Recent Posts from Chart Trader and System Trader:
SPY/QQQ Hold Up, MDY/IWM Draw Battle Lines, 6 Short-term Breakouts, 4 Pullback Setups, Breakouts in Semis
Report with video. The weight of the evidence remains bullish, but there are some sizable pockets of weakness within the market. SPY and QQQ are holding up, but RSP and IWM have yet to recover since their December declines. We draw the battle lines. The Industrials SPDR and Finance SPDR are in pullback mode and near Bullish Setup Zone. We also highlight several ETFs with short-term breakouts and bullish setups.
2024 Report Card, RO-Trader Shines, RO-Investor Starts Rough, ETF Strategy Maintains Edge
2024 was a good year, even though it finished with a drawdown in December. The rotation trader strategies put in solid performances, especially RO-Trader-SPX. The rotation investor strategies started off well in November, but took a hit in December as the market fell. Momentum rotation strategies follow the ebb
ETF Trend Momo Profit Target Strategy – Performance Updates
This report shows performance metrics for the ETF Trend, Momentum and Profit Target strategy trades 74 stock-based ETFs. Trading on a weekly basis, this strategy outperforms buy-and-hold for the S&P 500 with much lower drawdowns. The Composite Breadth Model kept drawdowns in check with timely exits ahead of bear markets. A strong Win Rate and solid gain/loss ratio produced a Profit Factor well above 2.
SPX and NDX Breadth Models – Chart Signals, Performance Metrics and Methodology
This report covers the SPX Breadth Model and NDX Breadth Model. As the names suggest, they provide market timing signals for their respective rotation strategies. We show recent signals on the charts, analyze the long-term performance metrics and provide a signal breakdown. This page concludes with an explanation of the models and several chart examples with breadth indicators.
Composite Breadth Model – Chart Signals, Performance Metrics and Methodology
Market timing is an integral part of any strategy that trades or invests in stocks. The Composite Breadth Model uses breadth indicator based on small-caps, mid-caps and large-caps. It is a broad-based breadth model that extends beyond large-caps and tech stocks. We start with the chart signals and then show the performance metrics. This page concludes with an explanation of the model and several chart examples.
Levels to Watch for Breadth Thrusts, Small-caps Fail at Breakout Attempt, Semiconductor ETFs Break Out
Today’s report will show the deterioration in long-term breadth and the key levels to watch for short-term breadth. We will then review the breakout in the 10-yr Yield and breakdown in the Home Construction ETF. Attention then turns to the key levels for SPY, QQQ and a number of important ETFs. We close with the breakouts in the semiconductor ETFs (SMH and SOXX).
Rotation Investor Nasdaq 100 – Performance Updates
The table below shows performance metrics for the Rotation Investor Nasdaq 100 Strategy (RO-Investor-NDX) and $NDX buy-and-hold. The strategy handily outperforms buy-and-hold (+19.93% vs 14.67%), and the strategy’s Maximum Drawdown (-20.83%) is less than half that of buy-and-hold (-53.60%). The Average Drawdown was also significantly lower (-20.28% vs -31.5%).
Rotation Investor S&P 500 – Performance Updates
The table below shows performance metrics for the S&P 500 Rotation Trader Strategy and $SPX buy-and-hold. The strategy outperformed buy-and-hold with a significantly higher Compound Annual Return (CAR): +14.57% vs +8.91% (green shading). Just as important, the strategy’s Maximum Drawdown (-18.91%) is around a third that of buy-and-hold (-56.59%) and the Average Drawdown is in the -16% range (blue shading). Clearly, risk (drawdown) is being appropriately rewarded (return).
Rotation Trader Nasdaq 100 – Performance Updates
Our Dual Momentum Rotation Strategies are performing well in the first five months of the year. After big gains in January-February, the market softened in March-April, especially Nasdaq 100 stocks. The Nasdaq 100 strategy went into drawdown, while the S&P 500 treaded water.
Rotation Trader S&P 500 – Performance Updates
The Rotation Trader strategy trading S&P 500 stocks outperforms buy-and-hold by a wide margin and does so with much lower drawdowns. This page shows performance metrics that include the Compound Annual Return, Average Drawdown, Win Rate and Profit Factor. We include charts for the equity curve, annual returns and drawdowns, as well as a breakdown of monthly returns since 2003.
How to Trade Erratic Uptrends – An Example and Setup using IWM
The Russell 2000 ETF managed a double digit gain in 2024, but did it the hard way with several deep pullbacks along the way. Pullbacks within uptrends are opportunities and we can find such opportunities using %B. The chart below shows the Russell 2000 ETF (IWM) with the Zigzag(8) indicator. This indicator changes direction when there is a move greater than 8%, which means it ignores price moves that are less than 8%.
Video – Breadth Stays Oversold, Large-caps and Techs Lead, Small and Mids Lag, Lots of Pullbacks within Bigger Uptrends
Today’s video starts with the long-term breadth indicators to establish the market regime. Short-term breadth became oversold and remains oversold after a weak bounce. We will set the level needed for a bullish thrust. Large-caps and techs are leading, while mid-caps and small-caps feel the heat from rising rates. A rough December produced pullbacks and many ETFs are trading in bullish setup zones. We cover these and identify short-term resistance going forward.
A Rough December, Pullbacks within Uptrends, Marking Setup Zones and Resistance, Gold, Bitcoin and China
Today’s report starts with average stocks (equal-weight, mid-caps and small-caps). These groups fell rather sharply in December and gave back their November gains. They have fallen and cannot get back up. Many are trading near bullish setups zones, but remain short of breakouts needed to reverse the short-term pullbacks. We will set the key levels to watch for a dozen ETFs with setups. Attention then turns to gold, Bitcoin and China.
Warning Signs vs Weight of the Evidence, Oversold Double Dip, Leading Tech, SMH Holds Triangle Breakout
Some warning signs appeared in December, but the weight of the evidence remains bullish. We will start with the long-term breadth indicators and then show the oversold conditions in the short-term breadth indicators. SPY and QQQ are still in long-term uptrends and testing their 50-day SMAs. Meanwhile, tech-related ETFs are leading as SMH holds its 200-day SMA.
Is this Bounce a Robust Rebound or a Dead-Cat Bounce?
Breadth became oversold last week and stocks rebounded this week. Is this a robust rebound or a dead cat bounce? Today’s report will show a key short-term breadth indicator hitting its lowest level in 2024 and becoming oversold. A rebound is in place, but it is still to early to call this a robust rebound and we will show the critical level to watch.
Weighing Breadth, Yield Spreads and Trends, Warning Signs, Corrections, Breadth for Short-term Signals
Today’s report will highlight the warning signs over the last few weeks and assess the evidence (bull or bear market). Corrections are normal, but what might a normal correction entail? We will review the long-term breadth indicators, yield spreads and the weekly charts for SPY and QQQ, including correction targets. This report ends with two short-term breadth indicators to watch for a bullish signal.
Three Big Negatives Overshadow the Uptrends in SPY and QQQ
SPY and QQQ remain in long-term uptrends, but three big negatives are hanging over the stock market right now. Two negatives are tied to important cyclical groups and the third is reminiscent of summer 2022. This report will analyze the recent breakdown in housing, continued weakness in semiconductors and the big breakout in the 10-yr Treasury Yield.
10-yr Yield Breads 40-wk, Similarities with Summer 2022, SPX Becomes Oversold, What to Watch Now
The 10-yr Treasury Yield surged before, and after, the Fed statement. While interest rates are not the only factor affecting stocks, they are the focus right now and we will cover the relationship. S&P 500 stocks are oversold after a 3-week decline and these conditions could lead to a bounce. We will show how to distinguish between a strong bounce and a dead-cat bounce.
Video – Breadth, Yield Spreads, TLT, GLD, BTC, SPY, QQQ, MAGS, ITB, KBE, ITA, LIT, FXI and Follow Up for 14 Stocks
Today’s video starts with the deterioration in short-term breadth. Even so, long-term breadth remains net bullish and yield spreads narrow. We then address the surge in the 10-yr yields, weakness in small-caps and the break down in Home Construction ETF. There are setups in the Bank and Defense ETFs, while the Lithium and China ETFs fell back into their consolidations. We close with follow up on fourteen recently featured stocks.
Stocks Pullback, Yields Surge, Housing Hit, QQQ Leads, A Setup in Defense, Two Bullish Cloud Stocks
Today’s report starts with an overview of short-term break (weak) and long-term breadth (still bullish). QQQ is leading with a new high, but small-caps breadth is holding up as IJR forms a bullish wedge. We then look at the housing failure, weakness in hard assets, a wedge in gold, a bullish setup in a defense ETF and two cloud stocks with bullish charts.
Beginning in the Midst of a Bull Run and Dealing with Drawdowns
Not all pullbacks result in long-term trend changes and not all drawdowns lead to bear markets. The odds favor the bulls as long as the bull market signal is valid and drawdowns provide opportunities during bull markets. Today’s report will analyze the drawdowns in the Rotation Investor strategies. We will show the Maximum Drawdown, Median Drawdown and a drawdown range for putting money to work.
Revisiting Overbought Filters for Rotation Strategies – Can we Improve Performance with a Tweak?
Momentum-Rotation strategies get their edge from upward momentum. More often than not, this means there will be entry signals for stocks that seem overbought. Not all overbought stocks continue higher and some correct hard after becoming overbought. Can we improve performance by avoiding stocks that are extremely overbought? Today’s report will discuss the recency bias, show some overbought examples and puts an overbought filter to the test.
A Leader in Medical Devices, NVDA Stalls above Breakout, SMH Holds Support, CIBR and 3 Stocks
Today’s report covers a leading stock in the Medical Devices ETF (IHI), which is the strongest group with the Healthcare sector. We then analyze NVDA as it consolidates above the October breakout and shows the SMH chart. Attention then turns to the Cybersecurity group with three stocks forming short-term consolidations.
Video – Breadth, Yield Spreads, SPY, QQQ, IWM, XLV, XLP, CLOU, CIBR, SOXX, SMH, ITB, XHB, LIT, GLD, SLV and Eight Stocks
Today’s video starts with long-term breadth, yield spreads and the major index ETFs to define the broad market environment. We then focus on short-term weakness and the pullbacks in RSP, IWM and MDY. Some tech ETFs are very extended and a key group continues to lag. Housing ETFs are testing support, while gold and silver hold their breakouts. We finish with follow up for eight stocks.