Recent Commentary and Analysis
Trend Composite Strategy (Part 1) – Understanding the Individual Indicators, Aggregating Signals, Reducing Whipsaws, Catching Trends
This is the first article in a new strategy series that will extend over the next several weeks. We will start by defining the Trend Composite indicator and then work our way towards a systematic trading strategy. The strategy is based on signals from the Trend Composite.
Weekend Video – More Downtrends than Uptrends, Oversold with Excessive Bearish Sentiment, Commodity ETFs Lead (Premium)
January was a rough month for stocks so far as QQQ fell 11.6% and IWM fell 12.2%. SPY and the S&P 500 EW ETF (RSP) held up much better with declines of around 6%. Again, we are seeing more weakness in mid-caps, small-caps
Mkt/ETF Commentary – CBM Turns Bearish as Market becomes Oversold, Commodity ETFs Hold Up, Downtrend Signals Expand (Premium)
There were lots of downtrend signals this past week and over the past month. Selling pressure expanded and broadening participation on the downside was enough to push the Composite Breadth Model back into bear market mode. Note that I will update the Market Regime page on Friday morning. For now, the pickings are slim among the equity-related ETFs
Market Commentary – Value Sectors Hold Up, Quantifying Reversal Days, SPY Trend Signal and Oversold Condition (Premium)
The Composite Breadth Model has yet to trigger bearish as stocks recovered on Monday and closed strong. Despite this reversal, the technical damage has already been done to several big sectors and key industry group ETFs. Even so, the S&P 500 EW ETF (RSP) managed to hold its
The Nasdaq 100 ETF (QQQ) reversed its uptrend signal from April 17th, 2020 as two trend-following indicators turned bearish this week. The chart below shows QQQ with the deepest decline from a high since the 10.9% decline in
Weekend Video – Downside Participation Expands, 8 Sectors Hold Up, 3 Break Down, Commodity ETFs Lead Market (Premium)
The S&P 500 fell 5.75% this week and this as the biggest weekly decline since March 2020 (covid crash). It was the second biggest weekly decline since October 2020 (5.6%). Declines like this are normally associated with a selling climax that could give way to a short-term oversold bounce. Longer-term, however,
Mkt/ETF Commentary – Oversold Conditions Surface, RSP Holds Up, Housing and Semis Break December Lows (Premium)
Stocks continued their recent ways with small-caps (IWM) and high-beta tech stocks (QQQJ) leading the way lower in January. IWM is down around 8% year-to-date and QQQJ is down around 11%. The year is starting just how it ended: growth and high beta remain out
Mkt/ETF Commentary – Normalizing in 2022, Pockets of Weakness, Staples, Energy and Finance Lead, December Breakouts to Watch (Premium)
Last Tuesday, I wrote about the transition phase currently underway in the markets. Actually, there are a number of transitions underway and perhaps they are linked. While I do not like to dive deep into the fundamentals, the macro backdrop for 2022 is looking very different from 2020 to 2021.
The DB Agriculture ETF (DBA) was featured in ChartWatchers on October 1st as it formed a large cup-with-handle pattern, which is a bullish continuation pattern
Weekend Video – Market Remains Bullish and Mixed, Banks, Energy, Materials and Infrastructure Lead, Tech and High Beta Lag (Premium)
The weight of the evidence is bullish for the broader market, but there are some sizable pockets of weakness, as seen when looking at the percentage of stocks above the 200-day SMA for the various indexes. Yield spreads show no signs of stress and the Fed Balance sheet is
Mkt/ETF Commentary – Transition Phase, Banks and Energy Lead, EVs and Copper Hold Breakouts, URA Firms at Key Retracement (Premium)
The transition process is difficult and the markets are undergoing a transition from a covid-driven economy to a normal economy. A covid economy implies Fed easing, fiscal stimulus and falling Treasury yields. A normal economy means no more balance sheet expansion, no more fiscal stimulus and a normalization of Treasury yields.
In an ideal world, trends would be consistent and persist for months. An ideal uptrend would march higher by consistently recording higher highs and higher lows. Once reversed, a downtrend would take over and work its way lower with lower lows and lower highs. There are plenty of chart examples for these consistence and persistent trends.
Setting expectations is part of a strategy and this includes expectations for the number of signals we can expect in any given year. Signal frequency, of course, depends on your strategy and timeframe. Short-term mean-reversion
Weekend Video – Defensive ETFs Lead, Banks and Energy Extend on Breakout, 10-yr Yield Breaks Out, Tech ETFs Break Prior Lows (Premium)
The stock market is as mixed as it ever with defensive issues leading, banks and energy breaking out, materials and infrastructure holding up and tech stocks taking it on the chin. Healthcare ETFs were also hit quite hard this week. Six of the magnificent seven (stocks) are under pressure and this is weighing on cap-weighed SPY and QQQ.
Mkt/ETF Commentary – Techs Weigh, Defensive Groups Lead, TLT Breaks Down, XLE Hits New High, URA Sets Up (Premium)
Stocks were rattled on Wednesday with Technology, Communication Services and Consumer Discretionary leading the way lower. As noted on Tuesday, the magnificent seven dominate these three sectors. Selling pressure was not limited to tech as REITs, Biotechs, Airlines and