September 7, 2014 Strength In Numbers
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For more background on this report, the Strength In Numbers ppoint further explains what I am building here. Previous reports can be read here.
Note: After a busy weekend, I have had some technical issues today that have slowed me down greatly. I have all the normal data, but the commentary will be brief.
Macro Relative Strength
Click on either table for a deeper view including the Top and Bottom 20 ranked Broad Equity ETF and FINVIZ links.
More sideways action in the markets this week. The $IWM was the only negative reading for equities, but the gains on the others didn’t amount to much. The $UUP continued to move its way up the Intermarket list which could be putting some weight on the markets short term, but don’t think the markets can’t rise with the dollar. They can and have many times in the past. That said it is different than what we have become accustomed to. The Small Cap weakness weighed on their rankings in the Size & Style list with $IWO taking the biggest hit in relative strength. It does feel more like digestion than anything, but the small caps need to buck the weakness soon or it will start sinking into the breadth numbers. So far seems like some consolidation through time instead of price, but small caps need closer attention until they show their hand.
Universe 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 Differential
The Advance Decline Line
The McClellan Indicators
The Moving Average Breadth
Breadth Thrust Indicator
Percent Days
Summary: Price action is stalling a bit here at the old highs, but the breadth figures are not leaking yet. The Advance Decline Line is still lagging some for the first time in a while, but the McClellan Summation continues to move further into positive territory. The McClellan Oscillator and Breadth Thrust Indicators are both pulled back now with the Oscillator nearing a test of zero. If it can reverse here, the Summation should continue to move higher pulling the markets with it. Consolidation through time versus price is what we are seeing so far.
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. For this section, I have posted the Breadth Dashboards for the indicators I use. For the first three indicators below, if you click on each respective title or the Dashboard, it will take you to a page specifically for those sector breadth charts. I did not include pages for the Breadth Thrust or NHNL.
Broad Sector Advance Decline Line
Also, check out this subsector view I created to dig a little deeper into where participation is moving to and from.
Broad Sector Moving Average Breadth
Broad Sector Breadth Thrust
The New High – New Low Differential
The sector breadth held up pretty well this week too. Nothing that really jumps out right now. I am impressed with the continued strength of Real Estate and believe Energy still looks set up well, but neither of those are new thoughts. I am watching the Average Breadth dashboard a little closer this week to see how any further weakness affects the longer term readings. I don’t want to see them rollover here with such large divergences. That would be a big caution flag for me if they do, but let’s wait until it actually happens before we get concerned.
Sector Relative Strength Rankings
First, I look at the Custom Indexes and see what they are telling us on a price weighted basis. Click on either chart for a deeper view.
Next, I look at a Broad Sector ETF Proxy which I use Vanguard ETFs to make sure things are similar and for some trade-able ideas. Below that is the Equal Weighted version for comparison.
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 world including the Top and Bottom 30 ranked Sector ETF and FINVIZ links (added below this week).
Top 30 Sector ETF RS Rankings
Top 30 Sector ETF RS Rankings on FINVIZ
Bottom 30 Sector ETF RS Rankings
Bottom 30 Sector ETF RS Rankings on FINVIZ
Final Note: As I stated a few times above, this action looks more like consolidation and digestion than it does distribution. Most of the breadth readings are holding up. The short term measures are giving ground during this waffling, but not really diving anywhere. My focus on the McClellan Summation hasn’t changed. It is still moving higher and has plenty of room before it gets worrisome. As long as this continues, we should be fine and treat pullbacks as buying opportunities. If something bigger starts to change, we should see it here pretty early in the process.
Have a great week!
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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