Timing Models – Going for Short-term Breakouts, Split Market with Enough Strength, Composite Breadth Model (Premium)

Trend/Signal Summary

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 big three. We will focus on these breakouts because they hold the short-term key going forward. Long-term, the bulk of the evidence remains bullish and we are in a bull market.

Trend/Signal Summary

  • SPY: long-term uptrend and short-term uptrend.
  • QQQ: long-term uptrend and short-term uptrend.
  • IWM: long-term uptrend and short-term uptrend.
  • S&P 500: 5-day SMA crossed above 200-day on May 29th (uptrend).
  • Composite Breadth Model: bullish since May 29th (bull market)
  • Leading Sectors: XLF, XLC, XLI, XLE, XLB
  • Lagging Sectors: XLK, XLV, XLY, XLP, XLU
  • TLT and GLD are in strong downtrends.
  • The Fed Balance sheet expanded a little this week.
  • Yield spreads ticked up, but remain narrow overall.

Commodities, Bonds and Separate Ways

IWM Leads the Long-term Uptrend

Short-term Breakouts Across the Board

Old School Sectors and XLC Stand Out

Composite Breadth Model: Bull Market

Even though I analyze the weekly charts, follow yield spreads and am aware of the Fed balance sheet, the Composite Breadth Model (CBM) is the final arbiter when it comes to the broad market environment (bull market or bear market). As detailed in Wednesday’s commentary, this model aggregates the Trend and Thrust Breadth Models for the S&P 500 and S&P 1500, along with the long-term trend for the S&P 500. The Thrust Models are more reactive to ensure nimbleness, while the trend models capture the big trends and lag. The trend for the S&P 500 is added because this is the alpha index when it comes to the broad market.

The next charts show the S&P 500 Trend and Thrust Models with indicators.

You can learn more about the methodology and
historical performance for these breadth models in this article.

Yield Spreads and Fed Balance Sheet

Thanks for tuning in and have a great day!

-Arthur Hill, CMT
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