20120907 Intermarket Relative Strength Review
It was a pretty strong showing for a holiday week. The markets got even more of a sense from all angles that more easing was on the way. This of course continues to favor commodities with equities a close second. Markets believe the central banks are ready to make sure liquidity is abundant. Combine that with the us being the best in a bad situation and we got a strong move higher. There was even some volume to go with the move as everyone returns from vacation realizing they missed a pretty good move this summer. One of the possible drivers going forward are those who sold in may getting too uncomfortable to stay out another month. Time will tell. You can find all the RS scans at here.
Equities
It is nice to see equities breaking out without being way overheated on many different measures. The breadth work I do or using the summation indexes look fine. Indicators have room. It is a nice set up that favors more follow through and might just leave those on the sidelines behind. Of course Monday we could get clocked and the run be over, but I am not favoring that here. The $IWM has taken over the top equity ranking as it have been a beast all week.
It felt last weekend like it was ready when I wrote Don’t Sweat the Small Stuff, but I did think it might take a little more time. Well it didn’t. breaking higher confirming the daily and weekly breakouts to end the week. The $QQQ came next with the $SPY right behind both
with breakouts of their own. Bringing up the rear, as you would want to see, is the $DIA. It still sported a gain for the week, just not as impressive as the rest. The order here for
is about as strong as you are likely to see. I think this favors the breakouts holding.
Bonds and Currency
Bonds continue to favor risk as $JNK and LQD remain at the top of the category, but definitely taking different paths.
$JNK continues to climb and actually began to accelerate this week.
While $LQD is succumbing to some profit taking as money rotates to equities.
Neither $IEF nor $TLT could hold their gains this week. Both seem to be turning back down, which would also support the risk trade for a while. It could also be a case of investors finally rotating out of these areas.
Finally we have the continued collapse of the $UUP adding more fuel to the risk fire. all of this action is just what you would expect if Central banks were coming in… The markets are usually right, so I will trust them until the signs change.
Commodities
Metals continue to be the rocket ships. $SLV remains on top with another strong move
with no look back so far. Cutting through resistance like it is not even there.
The $DBC comes in next showing the broad commodity strength
One of the big moves this week was $JJC after China decided to join the easing party goosing the copper market.
$GLD had a strong move as well following $SLV, but not enough to move it in the RS Rankings.
$DBA continues to work up in the Ascending Triangle, but the longer it takes the more chance of a failure, so be prepared.
$USO bringing up the rear more because it is resting than any retracement. So far the wedge is holding and has room higher for another run as longs as it holds this support.
All of these groups continue to suggest and support the idea that we will get broad based easing form around the world providing the liquidity we need to burn higher. Whether it will last or not can’t be confirmed at this point, but so far betting for a big move down has not worked for long. I will certainly not be leaning that way as long as this structure persists.
Good Luck! It is there for you to make.
If you like what you see, follow me on StockTwits or Twitter.
