Broad Selling Pressure, but Not Enough to Tip the Scales

There are 11 sectors in the S&P 500, but the big six are the only ones we need to be concerned with when making a broad market assessment. The big six account for a whopping 82.5% of the S&P 500, which leaves the other 5 with just 17.5%. Consumer Staples is the seventh

The S&P 500 SPDR (SPY) gapped up on Monday and broke out of a classic correction pattern. The breakout is bullish, but the coast is not entirely clear. Here’s what to watch going forward.

The S&P 500 SPDR is down around 6% this month and QQQ is down around 8%. These two hit new highs on September 2nd, plunged the next three trading days and then worked their way lower. Both are below their 50-day moving averages for the first time since April.

Chartists are often faced with a choice: wait for the breakout or anticipate using a mean-reversion setup. The Metals & Mining SPDR (XME) broke out of a bullish consolidation this week and the breakout signals a continuation of its long-term uptrend. Chartists keying off the mean-reversion setup could have anticipated the breakout and gotten the early jump. Let’s investigate.

There are fewer silver crosses in the major stock indexes and this shows less participation during the last leg higher. A silver cross occurs when the 20-day EMA crosses above the 50-day EMA. DecisionPoint took this concept on step further and developed breadth indicators based on the percentage of stocks with silver crosses. This is a great way to look under the hood and aggregate medium-term trend performance for each index. The chart below shows this indicator for four key indexes: $NDX, $SPX, $MID and $SML. I set the bullish and bearish thresholds at

The S&P 500 SPDR (SPY) fell over 2% this week for the biggest weekly decline since June. The long-term trend is still up because SPY remains well above the rising 40-week SMA. However, a big Spinning Top candlestick formed last week and a volatility indicator ticked higher. Spinning Tops signal indecision that

Verizon (VZ) participated in the first leg up from late March to mid April, but then stumbled with a decline into mid June. This stumble, however, looks like a classic correction and the stock broke out with a strong move over the last six weeks. In addition, the TIP Trend Composite, which aggregates five trend-following indicators turned positive in early August. Let’s investigate further.

The total number of new highs in the S&P 500, S&P MidCap 400 and S&P SmallCap 600 continues to underwhelm. Even so, new highs are still outpacing new lows and this is enough to keep the uptrend since late March going. The first chart shows new highs and lows for the three indexes with horizontal lines at the 10% level (e. g. 50 and -50 for the S&P 500).

The Healthcare SPDR (XLV) is one of the strongest sectors in 2020. Even though it does not sport the biggest gain, XLV recorded a new high in July and some 80% of its components are above their 200-day EMAs. The new high points to a long-term uptrend and upside leadership, while the percentage of stocks above the 200-day EMA points to broad strength within the sector. Sector SPDRs, however, are only as strong as the sum of their parts (component stocks).

There were a number of Bollinger Band squeeze plays over the last two weeks and also a number of breakouts. These breakouts are bullish until proven otherwise, but chartists should also be aware of the head fake. In his book, Bollinger on Bollinger Bands, here’s how John Bollinger puts it: Traders beware! There is a trick to The Squeeze, an odd turning of the wheel that you need to be aware of, the head fake.

The 200-day SMA is a long-term trend indicator that chartists can use across the equal-weight sectors to measure the balance of power in the broader market. The more sectors trading above their 200-day SMAs, the more bullish the market. The more sectors trading below their 200-day SMAs, the more bearish the market.

The 20+ Yr Treasury Bond ETF (TLT) retreated as stocks advanced from mid April to early June and then popped as stocks dropped this week. Bonds are the natural alternative to stocks and TLT appears to be forming a classic bullish continuation pattern.

The S&P 500 is the most widely used benchmark for the US stock market and the 200-day SMA is perhaps the most widely used moving average. These two came together again in late May as the index crossed back above on May 27th. Today we quantify the performance of prior signals and show how a little smoothing can go a long way. Furthermore, a simple market timing mechanism can tell investors when to add risk and when to seek alternatives to stocks.

We all know that many stocks in the Nasdaq 100 ETF (QQQ) are also part of the S&P 500 SPDR (SPY). In addition, it is clear that these QQQ stocks affect the performance of SPY. But how much exactly? Today we will answer that question and compare performance for these two ETFs.

The Bullish Percent Index is a breadth indicator that quantifies double top breakouts and double bottom breakdowns, Point & Figure style. Basically, this indicator measures higher highs (breakouts) versus lower lows (breakdowns). This makes it a great candidate to quantify underlying strength and weakness in the S&P 500. There have been three signals in the last few months and one triggered this week.

When it comes to analysis and trading signals, seasonality is behind price action in the pecking order of importance. In general, seasonal patterns carry most weight when they jibe with the underlying trend. For example, bullish seasonal patterns in an uptrend can provide a tailwind.

The two most popular biotech ETFs are leading the market this month and making big statements. Before looking at these two, note that they are quite different. The Biotech ETF (IBB) is dominated by large-cap biotechs with the top ten holdings accounting for over 50%. The Biotech SPDR (XBI), on the other hand, is a broad-based ETF with the top ten holdings accounting for less than 25% of the ETF.

The S&P 500 went from a historic decline to a historic bounce to an above average drop. This key benchmark fell 33.9% in 23 days, surged 17.55% in three days and then dropped 5.25% the last four days.

Chartists looking to measure relative performance based on retracements can use the Stochastic Oscillator to quantify these bounces. Way back on March 1st, I posted an article to show how Chartists can quantify downside retracements using Williams %R.

While the price of an index reflects what is happening on the outside, breadth indicators show us what is happening on the inside, and we all know that inside information can provide an edge. Since we are all not Senators, we must use charts to find that edge