Bullish Consolidations Form, Banks Perk Up, Yields Spreads Narrow and Fed Balance Sheet hits New High

There is some curious activity in the intermarket arena. Namely, we are seeing continued weakness in Treasury bonds, relative strength in inflation-indexed bonds, weakness in the Dollar and strength in several commodity groups. I do not trade off intermarket relationships, but I do trade specific patterns and there are several commodity related ETFs with bullish breakouts working. Today’s commentary will focus on the DB commodity ETFs:

Today’s video starts with a review and outlook for the broader market. SPY formed a weekly spinning top to show indecision, but the falling wedge breakouts and follow through still dominate the charts. Small-caps are making a bid to outperform as a key ratio broke above its 200-day for the first time in two years. The rally continues to broaden with two more bullish breadth thrusts. Many ETFs are in the trend monitoring phase

Today we will start with small-caps, industrials and banks, because these three could be turning the corner. The IWM:SPY ratio moved above its 40-week SMA for the first time in 2 years, XLI is above the 200-day and KRE rose from the ashes the last four weeks. GLD may be parting ways with TLT and hooking up with SPY again. The breadth models remain bullish and there were two new signals in the short-term breadth models. The sector breadth model also remains firmly bullish with the newest signals coming

Today’s video starts with a broad market overview by looking at the long-term trends in SPY and QQQ, as well as the recent resurgence in small-caps and mid-caps. We then turn to the bullish breadth models and point out the breadth thrusts seen this past week, as well as the expansion in new highs. Within the ETF chart book, the setups in SPY and QQQ started from a position of strength, but the market leading gains in IWM and MDY started from a position of weakness (ditto for KRE and KBE).

Stocks surged the last two weeks with a new group of leaders. Mid-caps, small-caps, banks and utilities led the charge. Large-caps and tech stocks lagged, but they still gained and remain bullish overall. The period from late May and early June was the last time we saw small-caps and banks take the lead. After a 15% advance in SPY and 25% surge in IWM, stocks rested from June 8th to July 9th with consolidations.

Today’s post starts with trend-following and insights from a recent podcast featuring Nick Radge. I then analyze the benefits and drawbacks of using a market trend filter for a broad-based ETF strategy. And finally, I review the short-term breadth model, which was developed in response to the March-April surge.

Today’s video starts with a revisit to the ROC shock and the rationale behind the call for an extended corrective period, which would be quite normal. We will consider how long this correction might last, the path it might take and what would suggest that this is more than just a correction. The index and sector breadth models remain bullish overall, despite a few individual bearish signals. Utes and REITs

The long-term trend is up for the S&P 500 and Nasdaq 100, but questionable for the S&P SmallCap 600 and S&P MidCap 400. Small-caps and mid-caps are largely off my radar right now. Despite long-term uptrends and bullish evidence for large-caps, I remain in the correction camp for three reasons. First, SPY and QQQ became extremely extended in early September, as measured by

Today’s video starts with the broad market charts as SPY formed a weekly spinning top and QQQ formed a piercing pattern. Even though the ROC Shock reversal earlier this month remains the dominant chart feature, falling wedges are taking shape and breakouts from these corrective patterns would be short-term bullish. The Nasdaq 100 is holding up the best and its short-term breadth indicators are oversold. In addition, we are also seeing relative strength in several tech-related ETFs

SPY and QQQ fell in September and are in short-term downtrends, which are considered corrections within a bigger uptrend. The S&P SmallCap 600 SPDR and S&P MidCap 400 SPDR also fell in September, but these declines do not look like mere corrections within a bigger uptrend. MDY, IJR and IWM fell well short of their January-February highs and broke their downward sloping 200-day SMAs. These three look like they are reversing the uptrends that began with the March blast off.

This is a midweek update to address Monday’s price action and its effect on the breadth indicators and models. At this stage, there was only one new signal: %Above 200-day for $MID broke below 45%. Nine of the ten breadth models remain bullish, but we saw more deterioration in the breadth indicators on Monday. Selling pressure was the strongest un small-caps and mid-caps over the last five weeks (since August 15th).

This is a midweek update to address Monday’s price action in some of the ETFs in the core chart list. We saw a continuation lower in SPY and QQQ, but some of the tech-related ETFs held up relatively well. ETFs that held up relatively well during broad selling pressure are often the ones that lead on any bounce, even if it is just an oversold bounce. Elsewhere

Today’s video starts with the S&P 500 and the reversal seen over the last few weeks. We look at the spinning top, the outside week, downside follow through and the ROC shock. With a reversal in play, I put forth a correction target for the S&P 500 SPDR and this serves as the base case for the broader stock market (a correction within a bigger uptrend).

The medium-term indicators and breadth models are still bullish, but the ROC Shock in early September and some waning breadth indicators argue for at least a correction of the March-September advance. I covered the ROC Shock in detail last week and will review the findings. First, keep in mind that the character of the market (SPY) changed in January 2018 as the swings became bigger and 52-week lows were interspersed with 52-week highs. Big swings and volatility are the order of the day for now.