The bulk of the evidence remains bullish for stocks, but some yellow flags are starting to appear. Yellow flags argue for some caution and are not outright bearish. For example, defensive sectors are leading, but the offensive sectors are still holding up, even though they are lagging. Small-caps are
Large-caps and large-cap techs ripped higher the last five-six weeks with SPY and QQQ hitting new highs. The Technology SPDR and Consumer Discretionary SPDR are leading the charge among the sectors with 13+ percent gains. Keep in mind that Amazon accounts for 23.5% of XLY and Tesla accounts for 14.45%. These two are not exactly pure plays in the
The S&P 500 SPDR hit a new high to affirm the bull market and seven sector SPDRs joined the new high parade (XLK, XLY, XLC, XLI, XLB, XLRE, XLP). The Finance SPDR (XLF) and Healthcare SPDR (XLV) are within 2% of 52-week highs. Strength within the S&P 500 is broad and supportive of a bull market. Today’s report will show QQQ close to a new high and IWM struggling, but still bullish. Technology and Consumer Discretionary
The S&P 500 SPDR hit a new high to affirm the bull market and three sectors confirmed this new high. The Consumer Staples SPDR, Materials SPDR and Industrials SPDR recorded new highs at some point this week. Even though the other big sectors did not hit new highs this week, they are in uptrends and within three percent of new highs. These include the Technology SPDR
The market regime remains bullish, but we are seeing corrective price action over the last few months. The Nasdaq 100 ETF started it all off with a sharp decline from mid February to early March. IWM got involved this week with its biggest fourth decline greater than 9% since March 2020. SPY has largely avoided the correction fray and remains the strongest of the big three.
We finally got a bit of a shake up this week as oil fell sharply on Thursday. We also saw big declines in the Nasdaq 100 ETF and Russell 2000 ETF. It was basically triple shock Thursday with small-caps, large-techs and oil getting hit hard. Tech and growth related ETFs were also hit hard as money moved out of the high-beta end of the market.
SPY and IWM recorded new highs this week and continue to lead the broader market. Even though QQQ and XLK are underperforming this year, the old school sectors held strong and propped up SPY. After short pullbacks into early March, stocks caught a bid this week and we are seeing flag breakouts in
The long-term evidence remains bullish, but the major index ETFs have moved into corrective mode of varying degrees. The S&P 500 SPDR and Russell 2000 ETF are in the midst of shallow pullbacks, while the Nasdaq 100 ETF is leading the way lower with a sharp pullback. Downside participation was so strong in the Nasdaq 100 that the Breadth Thrust
There are Black Swan events and then there are BLACK SWAN events. The current decline, 12% in six days, ranks as one of the sharpest on record. Not counting 1929, the sharpest decline on record is the crash in October 1987, when the S&P 500 fell some 28% in 4 days.
As technical analysts and chartists, we study historical prices and patterns to get an idea of what to expect going forward. No two patterns are exactly the same, but they often rhyme with a few common characteristics.
There are plenty of cautionary tales to go around, and yet the new high parade continued this week. This is why process, price action and signals are so important. I can find plenty of reasons for caution and these were highlighted over the last few weeks.
The principle of confirmation stems from classic Dow Theory, which used the Dow Industrials and Dow Transports to confirm price movements. The bull market was in good shape as long as both recorded higher highs by exceeding their prior peaks.
The S&P 500 SPDR and Nasdaq 100 ETF led the market by surging to new highs. After a bashing at the end of January, these two came roaring out of the gates and answered with big moves in the first week of February. As the chart below shows, SPY held its early January low during the dip and showed relative strength in late January (less weakness).
The bears fired their first shot across the bow this week with sharp declines on Friday and Monday. The bulls were not in the mood to allow even a modest pullback and quickly stepped back into the market. Short-term, an oversold bounce after a 2.5% decline (Friday-Monday) is pretty normal stuff and does not change my overall thesis.
The S&P 500 SPDR is up 3% in three weeks (January) and trading near an all time high. Furthermore, the ETF is up 14.5% since August and 9.9% since October. These are big moves in relatively short timeframes, no matter how you slice it.
Stocks have been ripe for a rest or correction for weeks, and yet the current advance continues to broaden and buying pressure continues to outpace selling pressure. We already know that SPY and QQQ are hitting new highs and leading.
Stocks turned a bit mixed the last two weeks, but the bulk of the evidence remains bullish, both long-term and short-term. Looking at the five biggest equal-weight sectors, we saw new highs in the EW Technology ETF (RYT), EW Industrials ETF (RGI) and EW Healthcare ETF (RYH) this week. Technology led in 2019 and continues to lead in 2020.
It’s just the second trading day of 2020 and already the markets are setting up for a test. Stock futures are sharply lower as the S&P 500 looks set to open down around 1%. Gold, the Dollar and Treasury bonds are sharply higher as money looks for alternatives. A sharp decline in the S&P 500 could reverse the short-term uptrend and herald the much awaited correction.
There is not much change in the broad market picture. The S&P 500 SPDR hit a new high again this week and extended its uptrend. The long-term trend has been up since February and SPY has been on a tear since early October. Barring a 2.22 point decline today (Friday), the S&P 500 SPDR is set to close higher for 11 of the last 12 weeks. It is an extraordinary run (+9.71% since early October), and shows no signs of slowing.
Today’s report will focus on the S&P 500, the current advance and a future scenario. I am focused on the S&P 500, and SPY by extension, because this index is the driving force in the stock market. It accounts for some 80% of the US equity market and is the most widely followed benchmark for US stocks. Small-caps and mid-caps are more likely to follow the S&P 500, not the other way around.
The major index ETFs extended their breakouts as the bullish forces, which were highlighted last week, dominate heading into year end. Three of three technical forces remain bullish. Two of the three “other” forces turned from rumor to news this week.
Even though I mentioned these fundamental forces last week, the technical forces are what really drive my market stance.