs that capture two fast growing industries, video gaming and esports. We will show why these two ETFs are leading, why a consolidation within an uptrend is bullish and why a 50-day SMA is better suited for mean-reversion trading.
Today’s video starts with a broad market overview. The swings in SPY could widen further with another ROC shock this past week. Volatility is increasing, but the trends are up and price action remains bullish. We then look at the breakdown in the Dollar, the breakout in gold and the downtrend in Treasury Bonds. BBB yield spreads narrowed significantly over the last week or so and the Fed balance
Pretty much everything moved higher the last four days. Well, everything but the Dollar. Stocks surged with QQQ leading the charge. Money did not rotate out of safe-haven bonds as the 20+ Yr Treasury Bond ETF and Corporate Bond ETF gained over 2%. Oil was up over 7%, copper was up around 2% and the Gold SPDR took advantage of Dollar weakness
The charts are full of bullish consolidation patterns over the last one to two months. There are triangles, flat consolidations and falling channels. These patterns, when forming after a big advance, represent a correction and a bullish resolution is expected. Why? Because the path of least resistance is up when the bigger trends are up and the breadth models are bullish.
This article covers the Trend and Thrust Breadth Models in detail. We start with an overview of breadth and explain why the S&P 500 is my preferred index for measuring broad market breadth. Attention then turns to the individual indicators and the key levels for generating signals. These models use a “weight of the evidence” approach
Breadth indicators, such as Advance-Decline Percent, measure the participation behind a move in the underlying index. Sometimes participation is so strong that it tips the scales and signals the start of an extended move. For example, 10-day EMA of SPX AD% triggered a bearish breadth thrust on February 25th and the S&P 500 extended lower.
Weekend Video – Weekly Candlestick Reversal Meets Long-term Uptrend, Watching the Financial Stress Index
Today’s video starts with the S&P 500 SPDR to put the four week reversal and outsized decline into perspective. We will look at performance since the early September ROC shock, weigh the long-term evidence and compare the current setup with November 2016. Bank ETFs stood out this week as they bucked broad selling pressure and small-caps are holding up better than large-caps.
The S&P 500 SPDR shows a reversal in the making when we focus on the candlesticks the last four weeks, but the overall trend remains up and the Trend Breadth Models have yet to flip. The chart below shows SPY with a long white candlestick four weeks ago, two indecisive candlesticks and a long black candlestick this week. Despite the extra candlestick, these four clearly capture the essence
ETF Trends, Patterns and Setups – Leaders Revert Back to Laggards, Rising Correlations, Bonds and Gold Stuck Together
Last week I wrote about a possible changing of the guard, and Wednesday I had to rein in the bulls as small-caps and banks got cold feet. While the sudden change of heart over the last three days is not quite as dramatic as the rise from the ashes in late September, it is a warning shot across the bow for the stock market. Small-caps, mid-caps and banks are simply not performing that well this year.
Small-caps and banks went from potential leaders to potential failures over the past week. Basically, the markets got cold feet on the reflation/value trade and bailed the last two days. I do not know if this is just pre-election jitters, but there are a lot of BIG unknowns out there right now. These include the uneven rebound in stocks, election, covid,