Is the market poised for another rotation? I posed this question last Friday with analysis of the 10-yr Treasury yield, which fell sharply from mid May to mid July (1.7 to 1.2 percent). During this time, SPY continued its grind higher and tech-related ETFs surged with double digit advances.
The rodeo is in town as the S&P 500 SPDR fell 2.25% on Friday-Monday and surged 2.25% on Tuesday-Wednesday. Despite the same percentage moves, a 2.25% advance is not enough to completely erase a 2.25% decline and SPY remains below last Thursday’s close. The gray lines on the chart below show when a two-day 2% advance follows a two-day
SPY remains in a steady uptrend, QQQ is leading with a surge to new highs and the S&P SmallCap 600 SPDR (IJR) remains stuck in a consolidation. The deterioration in breadth is affecting mid-caps and small-caps, but not large-cap tech driven ETFs, such as SPY and QQQ. Small-caps, however, got a big bounce on Friday. I am not quite ready to call for a small-cap revival, but I am watching
Today we start with an up and coming industry group ETF (cannabis) and then turn to some commodity-related ETFs. Gold and silver were clobbered in June, but both are firming in potential reversals zones and warrant a watch going forward. The timber and copper ETFs were hit hard, but they are quite oversold within bigger …
The overall picture is bullish for stocks, but there are some “less strong” pockets. Large-caps are leading with SPY and QQQ hitting new highs in late June. Meanwhile, the Russell 2000 ETF remains below its March high, the S&P MidCap 400 SPDR peaked in late April and the S&P 500 EW ETF has been stuck in a triangle since mid May. The market is not firing on all cylinders, but the BIG cylinders are firing and this is why large-caps are leading.
Today’s commentary starts with Treasury yields by highlighting the divergence between short-term and long-term yields. We then look at the yield curve and its correlation with the Regional Bank ETF. Even though KRE has underperformed the last three months, it became quite oversold last week and got a bounce. We then turn to the breakout in the
Among the ETFs, there are still several holding above their breakouts and near new highs (Energy, 5G, Autos, Defense). These are still the leaders. We are, however, seeing a lot of short-term breakouts fail (Industrials, Materials, Metals, Agriculture). In addition, a few key groups are seriously underperforming
There is nothing like a Fed meeting to shake up the market. Thus, I am going to cover the intermarket ETFs a day early because there are some reversals and patterns we should be aware of. There appears to be a change in thinking at the Fed and the Fed is still the elephant in the room when it comes to
There are still plenty of short-term setups out there. These include one to three week pennants, flags and falling wedges. There were even some short-term breakout attempts in late May and early June. Several of these breakouts are under pressure as prices fell back. A short-term consolidation within an uptrend is typically a bullish continuation pattern, but
May was a volatile month for SPY with five swings of two percent or more, but the month ended slightly positive after a 3% upswing the last eight trading days. May is finished and now we head to June, which has a slightly negative seasonal bias. We will look at this seasonal pattern in today’s video and put the current
There is a rotational or rolling correction underway in the stock market. Tech-related ETFs and high flyers peaked in mid February and corrected into May. During this period, the old economy ETFs picked up the slack and moved to new highs (industrials, materials, steel, copper, energy, banking, housing).
This commentary will look at oil, gold, silver, bonds and the Dollar. I am sure that there are some intermarket narratives at work here, but I will try to stick with the price charts for a pure assessment. Oil is backing off of a massive resistance zone. Gold broke above the 200-day SMA as it extended its run and silver is challenging
The ETF universe is also split. We are still seeing plenty of strength in the old economy ETFs as several recorded new highs in May. The highest of the high flyers remain weak with ETFs related to clean energy, cannabis, cloud, ARK and biotech forging lower lows here in May (below their March lows). Most eyes are on some tech-related ETFs
A benchmark high/low is a price peak/trough that we can use to compare performance. ETFs that break above benchmark highs, such as the mid March highs, show relative strength. ETFs that fail to exceed these highs show relative weakness. ETFs that break below benchmark lows, such as the late April lows, show relative weakness. ETFs that hold these lows show relative strength.
Old economy ETFs continue to lead. ETFs related to industrials, materials, metals, housing and finance hit new highs. These ETFs were already in uptrends and they were simply extending on their breakouts, which occurred in March or April. Even though they are leading and in strong uptrends, many are getting quite extended and ripe for a rest. This means they are in the trend-monitoring phase.
The stock market has been churning the last few weeks with indecisive price action producing a fair number of whipsaws and head fakes. The old school ETFs associated with industrials, materials, REITs, housing, steel, metals and agriculture continue to lead. The high-beta high-flyers of 2020 continue to lag and many did not even make it back above