Systematic Trading Strategies and Next Level Trading Setups
Complimentary Analysis
The Finance sector is leading the market with a new high this week and the Bank SPDR (KBE) is extending on its breakout. Today’s report will outline the lessons of the early January setup and show the mid January breakout. We then show how to set a re-evaluation level that would prove the breakout wrong.
The Cybersecurity ETF (CIBR) has been leading the market for a solid four months and recorded yet another new high this week. Chartists looking to take advantage of this leadership can use two timeframes: one to establish the absolute and relative trends, and another to identify tradable pullbacks along the way. Note that CIBR has been on our radar for four months and was featured in October.
The Mag7 ETF (MAGS) formed another short-term bullish continuation pattern as it worked its way higher since the triangle breakout in mid September. This report will also analyze the long-term trends, highlight the short-term setups and compare performance for the seven component stocks.
Mid-caps show leadership and were the first to trigger a breadth thrust. Stocks surged this week with mid-caps showing the highest participation rate. Chartists can quantify the participation rate and identify breadth thrusts using the percentage of stocks above their 20-day SMAs. We will analyze these indicators for six broad indexes and show the breadth thrust for the S&P MidCap 400
The stock market is in pullback mode with the S&P 500 EW ETF down 5.15% over the past month and down 1% year-to-date. This makes it a good time to monitor relative performance and create a relative strength watch list. Stocks and ETFs holding up best during pullbacks often lead when the market regains its footing. Today’s report will show a starter list and analyze the chart for an AI Robotics ETF.
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%.
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.
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.
Chartists looking for stock setups can start with strong industry groups. The Fintech (FINX) is in a strong uptrend and leading, but looking extended short-term. While there is no setup currently, we can learn from past setups and apply these lessons to stocks within the group.
The 10-yr Treasury Yield plunged as Treasury bonds surged on the heels of a new nomination for Treasury secretary. These moves lifted small-caps, banks and homebuilders. Banks have been leading for some time and small-caps started their move last week. Homebuilders held out for interest rates and got their catalyst on Monday. Today’s report will analyze
Even though trading based on chart analysis involves some discretionary decisions, chartists can improve the odds of success by systematizing their process. This report will show four prerequisite filters based on a top-down approach. We will start with the broader market, look at the sector, and then apply two qualifying filters to the stock. First, I would make sure
The iShares Semiconductor ETF (SOXX) is lagging the VanEck Semiconductor ETF (SMH) as it broke the 200-day SMA and confirmed a bearish pattern. SMH is holding up because its top component remains strong. Nevertheless SMH is at a moment of truth ahead of a big earnings report from Nvidia.
There is only one way to trade in a long-term uptrend: long. Forget about picking tops and breaks below short-term moving averages. Leaning bearish within a long-term uptrend is not a profitable strategy. Instead, we should lean bullish and use oversold conditions to our advantage. In a long-term uptrend, I am only interested in
There are no magic bullets, but we can improve our trading edge by starting our selection process with two proven concepts: trend and momentum. These are perhaps the two most powerful forces in the market. The idea is relatively simple: stay on the right side of the trend and focus on the leaders. This is basically dual-momentum. Starting our process with these two steps
The Cybersecurity ETF (CIBR) is resuming the lead as it surged to new highs this past week. It is important to note that CIBR began its leadership role a lot earlier because it hit a new high in late August. Today’s report will analyze the recent breakout and suggest some possibilities in the future.
Any strategy that trades stocks needs some sort of market timing mechanism to identify bull and bear markets. Typically, stock strategies are fully invested during bull markets because risk is acceptable. Strategies move to cash
Extended trends often start with big bangs and major breakouts. Chartists can identify “big bang” moves by showing price change in ATR terms. We can use the price charts to identify big breakouts. Today’s example will show
The Home Construction ETF (ITB) is leading the market as it surged to a new closing high this week. While this high is certainly bullish and points to upside leadership, the real signal triggered back in early July as the Trend Composite turned bullish with an outsized move. Let’s review this signal and then look at a recent signal in
The 20+ Yr Treasury Bond ETF (TLT) is turning the corner as a long-term trend indicator turns bullish and price extends on a breakout. TLT is also starting to outperform the S&P 500 EW ETF (RSP), for the first time in a long time.
QQQ is leading the market lower and weighing on tech stocks. The long-term trend is up and oversold breadth could present an opportunity. Short-term breadth has yet to become oversold and this means we may have further downside first.
After a big run this year, Nvidia (NVDA) fell over 15% from its high and broke its 50-day SMA. On the face of it, a break below this “key” moving average seems like a short-term bearish signal. Such a view, however
Small-caps took the lead over the last two weeks with the S&P SmallCap 600 SPDR (IJR) surging over 10% in five days and hitting a new high. IJR also broke out of a long consolidation and this breakout is bullish. There are now three possibilities going forward
The Nasdaq 100 is a major driver in the stock market and Nasdaq 100 breadth indicators should be part of our broad market analysis routine. 84 Nasdaq 100 stocks (16.8%) are also in the S&P 500 and their weighting
The broader market is fairly mixed with one clear leader: technology. I am also seeing mixed performance within the technology sector and within specific groups. Semiconductors are strong overall, but groups like cybersecurity