Timing Models – Triple Shock Thursday, the Secular Downtrend in Oil, Tech Sector Continues to Lag (Premium)

Trend/Signal Summary

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.

Overall, SPY and IWM have been moving higher since late October and sport some pretty obscene gains, 20% and 47%, respectively. These gains accrued in less than five months and without much of a correction. The longest pullback was just two weeks. Stocks are overdue for a corrective period and this week’s triple shock could be the catalyst.

Trend/Signal Summary

  • SPY: long-term uptrend and short-term uptrend.
  • QQQ: long-term uptrend and short-term uptrend (shaky).
  • 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).
  • XLK is a Lagging Sector in 2021.
  • An Outsized Decline at Resistance for Oil.
  • The Fed Balance sheet expanded quite a bit this week.
  • Yield spreads slightly widened, but remain narrow overall.

Oil Gets Hit as GLD and TLT Diverge

SPY Leads with most Recent New High

Short-term Breakout Under Threat for QQQ

Composite Breadth Model: Bull Market

The Composite Breadth Model defines the market regime and remains in bull market mode with all five inputs bullish.

Declines and consolidations are considered corrections within the bigger uptrend as long as the Composite Breadth Model is net bullish. Note that this model is designed to absorb corrections and not turn bearish until the weight of the evidence is bearish.

Model and indicator charts can be found on the Market Regime page. These include the S&P 500 Thrust Model, S&P 1500 Thrust Model, S&P 500 Trend Model and S&P 1500 Trend Model.

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

Tech Lags as XLU and XLP Surge

Oil hit with Outsized Decline at Resistance

Yield Spreads and Fed Balance Sheet

Thanks for tuning in and have a great day!

-Arthur Hill, CMT
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