Total Market:
- Seeing our 1st test of breadth in a while, but still early
- Longer term Indicators showing little damage
- Short term breadth Indicators are finally getting closer to extreme readings which can provide opportunities and is good to see with longer term reading solid.
- The key to watch for is how the Longer term Indicators react to the pivot in the Shorter term ones. No reaction out of the longer term is a problem.
- Intermarket RS rankings are showing caution flags with $TLT & $UUP high on the list, but could be a blip if fear subsides quickly. If not, confirms other softness.
- On positive note, Size & Style and Sector RS rankings still showing support for a strengthening economy and equities.
Broad Sectors:
- Some defensives continued to attract participation this week and should be on the radar, but Cyclicals like Technology and Industrials didn’t seem to be losing it fast enough to signal anything big yet. $IYR $IDU $IYH
- The continued loss of correlation in the sectors should benefit those who follow strength, but could make it hard for Broad Index Investors to make any headway for now.
- McClellan Summation Index and the Adv Decline lines are showing where the money is flowing recently. Health Care, Real Estate, Basic Materials $IYM $GDX $IYR $MORT
- Financials effort to shore up this week was rejected as well. It will be a big win here if the bears can capitalize due to the market weighting, but they are not there yet.
What We are Watching:
- If the breadth bounces this week, I would continue to focus on Small Cap names with tighter stops. $IWO $IWM
- Growth still holds a decent advantage, but no great edge at the moment. Again, using breadth extreme pivots is the best idea on broad based entries. $IWO $QQQ $IWP
- Sector concentration should lean toward Growth and Cyclical sectors (including Health Care), but now looking for them to pivot off extremes. It is tough to do here, but the larger trend is still intact for now. $IAI $IYJ $XLK $FDN $SMH $ITA $IYT $IYF $IBB $IYH
- Financials are still in limbo and remain important to the overall picture. $IYF $IAI $BIZD $RYF $PSP
- Consumer Discretionary looks better to me for a short term bounce play that could materialize into more. Either way, the risk is higher in the short term. The long term play can’t be assessed at this point until we have a little more evidence. $IYC $ITB $PBS $BJK or dig into the individual RS Ranking within the sector and subsectors.
Thanks for taking the time to review this report. If there are any other improvements I can make, I would love to hear them. Please email me at gtlackey@gmail.com and please include your Stocktwits or Twitter handle.
Good luck this week. It is there for the making!
G. Thomas Lackey Jr, CMT CFP®
Follow me on StockTwits and Twitter @gtlackey
(All market data above are derived from Stockcharts.com, Esignal, and Reuters Datalink)
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