Weekly Macro & Sector Reviews
The Weekly Majors are sitting in distinctly different spots of the battle stages. $IWM already took a big move below range and the minimal bounce came back up into the underside and failed two weeks in a row. Follow through this week would seal the retest for smaller players, but so far it is the furthest from that retest, surprisingly. $QQQ is having that retest now and failing at the moment after getting rejected at its MA bands and testing the RSI bull range now. $SPY is the only one still in the MA band and the RSI bull range, but closed ugly this week. OpEx added to the volatility and juiced moves, but the headline mill is back and not much of it is supportive at the moment, which is normal in a downtrend. The current retests are are a big deal, but now that OpEx is over I think we can get a cleaner picture as the retest plays out. Sellers are in control here going into the week, can they push through or not yet? $SPY and $QQQ RSI bull ranges are still at a spot they could recover with CFGs pretty low, even $IWM could be a spike, but that would take a lot of heavy lifting by buyers and sooner than later. It’s hard to see that from this picture, but let’s remain open, a successful retest and even a higher low are both viable possibilities if we do see a change in character.
Not much change around the world this week with the RS ranked below still heavily favoring Latin American and Middle East and Asia. The US is still near the bottom and other devoloped nations are no where to be found in the top ranks. Put of the 60 on out ranking list, $QQQ was 3rd from the bottom. $IWM was 8th and $SPY 11th. nothing to write home about. Atleast $RSX was lower than $QQQ. All jokes aside, this is still showing smaller more emerging market countries are starting to get attention for the first time in a while.
Next we look at the Intermarket RS view by ranking all of the asset classes with each other. Commodities still the clear leaders, but interesting to see $USO being one of the bigger lowers for the week. Seems some of those dollars went to other commodities, because they sure didn’t find their way into equities this week. We still feel a heavy OpEx might have had a good bit to do with that, but there are plenty of other reasons that could also be pointed if we are looking. $JNK turned a slight positive this week with $TLT flat which is a small change in character after decent slides in both. Of the two, $TLT at a pretty major support zone on the weekly, a move higher could signal a little relief from the inflation worries, especially if $USO continues to soften as well. The question is whether rising bonds and falling interest rates will relieve some tensions in tech or be seen as another risk off sign. That is where $JNK action might be more volatile but more telling going forward.
This week we separate out the measures we follow by long, intermediate and short term and look at them separately as their message are all slightly different at the moment leaving uncertainty relatively high.
- Longer Term:
- * NHNL Differential is back on full sell signal with end of weak weakness.
- * Advance Decline Line also rolling over some.
- * %>200sma trying to forge another lower high.
- * %>50sma also rejected at 50% level this week for another lower high, could just be consolidating, but bias with trend
- * McClellan Summation rare bright spot still hanging on, but couldn’t totally withstand the weakness as it curls.
- Shorter Term:
- * %>20sma has been trying to hold 50% and pull the others along. Lost that Friday, but still relatively neutral
- * McClellan Oscillator keeps skipping along the flatline. Friday was another close below, recover or fail? if fail see if can diverge.
- * Breadth Thrust still very neutral.
It is the first time in a while that Energy has been down toward the bottom of the performers list; that said, it did hang on to its top RS spot for another week. There wasn’t and change in the top half, just a little juxtopositioning in the lower regions. Materials and Industrials led the week on our equal weighted measures. Metals remains strong pulling materials along. As mentioned above, looks like they got some of the Energy money rotating this week. Growth sectors did the poorest with Health Care getting hit again as it remains on the bottom.
We cover all of this and more in the video at the top of the page. Also look for our Power Sector Review for a closer look under the hood. you can find these and other charts on our Stocktwits and Twitter feed @Power1nvesting and throughout this site.
POWER SECTOR REVIEW:
As the major indexes work their way back to retest the lows, we will keep a close eye in the Macro Review on how that turns out, but while it’s going on we will also be watching the sector and subsector worlds closely. Certainly comparing defensives versus growth and cyclical type investments is one thing to keep an eye on; but emerging relative strength or weakness provide the best opportunities to maneuver the landscape Whether or not the retest holds, this type of battle ground action can help separate strong and weak sectors and subsectors. If the retest does hold, the strongest and subsectors won’t come likely come anywhere near their previous lows and the weakest ones will overshoot. If it doesn’t hold, then defensives will keep their relative strength, but may not show much if any absolute strength. Another leg down would likely take out most of the leaders just as collateral damage. I am not saying that is where we are, just that if we do lose these levels we could see some panic finally set in over the immediate term, which might actually help in the bottom process if it were to happen. While all this plays out, we watch and study sectors and subsectors to keep a tab on where money is flowing too and from.
Slipping back into pink here too as the markets roll from the recent peak. Metals and Food & Staples Retailing the only green showing anywhere. The Power Universe as well as most sectors ended the week with over 20% making new 10day lows showing the selling pressure is broad.
On the sector level Energy and Materials are on top with a defensive posture overall still clearly, but leaning more to the Inflationary side still. While Materials were strong this week, Energy was actually the second worst behind Health Care. Materials and Industriala led the week. Seeing Energy and Financials down on the week could hint at some relief on the inflation side if it gets follow through weakness this coming week. Health Care smacked again this week with biotechnology weighing big on the whole sector, but most of the subsectors were on the worst performers list below, so we can’t blame it all on Biotechnology.
The Three views below give us the RS gainers, top performers and bottom performers for the week. The RSI movers shows some strong weekly performances, but not a large amount of green in the RS table. This shows some of the weaker spaces while still catching some strength in Transportation and Industrial Metals. However, it’s hard to make a big move up in RS when you are already near the top. That is why we also want to look at the absolute performers for the week. High RS can stay high a while. Many of the same names on the second list as the first, with a few variations. The final list is the week’s worst performers. Software sitting right on top, well bottom, while many of the other Info Tech, Communication Services, Consumer Discretionary and Health Care. Those are many of the heaviest weighted sectors so it will leave a mark, but let’s not let it slip by that two Energy Subsectors are on the worst performers list. This is a big change and is worth watching to see how it plays out.
The video will take you through our move down into the sectors that are moving and look at many of the setups based on our 4 pillars of relative strength. Also a quick introduction to the Custom RS scans that allow you to put in stocks, ETFs and mutual funds and rank them versus each other using our relative strength scoring.
POWER STOCK SETUPS:
Below are various names that caught our eye during our research process that might be worth a closer look. It is certainly not an exhaustive list, but should give plenty of names to review and develop a plan around based on your trading style and strategies.
Major high pre-breakout setups and current day Breaks
SEE GATX EAB MATX NTB RS AER SLG
Minor breakouts in a larger range or consolidation in an uptrend
MEI CLS OC ACM ATOM FCFS IOSP THRM TTD HMST ACRS TDC
Breakout setup from a consolidation after a downtrend
WRK GWW JOBS ABG DLX KHC KNSL CLFD SAND
Pullback to potential support zones in an established trend
CSCO SUM TRTN MPWR SMPL
RSI Bull Range Test
Daily or Weekly pulling back to test RSI 40 while in a Bull Range
GEF MLM SLGN GLOB PDCO
RSI Bull Range Shift
Emerging trend with RSI setup to move over 60 after a Bear Range
COMM CTS SON GPK VRTV UFPI REZI KGC SA CMCL INFN XPO R AKR CATO CORT CAKE
Extreme oversold showing short term change in character
All downside setups for near term potential weakness.
GE ICHR SNAP KIDS
Below are verious names that caught out eye during our research process that might be worth a closer look. It is certainly not an exhaustive list, but should give plenty of names to review and develop a plan around based on your trading style and strategies.
Cisco as pulled back from a failed BO that put the daily into a bear range since the beginning of the year. Earnings this week changed that as price gapped higher and held into the end of the week even with the overall market issues. The weekly RSI held its bull range test while forging a fresh RSI Positive Reversal to work with. The Weekly relative Comparative charts in the bottom left shows basing over the last year or so and now reaching the top of the relative ranges well ahead of price. In the bottom right we zoom into the 65min chart with where we see the 5day moving average turning up and Price challenging the AVWAPs from both the highs ad lows of the last quarter. A move over Fridays highs could see solid continuation. If it pulls back to the 56 area I would look for buyers to show up and see if they can defend that level.
Owens Corning gapped higher on earnings helping the daily chart shift to an RSI bull range. After the surge price consolidated into the end of the week, but didn’t give back much so far. The weekly chart still closed strong and looks like it wants to move out of the basing action and start building the right side. The relative comparative chart with the SPY shows a big base break out here as it moved above all the important moving averages including the flat 200sma. Bottom Right shows the 65min chart with the 5day moving average now following price higher and should act as support on pullbacks if buyers are serious.
CommScope working on a trend reversal after strong earnings move that held well into the weakness at the end of the week. Daily chart shows it breaking a long down trend line off the highs that developed this last leg down. As this is happening the RSI is trying to shift to a new RSI bull range on the daily. Now this is tentative, so it will take continuation to fill it out, but that is what we are looking for. Looking at the weekly on the right we see a well defined divergence at the lows and right on the big volume node. With the weekly still in a bear range, we don’t start looking for a move right back to highs, but even a move to the January highs is over 10% from here. This one could pullback some, so be watching for both continuation and pullback entries. Both of the charts on the bottom are 65min views. Price is safely above the AVWAPs and 5day moving average which can be watched on any pullbacks as well as the box area in the chart on the right. A pullback to this zone that finds buyers would be interesting too.
Westinghouse Air Brake Technologies is another name making a big post earnings move that will likely need to be digested in some way, but even if it takes a minute it is setting up a strong weekly breakout that could send the stock to test the highs later in the year. Both the daily and the weekly RSIs are moving over 60 solidifying the RSI bull ranges. The Relative comparative with the SPY made two breakouts on this move too. The 65min level is showing the AVWAPs and 5day moving average are all moving up under price giving some spots to watch if it consolidates or pullback. It can test the gap here, but wouldn’t want to see it closing a lot of it quickly. If so, this likely hangs in this range for a good bit longer.
Bank of NT Butterfield is a small cap bank showing solid strength and paying a 4%+ dividend while you wait to see how this pattern resolves. On the Daily RSI is moving into a fresh bull range after the earnings move right up into resistance. Volume is solid on the move but after that surge it might need to catch its breath before challenging the big weekly level. The relative comparative chart has both IWM and SPY on it showing the relative strength here is not new, but broke out against both recently. The 65min chart in the bottom right has the 5day moving average right up below price, if we lose that, It might head back to test the orange line near the bottom of the surge candle. below that goes back to no mans land.
AECOM is currently forming a pennant in the middle of a large range on the daily chart. During this it moved into a new daily RSI bul range. On the wekely chart a RSI Positive Reversal formed during this action in a strong bull range and price trend. The relative comparative chart is also showing a relative breakout after trending higher for months. It is also notable that the shakout that started this move held right at the rising 200sma. On the 65 minute view in the bottom right we price is above the AVWAs and currenlty tangled with the 5day moving average. a move higher out of this will likel give resolution to the pennat we are seeing.
Ichor Holdings is one of the worse looking semiconductors out there as it sits on a ledge here. This is our short example this week. The daily chart lost the RSI bull range a while back and is now challenging 40 RSI again while the while the weekly chart continues to bounce around below 60. It hasn’t actually lost 40 RSI on the weekly yet, but if it loses this level it will. This is a strong polarity level an may hold, so be tight if you decide to try this one to the downside. The bottom right chart shows you the AVWAPs from high and low of the last quarter as well as 5day moving average (yellow) which are all pointing down. A close over these probably means this thesis is wrong for now.
Cheesecake Factory is working on a trend reversal after the year long weeky downtrend. Daily broke the down trend line before earnings and has seen a mixed reaction since. It is in a fresh RSI bull range and on Nitrous at the moment after moving over the MA bands. Not having a bad earnings reaction to a miss in a tough market may be a message we should hear. The weekly also broke its longer term trend line this week with RSI still in a bear range but leading price handily right now. SPY and IWM relative comparatives are making their own moves supporting the price action too. on the 65 minute chart price continues to ride a rising 5day moving average and well above the AVWAP off the lows which might be a good spot to watch if we get any backfill early week. The negative here is the falling 200sma just above. This might be a battle ground, but a move over would add another piece of evidence to the reversal thesis. A stop on close below 38.50 would cool this one down.
The charts and tickers above are for educational purposes and are not recommendations to do anything. This is just to help show you what we see and then let you take it from there and do your own due diligence. Either build your own trade plan or get with your advisor or broker form one before considering any ideas above.
As always, I hope this helps!