Weekly Macro Review

January 21, 2024

We are back!


After a long haul without charts, I have found a new programmer and we are back on track; and not a moment too soon by the look of the markets. We don’t just have our charts back, we are making updates and improvements every week to make the site faster and easier to use. It won’t be long until we will be ready for memberships, but until we dot those i’s, cross those t’s and polish a few things, our reports, on all levels of depth, will be available here and through our email list. If you previously signed up for the list and don’t start getting emails soon, please sign up again or reach out so we can get you back in the loop. Also, we would appreciate you sharing this with anyone you enjoy talking markets with.
I am excited to be back and look forward to building the content to make traversing these markets easier for all of us.

Triple Play Review

The markets put in a strong week in two of the three majors we follow in the Triple Play Charts, $SPY and $QQQ look great here, but $IWM has been the clear laggard since the start of the year after leading last quarter, and with both price and breadth thrusts we haven’t seen in a long while after testing the pattern lows.  A pullback here in the $IWM isn’t the story, the story is how shallow it has been so far at right around the 38.2% Fib retracement levels and the previous breakout zone. It seems many just don’t like that it matched some of the velocity we saw on the way up as it currently pulls back some. However, this week’s hammer here in the small caps bodes well as it tries to shore up near the recent breakout zone. On the other hand, the big boys in $QQQ and $SPY have broken out from their Cup and Handle Patterns and aren’t really looking back much yet. I was expecting more of a pullback or digestion, but so far it hasn’t come, and these RSI readings are not overbought in the grand scheme of things. It could lose momentum and correct more whenever, but this weekly chart looks very strong on both $SPY $QQQ. Longer term this sets up well for the markets.

The daily charts have done an exceptional job of working off the end of year froth on the RSI while holding the RSI bull ranges the whole way.  $SPY and $QQQ are breaking out to end the week showing very little fear of holding stocks over the weekend here. Of course, OpEx had a good bit to do with some of the wilder moves and volume, but whatever wrapper you put around it, they broke out on volume and that is a bullish sign. Historically, the week after OpEx can be pretty weak, so we will be watching to see how that perspective weakness actually plays out.  It should give us some great clues on where we are in markets current move higher and how much rest they are willing to take here. Even $IWM held the RSI bull range well, on this daily level, with the abrupt zig-zag pattern it has been filling out.  Patterns can morph, but with the breakout in the other two, I would expect some catch-up both relatively and absolutely in the coming weeks. Markets don’t care what I expect, so let’s see what happens.

The 65 minute charts showing the patterns building under the surface, especially in $SPY and $QQQ. Since, the $IWM didn’t really participate until Friday, it still has a good bit of heavy lifting to do.  $IWM is on the verge of a RSI bull range shift if it can clear RSI 60 early week and not look back much.  $SPY and $QQQ broke out into solid RSI bull ranges and both hit the nitrous on Friday about mid-day, this type of momentum could easily carry over into the start of the week pulling $IWM over the hump with them. If not, the the current digestion isn’t likely done yet.

World and Intermarket

World 3mo RS Rankings show $QQQ and $SPY in the top rankings, but some less than usual suspects have been performing well. As far as developed countries, not real incentive here to go venturing too far outside US with our setups. There are certainly opportunities, but make sure you are able to assess the (outside the charts) risks if you want to diversify some here.

Not to get giddy, but the Intermarket setup just doesn’t get much better than this for US equities. This will bounce around some, but this is the first time in a long, long while we are seeing 4 of the top 5 RS rankings going to equity indexes. I wouldn’t ignore this from a longer perspective view that things are shaping up in a bigger way than we have seen in a good while. Commodities at the bottom also bodes well for the inflation picture which can fuel this markets positive structure going forward. 

The Size and Style ETF RS Rankings are telling us its a growth world again among the 3mo (shown here), 6mo and 12mo RS Rankings lists on this subject. This is especially true the larger the capitalization ETFs. Small growth isn’t quite as strong as the rest as we go out to the longer measures, but can we really be that surprised about that considering? I don’t think  so. The list is currently, Growth to value with a top down structure.

Power Universe

The Power Universe currently consists of 3,057 (changes daily) stocks broken into equal weighted sectors and subsectors we build ourselves. This shows the current RS rankings on the sector level. Health Care is in the top spot and a sector with a lot of holdings. On the subsector level, which we will talk about more in the weekly sector review, Biotech has been the leader here after years of poor performance with Pharmaceuticals trailing it some, but Medical Equipment and Devices is starting to show some life as well. Back to the sector level, Information Technology and Financials are just behind. These three spaces are great places to focus if you are looking for continued strength.  It is also notable that Consumer Staples, Utilities, Materials and Energy are all near the bottom. It may be an even bigger sign that inflation pressures are really abating and the above growth reading from the Size and Style is on the mark. When defensive sectors like these are at the bottom of the RS rankings, it’s hard to be too bearish. Consumer Services was a leader most of last year that has pulled back in the short term relative strength readings as we start the year. Looking at the chart of the sector, subsectors and some constituents, price action is digesting some big moves so far, and doesn’t look too concerning. Overall, this list’s structure also favors and supports the strong equity markets we are seeing.

Wrap Up

The markets start the year with an abrupt drop after running strong into the end of 2023, but caught themselves quickly and are trying to continue the trend started in early November. We shouldn’t be surprised that small caps pulled back the most after running the hardest off a big breakdown level was tested. This is all just part of how technical analysis works, and it does work as long as you are paying attention and willing to adjust with the charts.  This top down view of the macro side of things leaves us optimistic as we go into the week, but watching to what reaction we get to expected further weakness after such a big OpEx last week. The answer should be telling once we observe it.

You can find these and other charts on our Stocktwits and Twitter feed @gtlackey and will be reviving the @Power1nvesting feeds in the future.  You can also find these charts and tables throughout this power-investing.com website. Anything mentioned is for education purposes only and are not meant to be recommendations to buy or sell any securities. Please see the full disclosure in the footer for more information.

As always, I hope this helps!