Power Snapshots

July 1, 2024

Highlights:

    • Triple Play Charts over 5 time frames are all in RSI Bull Ranges.
    • Information Technology takes back the top spot and is starting to hit on all cylinders.
    • Real Estate continues to improve and nears a breakout from a long consolidation.
    • Breadth improved second half of the week

As the quarter comes to an end, we look down from the 50,000 foot view with the quarterly chart all the way to the 65 minute intraday chart. All three on all time frames are in RSI bull ranges. I might should just stop there and move to the next section, but let’s add a little color here to see what’s really going on. Top level is strong bull trends with $IWM showing a new divergence being down this quarter a bit, but RSI is still above the 60 level for now. $SPY and $QQQ have elevated RSI, but the price candles remain strong for now showing no sign of reversal.

The monthly charts are marching higher on $QQQ and $SPY regardless of breadth. Both in RSI bull ranges on Nitrous with both indicators moving north. $IWM is still in a bull range and back challenging 60 to solidify this move off the November lows. Small caps are definitely the anchor, but they really have only stopped themselves. The other two majors’ concentration has propelled them without much drag.

Moving down to the weekly chart, we start to see a little more actionable detail. $SPY and $QQQ candles with tails the last two weeks are a warning sign the momentum is waning and buyers are getting a little tired. At the same time, $IWM has put in two solid candles to close the quarter. It could have been just end of quarter squaring, but looks more like some rotation beginning. That doesn’t mean the two big boys can’t eat those wicks and move higher. It could have been just the rest they needed, but be ready for a break lower here to give them a little time to rest and set back up while the small and mid caps play some catch up. The rub is, with the current concentration in the $SPY and $QQQ, any pullback could be entirely driven by the handful of concentrated names that led us up here while the other 475 or so (using $SPY as an example) get some love under the surface.  

This divergence between $IWM and the other two gets more stark as we drop down another level. As I mentioned at the top, all of them are in RSI bull ranges, but $SPY and $QQQ have been in strong trending bull ranges while $IWM has barely been holding on to its range during this flagging action. $IWM looks like it might be setting up an Inverse Head and Shoulders continuation pattern here in this mess. Rotation from the largest most concentrated leaders to the broader market would be very healthy here while everyone concentrates on the leaders “potentially” faltering. Don’t concentrate as much on where the money is coming from as to where it is going at this stage of the bull market.

Down to the intraday level using the 65 minute chart gives us a good view of shorter trends without getting into the weeds of the 15 or 5 minute charts. $SPY and $QQQ are still in RSI bull ranges, but nearing hard tests of the 40 level if we see anymore intraday weakness. Of course, the shorter the time frame we look at, the more volatile the indicator is and the more amplitude we see in the swings. This level has a good bit of both. Both $SPY and $QQQ are on watch for a RSI bear range shift if the 40 levels don’t hold. $IWM on the other hand is catching some needed momentum at the moment and is looking more solid in its current structure.

Information Technology is back on top and if you saw the equal weight sector chart I posted on X this weekend, you can see why. It is the strongest right now and seeing broad strength here since IT Services and Software decided to get it in gear the last two weeks. Financials (also posted that one) has been steady Eddie all spring by never really pulling back much at all. Regional Banks have been the anchor which lifted a little this week helping it gain a few spots on the list, but the big mover was Energy as it put in a strong week and was the second best performing sector for the quarter behind Financials. This doesn’t show as much on the surface when you have the big indexes so concentrated, but does let us know there are other fishing lanes out there that are working. On the weaker side, Materials, Health Care and Consumer Staples are at the bottom. This is not a defensive market by any stretch.

Real Estate and Financials are seeing the best positioning again this week.

This was more of a meandering week for momentum with no big moves. Improvement in the second half of the week came in most spots except Materials which is getting mildly oversold here with 9sma of RSIs in the 30s. It can go lower, but I will put it on the radar to watch for some better action there soon.

Short term breadth started off shaky, but put in the work to show not only improvement, but some outright strength by the end of the week.

This week showed some vigor on Monday and Tuesday when it comes to buying and selling pressure, but after that calmed a lot into the second half of the week and the end of the quarter.

Highs started to disappear during the week, but came back strong on Thursday and Friday to finish strong. Pay attention to who spreads across the timeframes first to see if $IWM continues to re-emerge here.

 

In opposites fashion to new highs, this one saw a flare up on Tuesday and Wednesday, but had calmed a lot by Friday. This is how we want to see these last two sheets working together. To have a lot of new highs and lows at the same time in markets is not ideal and shows a lot of indecision and potential trouble lurking. That is not how it was shaking out to end the quarter here.

The Wrap Up

A strong quarter for the major indexes while the broader market was more in consolidation mode most of the time. The chart alignment is bullish across all time frames, even up to the nosebleed section, but as we zoom in we can see some potential rotation back into the broader market names as the leaders see profit taking. This is the kind of rotation we want to see, but don’t just look at it as sector rotation because we are seeing a lot of rotation within stronger sectors already. We are also just starting to see size rotation, but that is still very early and we need to see more progress on the breadth scene which we will look at more in the Macro Review. All in all, markets start the new quarter on good footing with a great opportunity to broaden out here in the second half of the year.

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As always, I hope this helps!