July 12, 2015 Strength In Numbers

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July 12, 2015 Strength In Numbers

12-23-2013 Cover Graphic

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For more background on this report check out Strength In Numbers Explained.  Previous reports can be read here.

Macro Relative Strength

7-10-2015 Intermarket RS

Intermarket ETF on FINVIZ

7-10-2015 Equity Size & Style ETF RS Rankings

Size & Style on FINVIZ

After falling last week, equities continued on that path to start this week, but they had erased most of the early losses by the end of the week.  It wasn’t enough to turn them all positive, but we will take it given the dire look early on.  The major equity indexes looked like they had lost the current ranges and might be ready to extend to the downside, but once again, fear cropped up quickly and sent too many people to one side of the boat.  Once everyone had decided it was time to step aside, the markets quickly became oversold enough to start a rebound attempt.  It took most of the week, but we closed with a reversal back higher taking shape.  Nothing performed very well in the Intermarket RS list; the big standouts were $USO & $JJC which took big hits dragging down commodities in general.

In the Intermarket list, Equities are scattered but remain in the top half where we want them to stay, but certainly not showing much if any leadership here.  Moving down to the Equity Size & Style, we are starting to lean back towards the smaller names again. Growth is still also slightly favored as well.  Here again, the list does not have a clear structural bias.  Another week without much change to the structure showing the markets are still undecided on these two measures.

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.

7-10-2015 Broad Sector CI Relative Strength 7-10-2015 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.

7-10-2015 Sector Proxy ETF RS Rankings 7-10-2015 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 Rankings7-10-2015 Top 30 Sector ETF RS Rankings

Top 30 Sector ETF RS Rankings on FINVIZ

Bottom 30 Sector ETF RS Rankings7-10-2015 Bottom 30 Sector ETF RS Rankings

Bottom 30 Sector ETF RS Rankings on FINVIZ

Consumer Staples, Utilities and Real Estate were your top performing sectors this week.  The big surprise might be that Consumer Staples is the top performer over the last month.  That doesn’t exactly scream confidence, but shouldn’t usher in despair either.  Actually, 6 of the 10 were positive for the week looking a little better than the major indexes.  The defensive nature of this week goes along with the recent fear.  The more cyclical sectors took the biggest hits early, which should be watched, but many also saw the largest rebounds off the lows.  We can tell buyers are still lurking by the quick snapbacks we see, but they need a reason to get engaged.  Some perceived resolution could possibly bring them back to the table.  If not, we will be on alert for another leg down this summer that could result in a full correction.

Broad Market Breadth

Universe of 3,070+ 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 Differential7-10-2015 Universe NHNL

The Advance Decline Line7-10-2015 Universe AdvDecLine

The McClellan Indicators7-10-2015 Universe McClellan

The Moving Average Breadth7-10-2015 Universe MA Breadth

Breadth Thrust Indicator7-10-2015 Universe BreadthThrust

Percent Days7-10-2015 Universe Percent Days

The technical and breadth damage was palpable last week, but this week we saw more stabilization than anything.  We didn’t fix it all, but there were a few things in there worth noting.


1. NHNL Differential diverged on the last move down, but will take a big shift to keep 30sma in positive territory saving us from the 3rd sell signal in that sequence.

2. %>50sma & %>20sma both bounced after touching bottom quadrant.

3. Breadth Thrust saw a nice move after the double dip into extreme readings.

4. 80% Down Day was followed immediately by some relief.

5. Custom Index is backtesting the Inverse Head and Shoulders breakout from February.


1. NHNL Differential can’t lose any more ground or 30sma will go negative which is a long term sell signal for this indicator.

2. Advance Decline not recovering quickly.

3. McClellan Summation Index still looks sick.

Even though it looks like the positives outweigh the negatives above, it is still a very difficult read here.  There are good arguments on both sides and the bears are making more headway than they have in a while, but that is always how it feels near a short or long term bottom.  With the reversal action we saw this week accompanied by the nice thrust in short term breadth measures, we could have forged a tradable bottom this week, but we do need to see more follow through early week or we will likely see a swift retest and possible break of the recent lows. 

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 Line7-10-2015 BSec AdvDec Line Dashboard

Broad Sector Moving Average Breadth7-10-2015 BSec MA Breadth Dashboard

Broad Sector McClellan Charts7-10-2015 BSec McClellan Dashboard

Broad Sector Breadth Thrust7-10-2015 BSec Breath Thrust Dashboard

The New High – New Low Differential7-10-2015 BSec NHNL Dashboard

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

Last week, we talked about the damage we saw in many sectors.  That continued at the start of the week, but caught a bid when things started to change.  Above you can see how much of that played out, but if you want to know which areas got most of the action off the lows, the Breadth Thrust Indicator page (click on the Dashboard above) can show which sectors and subsectors saw the most powerful breadth reversal once things started shaping up.  Utilities and Real Estate stood out this week with some thrusting action which actually started showing up last week.  Another example would be Technology which saw many subsectors thrust out of the midweek lows.  If the sector is really improving, once the thrust off the lows is wearing off, then we can start to watch the specific Summation Index to make sure it is following suit.

That is just one idea of how to use the breadth action as a trading signal as well as a guide.  The breadth picture has become minorly washed out pretty quickly showing many were indiscriminately looking for the exits recently.  If they perceive they were wrong, a rush back in can cause the thrusty action off the lows we often see.  What happens next is where the real information is found.

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:  The first a few days off a breadth extreme reversal and can be profitable for the most nimble out there, but for most it is best to look for those reversals and monitor them for returning/emerging strength through both breadth and relative strength measures.  This won’t protect you from all the markets tricks, but does help keep you in the flow which goes a long way.  These markets have not given a clear message for a month or two and are wearing people down at this point.  That doesn’t mean a major top is imminent, but it is smart to have that scenario in your playbook just in case.  Overall, we are still in the range and believe the markets are showing good resilience in recent days, but we must build on this or more corrective action will take hold quickly.

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.

About Author


is a Chartered Market Technician (CMT) and Certified Financial Planner (CFPr) in Greensboro Georgia (Outside Atlanta). Founding partner of Barber Lackey Financial Group, LLC, a Registered Investment Advisor. However, this blog is not affiliated with BLFG and does not make recommendations to buy sell or hold any securities.