Tag Archives: Top Down

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2016 Triple Play Charts End of Year Review

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Those who follow my Triple Play Charts regularly on Stocktwits and Twitter know this as one of the momentum based trend gauges we use to guide us through the markets.  I post the same two charts every day which on one hand can get monotonous, but I feel the consistency keeps us updated on the ever changing view of the markets while also helping teach us the personality traits that can give clues in the future.  I wanted to do an end of year review.  In this exercise I take a look from the quarterly view using Index charts (since the ETFs don’t really go back far enough to use my indicators at this level) and methodically move down to the 65 minute chart that is part of the daily routine. Let’s get started.

(for those new to these charts you can learn more about them here and here)

Quarterly (Index)1-1-2017-9-10-42-am-tp-qrtly-index

This level is for a 50000 foot view or a very long term investor.  Don’t forget as we move down each time frame how much time each one devours to make a new candle.  This quarterly chart is made up of the $RUT $NDX and $SPY since the $IWM $QQQ $SPY ETFs don’t have enough history to complete the charts.  These cover the last 26 years of data give us a view of the long term uptrends we are seeing across all three at this point.  This uptrends started in 2009, but do not signal the start of this bull market in my opinion.  The recent consolidations on this chart I believe can serve as reset which means the new bull markets is less than 15 months old by most measures. The biggest detractor here is the $NDX ended the year with a d0ji with RSI elevated, but also firing a high level RSI Positive Reversal as this chart finally breaks above the 2000 highs.  Even elevated, the RSI Positive reversal  suggests the move might not be ready for a larger consolidation just yet.  The $SPX chart also shows an RSI over 70, but a new longer term CFG Positive Reversal fired there as well in 2016.  Finally, the $RUT is coming out of a long consolidation with a +20% drawdown or bear market and now has its own RSI (tighter) and CFG (longer term) Positive Reversals firing as it closed the year on a strong breakout.  RSI are elevated but still acting pretty strong and all CFGs are turning up without making it down to Oversold territory.

Monthly1-1-2017-9-06-45-am-tp-monthly

The Monthly ETF charts are all in RSI bull ranges and have been since late 2009 for $IWM $QQQ and late 2010 for $SPY.  We have seen a few deeper pullbacks along the way (especially in $IWM) but all in all the longer term RSI bull ranges have held very well and CFG getting to or near Oversold levels has serves as decent entries.  All of the RSIs have been trending higher since early 2016 and are just now moving back over 60 giving lots of room to move higher if they want it.  We even saw the $QQQ & $SPY hit the Nitrous Button closing the year with $IWM not far behind and trying to play catch up.  Divergences are potential here and would be a warning, but I believe it is too early to start that talk until they form a little better.  The biggest warning I see here is the waning CFG here before getting over the 100 level showing a loss of ST momentum into the end of the year, but the elections might have been a culprit there.  The Monthly RSI bull ranges are fully intact after being tested in early 2016 and now heading back higher over 60. Many will see this a sign of getting overbought, but a strong RSI can run for longer than most believe. The set up here remains one of strength with potential to continue higher.

Weekly1-1-2017-9-03-27-am-tp-weekly

The Weekly level is where things start to get a little more wiggly as larger black candles have began to show up.  $IWM & $SPY look fairly extend and could easily pull back some or flag a while longer without much if any damage to the higher time frames.  The RSI aren’t particularly Overbought, but are rolling over a little here. Interestingly the $IWM & SPY are also hitting the Nitrous here which always catches my eye. I want to see if these pullback remain muted and just flag from here.  $QQQ is in a little different spot just breaking out and now backtesting those previous highs with RSI finding some resistance at 60.  A successful backtest here could set the tone for all the major indexes in on this level. Weekly charts are starting to show signs of a reversal or consolidation, but too early to tell how it will materialize. I would cue on $QQQ & $IWM to dictate market direction in the early part of the year.

Daily12-30-2016-4-03-14-pm-tp-daily

The Daily view shows after consolidation most of December after the early surge with $QQQ struggling to hold the recent range break.  All three are still in RSI bull ranges.  $QQQ looks the weakest, but if it can reverse with RSI remaining above 40 and without turning down the MA bands it will be a good sign.  $IWM $SPY still have a good ways to go to test RSI 40, but they don’t have to get all the way there, a reversal at 50 is fine and might be all we see with almost 3 weeks of sideways to down action behind us here. One thing I do like seeing is the faster CFG getting close to Oversold levels without seen a lot of damage to the RSI. if the CFG can reverse form Oversold before the RSI break their bull ranges (40) then it can often lead to a nice move higher to continue the trend.  A reversal of trend can strike at any time, but all with all the higher time frames still in RSI bull ranges, we are watching to see if the daily charts can hold their respective RSI bull ranges on this consolidation.  If so, the trend can continue higher sooner than later, but if they fail we can move a little more cautious and wait for them to set back up and align themselves again.  The 1st tell her is likely the $QQQ since it is already pressing down on some important levels to start the year.

65 minute12-30-2016-4-07-27-pm-tp-65min

The 65 minute view gives us a good breakdown of intraday price action which is currently losing momentum and ground as all these charts are in RSI bear ranges to start the year and need a move back over RSI 60 and the MA bands to improve the picture.  Until that happens the burden of proof is on the buyers to show up and take charge of things.  The $IWM looked the best into the close with multiple divergences showing and the best RSI & CFG levels, but that is not saying much.  $SPY & $QQQ both look extended to the downside short term, but it will take some heavy lifting to shift these back to RSI bull ranges.  That said, being an intraday chart, that lifting can be done within a day if aggressive enough, but is more likely to take a few days to week to play out and see if a shift back to the upside can happen before we pull the Daily charts into larger downtrends.

Good Luck and I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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Triple Play Drill Down

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With Friday’s close of the quarter, let’s take a quick look down this weekend.  In Technical Analysis we talk a lot about looking at one or more time frames higher than the one you trade to get the bigger picture; similarly, this top down process looks at all the time frames to help us adjust our near term outlook and holding periods based on which levels are working better in the current market environment.   If you are not familiar with my TP charts you can start with a these two posts here and here to learn more.

TP Index* Quarterly10-2-2016-11-07-26-am-tp-quarterly

Starting at the highest levels we can see the strength the major indexes have seen since the 2009 lows, but nothing here on the RSI chart that screams that is ending.  All three had strong candles this quarter and are on Nitrous in RSI bull ranges showing on this long time frame buyers are still in control.  The RSI do remain elevated with $QQQ closest to 80, but in strong trends moves over 80 are better overbought signals normally.  The CFGs in the bottom pain are also turning back up here before reaching oversold which also suggest the trend is still in the bull’s camp.  This timeframe is helpful, but will take a long time to change character which makes it less directly relevant to most traders

TP Monthly10-2-2016-11-13-12-am-tp-monthly

Dropping down to the monthly view, we still see all in RSI bull ranges moving back over 60 recently and not overbought. $SPY $QQQ have already moved to new highs and backtested those in the case of $SPY.  $IWM is not quite there yet, but has been the strongest move off the February lows.  If October can buck the seasonality and see $IWM break to new highs it would be a pretty big deal and could fuel these RSIs to overbought before done, but again intra-month volatility can still be high enough to frustrate many out of good opportunities.

TP Weekly10-2-2016-11-15-37-am-tp-weekly

ON the weekly level, once again we see all three on Nitrous in RSI bull ranges, but not really near overbought territory on any of them yet.  This level shows the recent breakouts and backtests on $QQQ and $SPY which proved to be successful so far.  The CFG’s all just recently turned back up with $IWM and $QQQ not even breaking 50 on the pullback.  It is the $SPY charts that is beginning to lag from this level.

TP Daily9-30-2016-4-01-22-pm-tp-daily

The daily view is where we can really start to see the chop over the last couple of weeks that has created the volatility in both directions, without either side gaining any traction.  Here to we see the $IWM is the only one that never lost the RSI bull range in September.  $QQQ broke RSI 40 barely, but snapped right back in what we call a range spike.  This is when officially the bull or bear range in RSI is broken, but quickly moves back over RSI 60 to confirm the bull range is still intact.  In the Weekly time frame I mentioned the spy $SPY was lagging which comes into clearer focus as we move down to the daily level.  The $SPY is the one of the three that actually looks like it could be shifting into a RSI bear range, but with it being the only one there yet, we want at least one of the others to join it before it gets more concerning.  Overall the grind off the September lows has been good to see from a strength standpoint.

TP 65min9-30-2016-4-06-12-pm-tp-65min

The 65min Charts actually shifted back into RSI bull ranges in mid September and are currently still holding them even among the chop we have seen.  Friday’s closing candle does look ugly here and will be watched, but until we lose the MA bands and the RSI bull ranges break here the this level continues to support that move off the lows this month.  Don’t read too much into that last candle as quarter end could have a bit of squaring going one.  Monday will be here soon enough and our next set of candles will bring the next clues for us to work from.

After going through this drill down, the one thing that stands out to me the most is almost every chart on every time frame is currently in a RSI bull ranges and moving higher.  Contrast this AAII bulls nearing the lows this suggests to me the wall or worry is still out there even with the progress the markets and their charts have made this year since forging those February lows.  Now you know my views, feel free to incorporate that into yours any way you like and as always, I hope it helps!

Have a great week!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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Drilling down the Triple Play

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I always love it when the month ends on a weekend (even better when it’s a quarter end), because it allows us to take a very clean top down view of the major indexes using the TP charts I post everyday. The markets have been showing signs of strength we haven’t seen in awhile, but that hasn’t deterred nor diminished those looking for another big bear right around the corner.   And, the could be right, but I prefer to let my charts guide me to such a decision.  This top down view allows us to move from the 50,ooo foot view quickly down to an intraday chart.  For all traders or investors at least one or two of these views can be helpful even if you don’t trade the indexes.  Let’s dig in. (disregard the arrows charts, they are not meant as highlights).

 

7-31-2016 1-16-56 PM TP Monthly

 

Not much to argue with here as we start with the monthly view.  $SPY has already left the station, $QQQ challenging now and $IWM still has a ways to go, but is giving a good effort since bottoming in February.  This shows only $IWM was officially in a bear market by percentage decline, but I would say two years of this action worked off excesses in many stocks throughout the markets and could be qualified as a stealth bear market if it must be labeled (labels don’t usually help much). RSI did work off the overbought nature during this time period, but never threatened breaking down into a bear range even in the $IWM during this decline. In fact, $SPY $QQQ RSI never even lost 50.

7-31-2016 1-11-06 PM TP Weekly

On the Weekly time frame you get a better feel for just how much the $IWM underperformed over the last year, but it has also been the most aggressive off the lows in an attempt to play some catch up.  RSI here did move into bear ranges last year and recently moved back into RSI bul ranges across the board.  $IWM & $SPY are even close to hitting the Nitrous.

7-31-2016 1-09-26 PM TP Daily

The daily charts are all sitting in RSI bull ranges, above the MA bands, on Nitrous and none are overbought at the moment.  This momentum won’t last forever, so enjoy it while it’s here and stay attentive for signs it is waning.

7-31-2016 12-50-27 PM TP 65min

Even drilling all the way down to the intraday view of the 65min charts you can see the recent sideways action in $SPY & $IWM are hardly bearish so far and helped work off the oscillator so another surge could certainly happen if we break out of these creeping ranges.  $QQQ is doing its best to lead the way.

That is my view of where we are right here right now.  It can change within just a few candles if the action changes, so there is no need for me to rush to judgement or attempt to anticipate when the buyers will take a break.  Like I said above, enjoy it while it lasts and let your risk management plan take care of the rest.

Good Luck and I hope this helps!

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation

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January 10, 2016 Strength In Numbers

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Macro Relative Strength

Intermarket ETF RS Rankings1-8-2016 Intermakret ETF RS Rankings

Intermarket ETF on FINVIZ

Equity Size & Style RS Rankings1-8-2016 Equity Size & Style ETF RS Rankings

Size & Style on FINVIZ

What a week!  The equity markets saw their worst returns in history for the 1st week of a year which was not at all what I expected after last week’s modest improvement in the Intermarket RS structure.  That modest improvement was quickly eliminated with the hard drop in equities this week.  At this point, we start week 2 with all of the equity proxies in the bottom half of the list except the $QQQ which closed right in the middle spot, but after leading for the last month, that is not promising.  The only green we saw this week screamed of the flight to safety which is to be expected when equity markets have such a dismal week.  The Size and Style is lining up more from large to small at this point, but $QQQ remained on top showing large growth was still our leader even after a 7% drop this week.  There was really no place to hide this week in the broad indexes.  It felt like straight liquidation from start to finish with some potential capitulation-like action as the markets slid into the close on Friday after holding up early and then seeing over $2 billion to sell on the MOC (market on close) as we finished. It seemed no one wanted to hold anything into the weekend as panic set in.  That said, I do believe it brought us closer to a tradeable bottom for now, but don’t necessarily expect us to start next week with that.  With many of the Major indexes sitting at critical levels, it is hard to know when buyers will actually show up.   Remember, it is only the first week of the year and it always feels the worst near bottoms.  The problem is determining whether the near term bottom will be just a flash in the pan or will build into something more constructive with all the damage done in recent weeks.  The longer term investor you are, the more patient you should be here and make buyers prove their conviction.   Only the most nimble should allocate more aggressively once we see some buyers show up.  Their vacation should be over sometime soon, but whether they come back with a hangover or not is still to be seen.

Sector Relative Strength Rankings

First, I look at the Custom Indexes that I use for all the breadth work to see what they are telling us on a price weighted basis.

Broad Sector Custom Index RS Rankings1-8-2016 Broad Sector CI Relative Strength

Subsector Custom Index RS Rankings1-8-2016 Subsector CI Relative Strength

Next, I look at a Broad Sector ETF Proxy which I use Vanguard ETFs to make sure things are similar and for some tradeable ideas.  Below that is the Equal Weighted version for comparison.

Broad Sector ETF Proxy RS Rankings1-8-2016 Sector Proxy ETF RS Rankings

Equal Weight Sector ETF RS Rankings1-8-2016 EW Sector Proxy ETF RS Rankings

This will differ a little due to the different make-up of the Capitalization Weighted ETFs.  If you click on the table (or here), it will take you to a page that will go much deeper into the Sector ETF Relative Strength.

Top 30 Sector ETF RS Rankings1-8-2016 Top 30 Sector ETF RS Rankings

Top 30 Sector ETF RS Rankings on FINVIZ

Bottom 30 Sector ETF RS Rankings1-8-2016 Bottom 30 Sector ETF RS Rankings

Bottom 30 Sector ETF RS Rankings on FINVIZ

The sector world this week firmly reflected the defensive tone as well with Utilities being the only sector losing less than 1% and the rest of the defensive sectors showing relative strength while still being down over 2%.  The only green anywhere in the tables above were in the Precious Metals space which has been one of the most hated over the last couple of years.  Moving all the way out to the monthly performance, we only see Precious Metals, Utilities and Real Estate still holding up positive and even then you have to be in the right  spots inside those sectors.  Once we do start seeing some bounces, offensive high beta sectors should see the most reversion, but may not this time if we are starting a new full fledged bear market.  I believe buyers are likely to start to show up soon and we will get a fairly sharp snap back up to the prior support levels which should now act as resistance; however, if we can’t muster a bounce in the near term in key sectors, it will paint a much more ominous picture for at least the next few months and warrant remaining cautious until things do start to improve.  Markets do go up and down, so if you are still fully invested, use these bounces to adjust your risk to better match the market action and your outlook as the scenarios begin to play out.  The defensive sectors are where we have seen the best action recently and can continue to be actionable if markets remain weak, but in order to see more broad market improvement, we must see the heavy weights like Financials and Technology find buyers sooner than later.  The question is what will the catalyst be that can cause such a change?  The only two I see right here are earnings season which will start this week and oversold breadth washouts which we will look closer at below.

Broad Market Breadth

Universe of 3,300+ stocks from 10 custom broad sectors and 49 subsectors.  Universe contains only stocks (that are both optionable and shortable) with no Preferred stocks, CEFs, ETFs, or UITs to skew the breadth measurements.  There is a breakdown of the universe in the powerpoint presentation link at the top.

The New High-New Low Differential1-8-2016 Universe NHNL

The Advance Decline Line1-8-2016 Universe AdvDecLine

The McClellan Indicators1-8-2016 Universe McClellan

The Moving Average Breadth1-8-2016 Universe MA Breadth

Breadth Thrust Indicator1-8-2016 Universe BreadthThrust

Percent Days1-8-2016 Universe Percent Days

Last week, I was lulled into believing the lack of negative action might turn into a positive to start the year.  I was wrong and the opposite happened.  The markets fell hard and sent the breadth readings into a steep decline.   Below we see how the week ended.

Positives:

  1. NHNL has not made new lows as compared to August lows while price did close lower.  Only a potential positive divergence for now, but only if we find our lows before this indicator expands down any further.
  2. McClellan Oscillator & Breadth Thrust Indicator are both very oversold and likely nearing a bounce zone.
  3. Moving Average Breadth all fell below 20% this week which is firmly in zones to look for a bottom, but do have timeframe attached.
  4. Thursday was an 80% down day (with percent decliners at 91.62% and down volume percent at 89.44%) near previous support which should provide a bounce within 1-3 days unless we start seeing clustering signals down here which is more negative.

Concerns: 

  1. Price Trend is turning down on a longer term view with a more significant new low below the September floor.
  2. Advance Decline Line made new lows for the move with price.
  3. McClellan Summation Index gave another sell signal below zero.
  4. While firmly oversold, all the short and intermediate term indicators still have room to move lower if sellers keep the pressure on.
  5. Even if we do see momentum lows soon, we do need to keep an eye open for further price lows and potential divergences in the indicators before a final floor is found.

All of the above indicators reflected the bearish action this week sending them to the lowest levels we have seen since August-September when we saw a bottom for 2015.  Now we are seeing price take out those lows with the indicators heading down fast, but actually not making new lows yet.  This could forge longer term divergences, but we are not there yet and shouldn’t count on them.   Instead, we recognize both the negative action we are seeing and the potential to forge a bottom with the readings we are now sitting on.  This forces us to remain cautious longer term while looking for a shorter term bounce to gauge if any risk appetite can be mustered up at these levels. We are down here now, so instead of panicking, we should keep an open mind and do our best to read the action as it unfolds in the coming weeks.

Broad Sector Breadth

This can give us a first level view of the flow within the broader market.  It is a true measure of the markets’ breadth.

Broad Sector Advance Decline Line1-8-2016 BSec AdvDec Line Dashboard

Broad Sector Moving Average Breadth1-8-2016 BSec MA Breadth Dashboard

Broad Sector McClellan Charts1-8-2016 BSec McClellan Dashboard

Broad Sector Breadth Thrust1-8-2016 BSec Breadth Thrust Dashboard

The New High – New Low Differential1-8-2016 BSec NHNL Dif Dashboard

After seeing all the McClellan Summation Indexes remain positive, the only one left standing this week was the Utility sector and not by much.  That really was the only place to hide.  At this point, all of the Breadth Thrust Indicators are firmly oversold with more than half at or below the lower threshold.  This suggests some reversion is likely very soon.  I find it interesting the only Breadth Thrust that was pointing higher Friday was actually Energy.  It may not be first thing as we open on Monday, but I expect to start seeing some improvement in the coming week based on these washed out indicators which can be measured to get some clues as to how far we might expect a bounce to go or how much more weakness we could expect to see in the coming months. 

Don’t forget the Breadth Compilation Charts allow you to view all the relevant breadth indicators on one chart for each sector as well as the entire universe.  One thing to look for is when breadth extremes line up in multiple indicators on a chart.

Final Note:  After such a disappointing December, I was expecting a better start to the year and we didn’t get that.  While this builds fear of something worse in the offing (which we need be open to), we have moved so far so fast I do expect some relief soon that can lift markets to higher levels that should be a better place to make longer term adjustments to portfolios.  I believe the best scenario might be to start the week down testing or penetrating those critical levels I mentioned above and then seeing some buyers show up to push us back above these critical points forming a false breakdown and potentially generate a hard squeeze to eliminate the oversold state we will enter the week in.  From my experience, most of the signs are there for a reversion move.  Fear is high, sentiment is in the toilet and the price and breadth action is stretched to the downside.  If no buyers show up, I will be more convinced a new bear market has actually started and a whole different game plan is in order for both longer term and tactical investors.  Either way, it is probably worth moving a little more tactical for now while we are figuring it out.

Have a great week!

G. Thomas Lackey Jr, CMT CFP® CFS

Follow me on StockTwits and Twitter @gtlackey (All market data above are derived from Stockcharts.com, Esignal, and Reuters Datalink)

The information set forth herein was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed, constitutes a solicitation by us of the purchase or sale of any securities or commodities.  There is no guarantee that the views expressed in this communication will become reality.  Investing in the stock or bond markets involves risk and potential loss of principal.  Investment strategies should be thoroughly vetted and discussed with a financial advisor prior to implementing.


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January 3, 2016 Strength In Numbers

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*If you are not on the email list and would like to review the full report each week, please email me at gtlackey@gmail.com and I will add you to the beta list.  Please include your Stocktwits or Twitter handle in the email if you have one.  You will receive a weekly email with the password to log in to the report and any updates during the week.  I do not share your email with anyone at any time.*

Previous reports can be read here.

Macro Relative Strength

Intermarket ETF RS Rankings12-31-2015 Intermakret ETF RS Rankings

Intermarket ETF on FINVIZ

Equity Size & Style RS Rankings12-31-2015 Equity Size & Style ETF RS Rankings

Size & Style on FINVIZ

So, when it was all said and done, Santa may have come to your house, but his pre-Christmas visit to Wall Street was shortlived.  In fact, the entire month of December was a pretty big disappointment with the ONLY green in either of the lists over the last month being $JJC.  Yes, Copper actually put in a solid month while still having the 3rd worst return for the quarter on the Intermarket RS List.  A strange month and year on many different levels.  I won’t go into those details as there are many like @RyanDetrick , @SentimentTrader and @Bespoke who have posted plenty of market statistics showing this was truly an odd year.

That said, this week in these RS lists, we actually saw a little structural improvement which surprised me a little, but could turn out a good early hint we may see some improving action early year.  Of course, this is based on relative strength rankings, so it could just be the least negative, but I am not looking for that at this point.  In the Intermarket RS list, $IWM finally moved back into the top half of the list with the other three equity proxies sitting at the top.  The improvement in the Size & Style list was not as pronounced, but we did see most Growth segments moving higher with $IWC & $IWO making the largest jumps.  Seeing these types of improvements in weak markets tends to be favorable for the markets and suggests to me we may have a decent January ahead of us.  With the $SPY $QQQ $DIA only a few percent off their highs at retest or potentially penetration, it wouldn’t surprise me if we see some early buyers.  The question is where will the want to put their capital?

Sector Relative Strength Rankings

First, I look at the Custom Indexes that I use for all the breadth work to see what they are telling us on a price weighted basis.

Broad Sector Custom Index RS Rankings12-31-2015 Broad Sector CI Relative Strength

Subsector Custom Index RS Rankings12-31-2015 Subsector CI Relative Strength

Next, I look at a Broad Sector ETF Proxy which I use Vanguard ETFs to make sure things are similar and for some tradeable ideas.  Below that is the Equal Weighted version for comparison.

Broad Sector ETF Proxy RS Rankings12-31-2015 Sector Proxy ETF RS Rankings

Equal Weight Sector ETF RS Rankings12-31-2015 EW Sector Proxy ETF RS Rankings

This will differ a little due to the different make-up of the Capitalization Weighted ETFs.  If you click on the table (or here), it will take you to a page that will go much deeper into the Sector ETF Relative Strength.

Top 30 Sector ETF RS Rankings12-31-2015 Top 30 Sector ETF RS Rankings

Top 30 Sector ETF RS Rankings on FINVIZ

Bottom 30 Sector ETF RS Rankings12-31-2015 Bottom 30 Sector ETF RS Rankings

Bottom 30 Sector ETF RS Rankings on FINVIZ

Dropping down to the sector level, there are few bright spots, but when you get down to the Subsector level, we see a few more opportunities.  From a broad sector perspective, Consumer Staples and Utilities saw some green showing the defensive edge.  But when you drop down to the all sector ETF scans, 15 of the top 30 were green with Alternative Energy ETFs as the standouts.  However, as I mentioned above, looking for RS gains in a weak market can help spot the next set of leaders if the markets do perform; and currently Health Care, Real Estate and Basic Materials are starting to stand out on both the sector and subsector levels.  Of course, Energy Pipelines made a big jump, but still only sit at 30, so there is plenty of work to do there and the rest of the sector is not catching on yet, so it will be a tough road to hoe if they don’t wake up soon.  Overall though, these RS Gainers during a weak tape are the areas I will be focusing on this week for new opportunities, but we still need to see other large sectors like Financials, Technology and Industrials get some footing or the broader markets will remain weak.

Broad Market Breadth

Universe of 3,300+ stocks from 10 custom broad sectors and 49 subsectors.  Universe contains only stocks (that are both optionable and shortable) with no Preferred stocks, CEFs, ETFs, or UITs to skew the breadth measurements.  There is a breakdown of the universe in the powerpoint presentation link at the top.

The New High-New Low Differential12-31-2015 Universe NHNL

The Advance Decline Line12-31-2015 Universe AdvDecLine

The McClellan Indicators12-31-2015 Universe McClellan

The Moving Average Breadth12-31-2015 Universe MA Breadth

Breadth Thrust Indicator12-31-2015 Universe BreadthThrust

Percent Days12-31-2015 Universe Percent Days

Even though the markets lost ground this week and the Major indexes gave back a good bit of the gains from previous week, the breadth readings did not get hit that hard.  Actually, much of the breadth gains from last week’s surge were maintained.

Positives:

  1. All of the short term divergences we discussed last week were not negated with the weakness end of week.
  2. NHNL Differential finally saw some positive days over the last two weeks improving the moving averages as well and getting them closer to turning positive.
  3. Moving Average Breadth readings did not give up much ground with this week’s weakness.
  4. McClellan Summation Index is crooked down, but holding the buy signal so far.

Concerns: 

  1. McClellan Oscillator closed the week negative as a short term caution.
  2. NHNL Differential, Advance Decline Line & %>200sma all still very depressed and weighing on things until they start seeing some improvement.

With all of the Breadth divergences still in play at the moment, the only real worry I have on this level right now is the McClellan Oscillator pushing negative, but that can be changed quickly.  We just don’t want to see it continue down as that would shift the Summation Index back negative which would not be a good sign at these indicator levels.

Broad Sector Breadth

This can give us a first level view of the flow within the broader market.  It is a true measure of the markets’ breadth.

Broad Sector Advance Decline Line12-31-2015 BSec AdvDec Line Dashboard

Broad Sector Moving Average Breadth12-31-2015 BSec MA Breadth Dashboard

Broad Sector McClellan Charts12-31-2015 BSec McClellan Dashboard

Broad Sector Breadth Thrust12-31-2015 BSec Breadth Thrust Dashboard

The New High – New Low Differential12-31-2015 BSec NHNL Dif Dashboard

The only 3 things I will point out here this week are:

  1. All of McClellan Summation Indicators ended the week still on buy signals.
  2. Most of the NHNL differentials look to be improving.
  3. The Energy Breadth Thrust Indicator ended the week pointing higher with the McClellan Oscillator ending above zero there.

Don’t forget the Breadth Compilation Charts allow you to view all the relevant breadth indicators on one chart for each sector as well as the entire universe.  One thing to look for is when breadth extremes line up in multiple indicators on a chart.

Final Note:  December was very disappointing I must admit, but I want to see if we get anyone buying as we start the new year before moving into the bear camp here and am likely to give it the first couple weeks to decide.  Breadth is not deteriorating more here and actually seeing some improvement along with much of the Macro relative strength gauges.  It is subtle, but that is what I see right now and will give the new year a chance for a fresh start, but don’t expect too much of a leash if the subtle progress under the hood doesn’t continue.

Happy New Year!

G. Thomas Lackey Jr, CMT CFP® CFS

Follow me on StockTwits and Twitter @gtlackey (All market data above are derived from Stockcharts.com, Esignal, and Reuters Datalink)

The information set forth herein was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed, constitutes a solicitation by us of the purchase or sale of any securities or commodities.  There is no guarantee that the views expressed in this communication will become reality.  Investing in the stock or bond markets involves risk and potential loss of principal.  Investment strategies should be thoroughly vetted and discussed with a financial advisor prior to implementing.


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December 27, 2015 Strength In Numbers

Tags : 

*If you are not on the email list and would like to review the full report each week, please email me at gtlackey@gmail.com and I will add you to the beta list.  Please include your Stocktwits or Twitter handle in the email if you have one.  You will receive a weekly email with the password to log in to the report and any updates during the week.  I do not share your email with anyone at any time.*

Previous reports can be read here.

Macro Relative Strength

Intermarket ETF RS Rankings12-24-2015 Intermarket RS

Intermarket ETF on FINVIZ

Equity Size & Style RS Rankings12-24-2015 Equity Size & Style ETF RS Rankings

Size & Style on FINVIZ

The Santa Rally seems to have different parameters depending on who you talk to and who is backtesting, but suffice to say, various seasonal tendencies line up to favor equities going into the end of the year.  At the end of last week, it wasn’t looking so good for those tendencies, but I suggested we not give up yet.  Markets were sitting on the edge, but once again were able to stabilize and back away from trouble for now.  Major indexes stabilized Monday and climbed most of the week on the low volume trade.  This moved most Equity proxies back up the intermarket, however $IWM remained in the bottom half only moving up one spot.  The Size & Style this week sits in an unfavorable structure going from large to small.   Strong trends often have a small to large and growth to value setup which is almost opposite of what we see here.  With Small Cap seasonality the strongest into mid January, I would expect this to be improving, but nothing here yet.  Markets bounced back with strong weekly moves, forging Morning Star like patterns, but didn’t really change much in the macro structure which remains mixed.  Going into the last week, seasonality stays strong and many big players will not be involved increasing the likelihood for continuation of these reversals which is likely to put most of the markets right back in the middle of the ranges with $QQQ having the best chance to challenge the highs before ringing in the new year.

Sector Relative Strength Rankings

First, I look at the Custom Indexes that I use for all the breadth work to see what they are telling us on a price weighted basis.

Broad Sector Custom Index RS Rankings12-24-2015 Broad Sector CI Relative Strength

Subsector Custom Index RS Rankings12-24-2015 Subsector CI Relative Strength

Next, I look at a Broad Sector ETF Proxy which I use Vanguard ETFs to make sure things are similar and for some tradeable ideas.  Below that is the Equal Weighted version for comparison.

Broad Sector ETF Proxy RS Rankings12-24-2015 Sector Proxy ETF RS Rankings

Equal Weight Sector ETF RS Rankings12-24-2015 EW Sector Proxy ETF RS Rankings

This will differ a little due to the different make-up of the Capitalization Weighted ETFs.  If you click on the table (or here), it will take you to a page that will go much deeper into the Sector ETF Relative Strength.

Top 30 Sector ETF RS Rankings12-18-2015 Top 30 Sector ETF RS Rankings

Top 30 Sector ETF RS Rankings on FINVIZ

Bottom 30 Sector ETF RS Rankings12-18-2015 Bottom 30 Sector ETF RS Rankings

Bottom 30 Sector ETF RS Rankings on FINVIZ

Sectors all jumped on board this week’s train and moved higher with the Defensive sectors still at the top of the RS lists, but not atop the performance for the week.  It was what many would call a garbage week.  Sectors and names that performed poorly this year like Energy (especially Solars & MLPs), Basic Materials and Industrials led the week.  All the sector returns were over 1% except Real Estate which took a break this week.

Technology also had a decent week when you strip out the largest players.  You can see this by comparing the Sector RS lists above where you can see $VGT has fallen down the cap weighted list to the 4th spot while $RYT holds 2nd on the Equal Weight RS List.  $AAPL and some of the FANG stocks that have performed so well this year didn’t really participate much putting a damper on the large cap tech world for the week.  The comparisons are good to do once in awhile to see if there are internal sector opportunities to explore.  With ETFs like $RYT & $PSCT, you can compare and contrast to $VGT $XLK $IYW; it can help you decide if you want to be favoring large versus small cap names.  The best way I know to compare these is with relative comparative (ratio) charts.  You can even do this to some extent on the subsector levels with Ishares industry ETFs since most of them are equal weighted.  So, for example, using Semiconductors comparing $SMH versus $XSD in a ratio tells us if investors are favoring the entire space or leaning more toward the large names.  For many, this is getting too deep into a sector, but the more you concentrate on sectors, knowing these shifts and other industry nuances is worth a little attention.

This week may just turn out to be a holiday trade, but I have found there are some sneaky turns hidden in those low volume drifts.  Many of the worst sectors had big weeks, some with catalysts, some just out of selling exhaustion, but whatever reason, they were marked up and in some cases buyers were aggressive.  Take the Holidays into account, but trust the action and the charts more as we saw some relentless buying at a few junctures this week.  Major Indexes could remain slow if the mega cap players take the rest of the year off, but that doesn’t mean there can’t be good movement in the broader markets and especially specific sectors when they get started moving.  If that is the scenario that plays out, this would be where those equal weighted and small cap ETFs come in handy.  

Broad Market Breadth

Universe of 3,300+ stocks from 10 custom broad sectors and 49 subsectors.  Universe contains only stocks (that are both optionable and shortable) with no Preferred stocks, CEFs, ETFs, or UITs to skew the breadth measurements.  There is a breakdown of the universe in the powerpoint presentation link at the top.

The New High-New Low Differential12-24-2015 Universe NHNL

The Advance Decline Line12-24-2015 Universe AdvDecLine

The McClellan Indicators12-24-2015 Universe McClellan

The Moving Average Breadth12-24-2015 Universe MA Breadth

Breadth Thrust Indicator12-24-2015 Universe BreadthThrust

Percent Days12-24-2015 Universe Percent Days

We got the price reversals right off the bat that forged the short term divergences all over the charts which played out again.  This keeps the major washout theme in play; if correct should see the markets climb out from this low.  Let’s see what stands out this week:

Positives:

  1. McClellan Oscillator & Breadth Thrust Indicator cleared recent downtrends in the indicator peaks for potential initiation thrust.
  2. The 80% up day on Wednesday as up-down volume was very strong open to close.
  3. Moving Average Breadth all readings made new highs with/ahead of price.
  4. Advance Decline line appears to be leading price on a short term basis out of these lows.
  5. McClellan Summation Index crossed up below zero for buy signal.

Concerns: 

  1. NHNL Differential is still negative and the biggest longer term warning flag.
  2. NHNL Differential, Advance Decline Line & %>200sma all still very depressed and weighing on things until they start seeing some improvement.

I am happy I mentioned the potential divergences early as they played out well and set the markets up to continue the progression.  This week we moved out of short term extremes to intermediate improvement with the Summation Index signal.   Now we need the %>50sma and then the longer term measures to get in the game if we are going to see a sustained move higher from here.  One step at a time.

Broad Sector Breadth

This can give us a first level view of the flow within the broader market.  It is a true measure of the markets’ breadth.

Broad Sector Advance Decline Line12-24-2015 BSec AdvDec Line Dashboard

Broad Sector Moving Average Breadth12-24-2015 BSec MA Breadth Dashboard

Broad Sector McClellan Charts12-24-2015 BSec McClellan Dashboard

Broad Sector Breadth Thrust12-24-2015 BSec Breadth Thrust Dashboard

The New High – New Low Differential12-24-2015 BSec NHNL Dashboard

Clicking on the highlighted links will go to a page with the dashboards for the Subsectors.

The breadth improvement really started two weeks ago which is what paved the way for the many divergences we saw on the “retests” and survived this week.  Looking at many of the sector Advance Decline lines, Breadth Thrust and McClellan Oscillators, you can see the higher lows much more clearly now with some making strong improvements in just two weeks.  That said, we are just now seeing most of the McClellan Summation Indexes getting ready to signal and the %>50sma readings are still pretty beat up.  Looking through the charts, there are many MAs clustering after all the sideways action we have seen over the last year, so any improvement from here is likely to start showing up big on the readings.  You know by now the Summation Index remains one of my favorite intermediate signals, and with all of them lining up to cross together, it provides the potential for a strong and broad move out of this area if they all start signaling.

After a tough start to the month, seasonality (and moving past other catalysts) looks to be creeping in on a broad scale.  Breadth is improving across the board out of the recent lows which gives a better chance for continuation higher in the short term which is likely to provide more intermediate term breadth signals if so.  So with improving breadth as a backdrop, for the intermediate investors, many sectors are moving above short term consolidations which can give well defined risk for stops and good potential for the move to continue higher; but overhead resistance and timeframe taken into account, just make sure the risk to reward potential is still tilted in your favor.

Don’t forget the Breadth Compilation Charts allow you to view all the relevant breadth indicators on one chart for each sector as well as the entire universe.  One thing to look for is when breadth extremes line up in multiple indicators on a chart.

Final Note:  I think this week took us off the ledge and set up for more improvement and even a challenge of the old highs in the coming weeks to months, even in $IWM!  This will likely take more than this week, but the price action we saw coming right when it was needed and with broad participation sets us up for the potential at least.  The short term divergences played out well and are making some waves up the breadth levels, but need at least some continuation this week to forge the intermediate signals.  It seems very possible we could get it this week.  I could not get myself to turn bearish last week since we didn’t really confirm below any important levels nor did the breadth show negative expansion.  I am happy I didn’t.  There are certain times I might be willing to play an anticipation game with short term moves, but for longer term character changes, I find it is best to let them confirm before getting too caught up in the what ifs. 

Have a great last week of 2015!

G. Thomas Lackey Jr, CMT CFP® CFS

Follow me on StockTwits and Twitter @gtlackey (All market data above are derived from Stockcharts.com, Esignal, and Reuters Datalink)

The information set forth herein was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed, constitutes a solicitation by us of the purchase or sale of any securities or commodities.  There is no guarantee that the views expressed in this communication will become reality.  Investing in the stock or bond markets involves risk and potential loss of principal.  Investment strategies should be thoroughly vetted and discussed with a financial advisor prior to implementing.


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December 24, 2015 Relative Strength Scans

Tags : 

Intermarket ETF Relative Strength12-24-2015 Intermarket RS

Sector Relative Strength12-24-2015 Sector RS

GT500 Best and Worst Relative Strength12-24-2015 GT500 BestWorst RS

GT500 Best RS and Worst RS on FINVIZ

For dropouts and escapees look here

There are many valuable ways to look at Relative Strength; some of my favorites are patterns of strength and weakness, and big RS movers over short periods.  The movers list also gives clues of rotation through large point moves and clustering.  This is just a starting place for your research, so get to it!

The explanation of my methodology is here

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation.

  • -

December 20, 2015 Strength In Numbers

Tags : 

*If you are not on the email list and would like to review the full report each week, please email me at gtlackey@gmail.com and I will add you to the beta list.  Please include your Stocktwits or Twitter handle in the email if you have one.  You will receive a weekly email with the password to log in to the report and any updates during the week.  I do not share your email with anyone at any time.*

Previous reports can be read here.

Macro Relative Strength

Intermarket ETF RS Rankings12-18-2015 Intermarket RS

Intermarket ETF on FINVIZ

Equity Size & Style RS Rankings12-18-2015 Equity Size & Style ETF RS Rankings

Size & Style on FINVIZ

We ended last week with me suggesting the markets were in a tough spot, but I felt buyers were likely to show up soon.  If they didn’t, there could be bigger troubles.  Of course, we got a little bit of both this week.  Early in the week, we got the bounce we were looking for and even sustained it into the face of the FED rate hike (which I was wrong about), but then came Thursday and Friday which took it all back rather swiftly.  It was not an impressive week at all, but also not enough to signal the “bigger troubles” scenario yet; especially with it being a very heavy OPEX week, quadruple witching all with enormous Open Interest in the options markets with all the volatility of the last month.  This OPEX is usually bullish, but it seems the crosscurrents were too much this year and sellers won out.  Put it all together and ended the week on an edge once again.

The action didn’t change the Intermarket RS list a whole lot other than $UUP making a decent jump back up to 2nd spot.  All equity proxies are in the top half of the list except $IWM which was actually the best equity performer on the week.  It was slight and didn’t even register in the relative strength readings, but it seems smaller names actually saw some relative performance this week.  Heck, it is the first week in a long time $QQQ hasn’t been at the top of the Size & Style rankings, and $DIA is not exactly what we would prefer to have leading.  With most of the major indexes closing right at or below support levels on Friday, once again the early week action should be watched carefully for further breakdown or recovery in the relative strength readings.  The Intermarket RS List is still cautiously favorable to equities with the Size & Style structure deteriorating a little more. Not a great week for this section of the report as the equity markets can’t seem to get traction yet, but I am not ready to throw in the towel here yet going into the last two weeks of the year.

Sector Relative Strength Rankings

First, I look at the Custom Indexes that I use for all the breadth work to see what they are telling us on a price weighted basis.

Broad Sector Custom Index RS Rankings12-18-2015 Broad Sector CI Relative Strength

Subsector Custom Index RS Rankings12-18-2015 Subsector CI Relative Strength

Next, I look at a Broad Sector ETF Proxy which I use Vanguard ETFs to make sure things are similar and for some tradeable ideas.  Below that is the Equal Weighted version for comparison.

Broad Sector ETF Proxy RS Rankings12-18-2015 Sector Proxy ETF RS Rankings

Equal Weight Sector ETF RS Rankings12-18-2015 EW Sector Proxy ETF RS Rankings

This will differ a little due to the different make-up of the Capitalization Weighted ETFs.  If you click on the table (or here), it will take you to a page that will go much deeper into the Sector ETF Relative Strength.

Top 30 Sector ETF RS Rankings12-18-2015 Top 30 Sector ETF RS Rankings

Top 30 Sector ETF RS Rankings on FINVIZ

Bottom 30 Sector ETF RS Rankings12-18-2015 Bottom 30 Sector ETF RS Rankings

Bottom 30 Sector ETF RS Rankings on FINVIZ

Even though the overall markets had a losing week due to the mid week reversals, there were some sectors that held up well while others were sold harder.  Looking at the Subsector list, you had Internet and Semiconductors right near the top representing the Technology space with many of the Real Estate Subsectors not far behind in both returns and relative strength rankings.  Subsectors in Consumer Staples and Utilities were also up on the week as a defensive tone prevailed in the end.  Not that unusual to happen during weakness, bulls just don’t want it to take root.  Commodity based stocks continued to sell off in what is starting to look like potential capitulation, but we won’t know for sure until after the reversal takes place and it is hard to say when that could be or how long the reversal will last as the downtrend is well entrenched and will take a lot to truly change.

If you are watching sectors for market direction, we need some true leadership to show up in more of the heavy weighted sectors.  At least one or two more of the larger sectors like Financials, Consumer Discretionary or Industrials need to join Technology and Health Care with positive performance on weeks like these.  As long as the half strong, half weak tug-of-war we are seeing between the heavy weights continues, we won’t likely make much progress, but I am not convinced we will see a big sell-off either.  Financials were probably the most disappointing with the FED news, but even there I would not write them off yet as they are testing last week’s lows (admittedly they don’t look good here).  Once broken and closed under, it will change the read, but most ETFs in the sector are not broken yet.  I could see some stabilization or another reversal after this week’s mixed sector results on a red week.  I remain cautiously optimistic with us still in the larger ranges, but admit the short term gyrations have been more than frustrating for longer term positions.   

Broad Market Breadth

Universe of 3,300+ stocks from 10 custom broad sectors and 49 subsectors.  Universe contains only stocks (that are both optionable and shortable) with no Preferred stocks, CEFs, ETFs, or UITs to skew the breadth measurements.  There is a breakdown of the universe in the powerpoint presentation link at the top.

The New High-New Low Differential12-18-2015 Universe NHNL

The Advance Decline Line12-18-2015 Universe AdvDecLine

The McClellan Indicators12-18-2015 Universe McClellan

The Moving Average Breadth12-18-2015 Universe MA Breadth

Breadth Thrust Indicator12-18-2015 Universe BreadthThrust

Percent Days12-18-2015 Universe Percent Days

It is in the breadth readings that it starts to get more interesting to me this week and is giving me the feeling we may see that reversal into the end of the year and Santa comes after all.   Some might call me a hopeless optimist, but I didn’t see the internal selling pressure this week that I expected after we closed on Friday.  To me, it felt much worse than it is looking.   It wasn’t good and there is always a chance for that trap door from here, but as often as we see divergences pop up in breadth readings (especially the short term ones), I have a feeling that is a good chance there again.  With the custom price weighted index closing right at the previous closing lows, you can look up and see most of the indicators are currently showing potential divergences.  They don’t become active until we get the reversal, so potential is the only thing there right now, but something about the positioning of it that has my attention peaked.

Positives:

  1. NHNL while negative was not expanding as we ended the week on the lows.
  2. McClellan Oscillator & Breadth Thrust Indicator hit extremes bounce and now in a potential divergence set up that is fairly common.
  3. The 90% down day did lead to a bounce and then fade, none of which had high percent days in either direction which I consider a positive that we did not see any clustering.
  4. All of the Moving Average readings are showing divergent action at the edge of the bottom quadrant (signal line per say), so any reversal early week would potentially trigger them all.

Concerns: 

  1. All of the above positives are tentative and could be reversed quickly with an early week fall.
  2. NHNL Differential is still negative and the biggest longer term warning flag.
  3. McClellan Summation is falling and didn’t react at all to the early week bounce.
  4. The price pattern is very sloppy as the larger base or consolidation is playing out.

I try not to make too much of divergences until they actually play out, but felt the need to point out how many are out there this week not only in breadth indicators, but also other technical readings.  They are mostly short period ones since they were formed during this one week, but if those fire, it could be early this week and I find they are often pretty strong moves, again if they fire.  If they don’t, it could be another tough week leading up to Christmas.

Broad Sector Breadth

This can give us a first level view of the flow within the broader market.  It is a true measure of the markets’ breadth.

Broad Sector Advance Decline Line12-18-2015 BSec AdvDec Line Dashboard

Broad Sector Moving Average Breadth12-18-2015 BSec MA Breadth Dashboard

Broad Sector McClellan Charts12-18-2015 BSec McClellan Dashboard

Broad Sector Breadth Thrust12-18-2015 BSec Breadth Thrust Dashboard

The New High – New Low Differential12-18-2015 BSec NHNL Dashboard

Clicking on the highlighted links will go to a page with the dashboards for the Subsectors.

Bumping along the bottom is the best way to describe the sector world this week.  There were sectors like Real Estate, Health Care and Utilities which showed some minor improvement, but nothing to write home about.  This is what keeps me from really beating the drum for defensive sectors right here.  Seeing only slight improvement in these sectors and no improvement in Consumer Staples breadth at all tells me defensives are not seeing the flows I would expect to surface before a major turn.  That correlation doesn’t have to hold true again, but has often accompanied or preceded major market tops in the past.

Now that I talked about all the potential negative action from an intermediate and longer term view, I also feel compelled to speak of the many potential divergences on this level as well.  They are not fully formed, but at positions that can fire and produce nice gains from a small package (pattern) when they do work.  Another angle of analysis seems to have us sitting on the same edge as the broader markets with directional potential either way from here.

Don’t forget the Breadth Compilation Charts allow you to view all the relevant breadth indicators on one chart for each sector as well as the entire universe.  One thing to look for is when breadth extremes line up in multiple indicators on a chart.

Final Note:  Now we see if the faded bounces lead to sharp drops or play out as divergences into the last two weeks of the year.  I have a hard time ruling that out because of how weak the first half of the month was and also the very strong seasonality from here until the end of the year.  According to Ryan Detrick @RyanDetrick), this is the 2nd best 10 day period of the year beginning Friday’s close.  Tough to see it here with most closing on the daily and many on the lows for the week, but my thesis since the fall was a major breadth washout in August and September, so a major top in December would not be something we would expect here.  I still see the 2011 analog playing through this move which also still fits with excessive negative sentiment we are seeing on so many measures from bulls/bear ratio, put/call ratios and bearish twitter noise.  The markets will do what they want, but notable extremes followed by divergences are exactly what most of the breadth segment of my work looks for, so I will give them the opportunity to fill out and fire before I adjust my overall views of how deep this weakness runs.  I can be wrong and a Christmas without Santa is enough to alter anyone’s view.

Have a great week and Happy Holidays however you may celebrate them!

G. Thomas Lackey Jr, CMT CFP® CFS

Follow me on StockTwits and Twitter @gtlackey (All market data above are derived from Stockcharts.com, Esignal, and Reuters Datalink)

The information set forth herein was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed, constitutes a solicitation by us of the purchase or sale of any securities or commodities.  There is no guarantee that the views expressed in this communication will become reality.  Investing in the stock or bond markets involves risk and potential loss of principal.  Investment strategies should be thoroughly vetted and discussed with a financial advisor prior to implementing.


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December 18, 2015 Relative Strength Scans

Tags : 

Intermarket ETF Relative Strength12-18-2015 Intermarket RS

Sector Relative Strength12-18-2015 Sector RS

GT500 Best and Worst Relative Strength12-18-2015 GT500 BestWorst RS

GT500 Best RS and Worst RS on FINVIZ

For dropouts and escapees look here

There are many valuable ways to look at Relative Strength; some of my favorites are patterns of strength and weakness, and big RS movers over short periods.  The movers list also gives clues of rotation through large point moves and clustering.  This is just a starting place for your research, so get to it!

The explanation of my methodology is here

If you like what you see, follow me on StockTwits or Twitter.
(All market data above are derived from Stockcharts.com, Esignal, and Reutersdatalink)
The information set forth here was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. I or my affiliates may hold positions or other interests in securities mentioned in the blog.  Full Disclaimer
There is no guarantee that the views expressed in this communication will become reality,  Investing in the stock market involves risk and potential loss of principal, Investment strategies should be thoroughly researched and understood before implementing and none of this should be construed as a recommendation.

  • -

December 13, 2015 Strength In Numbers

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Previous reports can be read here.

Macro Relative Strength

Intermarket ETF RS Rankings12-11-2015 Intermarket RS

Intermarket ETF on FINVIZ

Equity Size & Style RS Rankings12-11-2015 Equity Size & Style ETF RS Rankings

Size & Style on FINVIZ

Very few safe havens this week.  It is a little ironic that other than $JJC, the only other green on the Intermarket RS list came from bonds.  $USO lost support and fell hard dragging others with it.  Large Caps bounced around most of the week near support while $IWM was weak until Friday when they all gave way quickly.  The $IWM weakness caused it to lose a good bit of RS ground this week on both lists.  The week ended with Ugly weekly candles for all the major equities.  This price action forces us to be on the defensive and puts somewhat of a damper on the Santa rally, but as we will see below, some extremes were also forged on Friday that should be watched for potential reversals.  With $IWM being the only equity not in the top half of the Intermarket list, it adds caution, but doesn’t turn it to an unfavorable stance yet.  The weakness in small caps in general puts them at the bottom of the Size & Style list once again which is not favorable for the overall markets.  Putting them together, it send us into this week skeptical of any bounces unless small caps can lead.

Sector Relative Strength Rankings

First, I look at the Custom Indexes that I use for all the breadth work to see what they are telling us on a price weighted basis.

Broad Sector Custom Index RS Rankings12-11-2015 Broad Sector CI Relative Strength

Subsector Custom Index RS Rankings12-11-2015 Subsector CI Relative Strength

Next, I look at a Broad Sector ETF Proxy which I use Vanguard ETFs to make sure things are similar and for some tradeable ideas.  Below that is the Equal Weighted version for comparison.

Broad Sector ETF Proxy RS Rankings12-11-2015 Sector Proxy ETF RS Rankings

Equal Weight Sector ETF RS Rankings12-11-2015 EW Sector Proxy ETF RS Rankings

This will differ a little due to the different make-up of the Capitalization Weighted ETFs.  If you click on the table (or here), it will take you to a page that will go much deeper into the Sector ETF Relative Strength.

Top 30 Sector ETF RS Rankings12-11-2015 Top 30 Sector ETF RS Rankings

Top 30 Sector ETF RS Rankings on FINVIZ

Bottom 30 Sector ETF RS Rankings12-11-2015 Bottom 30 Sector ETF RS Rankings

Bottom 30 Sector ETF RS Rankings on FINVIZ

Nowhere to run, nowhere to hide.  That sums it up for the sector world this week too.  The cyclicals we have been favoring got hit hard pushing them down the RS ladder while defensive names moved back up.  One thing not to forget is my RS is a 3 month calculation, so it sees more movement than many other RS readings, especially when you have big moves like we saw this week.  Consumer Staples and Real Estate went out on the top of the lists on that theme and even Utilities made a big RS move higher.  Again here in the sector world, it is very interesting to see so many yield plays moving up right before the FED announcement this week.  This week the defensive theme came back in vogue like we saw during the summer months, so we will continue to monitor and see if it was a change in character that can persist this time.  It is very hard to find any green on the week which turns us to concentrating on changes in RS readings and where they might be going.  There was definitely some jockeying going on during this action, but it is interesting to me how many Technology ETFs are still in the Top 30 list even with it being one of the worst hit sectors this week.  Sharp selloffs in leading sectors are not always the start of something bigger, but when the selling is as broad as it was this week, we do need to take more caution and somewhat of a wait and see attitude.  There really was no place to hide looking at the sectors and we ended on the lows, so I don’t see any sector jumping out based on this telling us to rush in and buy.  Instead, we see if they can get reversals off the breadth extremes this week (will discuss that next) and if there is any strength behind them.  It is a combination of the breadth and RS action that I like to use for guidance, but right here my focus leans more to the breadth side for more specific action ideas while monitoring the RS reactions this week. 

Broad Market Breadth

Universe of 3,300+ stocks from 10 custom broad sectors and 49 subsectors.  Universe contains only stocks (that are both optionable and shortable) with no Preferred stocks, CEFs, ETFs, or UITs to skew the breadth measurements.  There is a breakdown of the universe in the powerpoint presentation link at the top.

The New High-New Low Differential12-11-2015 Universe NHNL

The Advance Decline Line12-11-2015 Universe AdvDecLine

The McClellan Indicators12-11-2015 Universe McClellan

The Moving Average Breadth12-11-2015 Universe MA Breadth

Breadth Thrust Indicator12-11-2015 Universe BreadthThrust

Percent Days12-11-2015 Universe Percent Days

This is where it is the ugliest in my view.  After saying last week things were holding up okay, this week breadth rolled over pretty hard.

Positives:

  1. McClellan Oscillator & Breadth Thrust Indicator close the week at extremes.
  2. Friday registered a 90% down day which usually leads to a bounce in 1-3 days.

Concerns: 

  1. NHNL Differential took a big hit this week with new highs all but disappearing.
  2. Advance Decline continues to weaken and made minor lower low this week.
  3. McClellan Summation is rolling over and challenging -500 now which is our line in the sand.
  4. Moving Average Breadth have all fallen back into the bottom quadrant, but are not deep enough to get excited about them, so still on the concern list for now.

Man, what a difference a week can make.  Last week the small cap lag was noted, but not having big effects yet, but this week small caps led a broad decline that hit most everything.  The negatives here are growing and worrisome from the longer term perspective, but the short term extremes here in breadth and in other sentiment measures are suggesting a bounce soon, probably this week, but it better come with some serious muscle if it is to improve the intermediate and longer term measures.   The progression we saw off the fall lows got clipped this week so we are back to square one.  Short term extremes need to play out and build from there to get things back on track.

Broad Sector Breadth

This can give us a first level view of the flow within the broader market.  It is a true measure of the markets’ breadth.

Broad Sector Advance Decline Line12-11-2015 BSec AdvDec Line Dashboard

Broad Sector Moving Average Breadth12-11-2015 BSec MA Breadth Dashboard

Broad Sector McClellan Charts12-11-2015 BSec McClellan Dashboard

Broad Sector Breadth Thrust12-11-2015 BSec Breadth Thrust Dashboard

The New High – New Low Differential12-11-2015 BSec NHNL Dashboard

Clicking on the highlighted links will go to a page with the dashboards for the Subsectors.

As mentioned above, most everything got hit this week and it shows in the sector breakdown.  Actually, almost everything.  Precious Metals Advance Decline line slightly rose this week even though the subsector was not positive.  That really isn’t a lot to hang your hat on.  The selling was broad and deep, but started to feel like a bit of panic on Friday as the day progressed.

It looks like Financials actually took the biggest hit from a price and participation standpoint; starting and ending the week with 90% down days which matter in a sector with this many components.  Friday was actually a 96% down day.  Whoa!  The Summation Index is testing the flatline here and only 6.2% of the components are above their 20sma and only 15.88% are above the 50sma to end the week.  Another interesting turn of events with Financials being seen as the beneficiary of any rate hike.  Nothing this week played along with the rate hike rhetoric, so it will be very interesting to see what Yellen does.  On the positive side though, we must mention again the heavy 90% down day along with Breadth Thrust and McClellan Oscillator extremes which have both only seen lower readings once since 2012 which was the August flash crash day.  These types of extremes have all been at or near prominent lows.  There always can be a divergence or retest, but many I see on my charts going back to 2012 have been more of the V variety with sharp moves starting fairly quickly.  This time may be different and it always feels that way in the heat of the selloff, but I think it is worth giving them the room to bounce and prove it one way or the other.  If, by chance, Financials do reverse hard from here, it should bode well for broad markets and $IWM especially as it carries a 25.77% weighting in Financials.  That is still a big IF at this point, but we should know soon as the extremes here are pretty stark.

The short term extremes are pretty heavy across most sectors.  Using the Breadth Thrust Indicator as our measure, we currently see extremes in the Broad Universe as a whole, 9 of 10 sectors (Health Care sits at .4012, being the only one not below the .4 extreme line), and 42 of the 49 subsectors I track.  That is not likely to last very long.

Sectors are back to breadth extremes that produce bounces and with all of them there at the same time, it increases the odds of a solid move that can be more than just a bounce.  How much thrust we see off these lows whenever they do happen will be the clue to which sectors will carry forward.  RS has defensives heading back toward the top right now, but they aren’t likely to stay there long if the reversal takes hold.  Watch financials closely as they could be the key to small caps and broader participation across the board.

Don’t forget the Breadth Compilation Charts allow you to view all the relevant breadth indicators on one chart for each sector as well as the entire universe.  One thing to look for is when breadth extremes line up in multiple indicators on a chart.

Final Note:  This week was very tough and did a good bit of damage.  Not insurmountable, but troubling for a month that is usually so strong.  In last week’s final note, I suggested if we were soft much longer it could scare people out of good positions and that is exactly what I think happened this week.  The question now is how scared?  And what fears are taking the helm?  The fear of losing and a new bear market or the fear of missing out and underperforming into the end of the year?  It has been a tough year for markets with very few broad trends supporting them, but outside of commodities the bears just haven’t had enough strength to persist.

These short term extremes put us back at the starting line of the breadth progression; so we reset and see how it pans out, but we need follow through participation by buyers sooner than later as we might find a trap door if we keep bouncing along the bottom when it comes to participation which would cause more serious problems for equities.  Short term players, this is your spot to pay close attention and take advantage of these extremes; but the longer your horizon goes out, the more tepid I would be with making new commitments until we see more proof buyers can take back control.  Dipping your toe in the water is fine, but be nimble and commit new funds only as positive evidence mounts.  If it does, Santa might still come see us after all.

Have a great week!

G. Thomas Lackey Jr, CMT CFP® CFS

Follow me on StockTwits and Twitter @gtlackey (All market data above are derived from Stockcharts.com, Esignal, and Reuters Datalink)

The information set forth herein was obtained from sources which we believe to be reliable, but we do not guarantee its accuracy.  Neither the information, nor any opinion expressed, constitutes a solicitation by us of the purchase or sale of any securities or commodities.  There is no guarantee that the views expressed in this communication will become reality.  Investing in the stock or bond markets involves risk and potential loss of principal.  Investment strategies should be thoroughly vetted and discussed with a financial advisor prior to implementing.


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