Power Snapshots

July 7, 2024

Highlights:

    • $SPY and $QQQ are getting extended on all 3 time frames, but can push further.
    • $IWM still in RSI bull range all three time frames, surprisingly.
    • Mid-week saw breadth bounce, but narrowed back out quickly.
    • New Highs and New Lows oscillating denotes broader indecision.

Large cap indexes continue on an impressive run and aren’t showing much for signs of slowing other than volume. Not just on the holiday week, but in recent weeks. Volume is a secondary indicator at best these days, but price isn’t relenting. Breadth has also been questionable narrowing a good bit in the large cap world while slightly expanding or holding its own in the broader Power Universe. Even still, $IWM is still struggling to get any traction as the symmetrical triangle tightens up. $IWM can go either way, but considering the major trend is still up and the other two look like they do, it’s likely to follow eventually. That said, CFGs on the $SPY and $QQQ are getting elevated, so some cooling off could happen at any time.

It’s a similar position down here on the daily charts; strong trends that might be getting a little extended, but aren’t out of hand by any means. Still could see an extension from here or a stiff correction anytime. Then there is $IWM, stuck in the mud here too, just spinning and not going anywhere.

Intraday we are definitely short term extended, but as mentioned above, it could certainly get more extended. CFG are curling over while RSI is negotiating the 80 level on both $SPY and $QQQ. $IWM is trying to pivot up above the 40 level keeping the RSI bull range alive, even if seemingly lifeless.

Technology is starting move out versus the pack. With Semiconductors and the AI trade in general, it has already been leading, but now with the two lagging subsectors of IT Services and Software coming on, the sector has pulled ahead. Communication Services is now in second on the RS list as it is a first cousin to the Tech world. On the downside, Industrials and Consumer Discretionary had the roughest ride (don’t tell $XLY as it broke out on the week). That is real the story and right now with the concentration it feels like none of this matters, and at the moment it doesn’t, until it does. And eventually, it always does.

Financials saw the most progress this week until backing off to end the week. None of this is changing much at the moment. Materials are seeing Precious Metals and Industrial Metals to a lesser degree stand out as the rest of the sector languished. Consumer Discretionary, I mentioned the $XLY breakout, but looking at the sector as a whole, it is clear the concentration in that fund via $TSLA and $AMZN is ignoring the rest of the space. 

From a momentum and RSI trend standpoint, Technology and Consumer Services led here too, but Financials and Real Estate are still in the mix as well. Consumer Service ETF $XLC also has a lot of concentration with $GOOGL and $META, but the rest of the subsectors here are faring better than in Consumer Discretionary. Heck, even Telecom has been contributing.

Short-Term Breadth started the week with a lot of pink and red on the page and improved into the holiday. When we returned Friday, selling came back in the broader market while the concentration from Mega cap tech yanked the $SPY and the $QQQ higher.

The week started and ended with some selling pressure, but for the most part, it was just less liquid holiday action. 

Mid week we saw new highs starting to climb again and populating in hot sectors. It faded a good bit in places like Energy by the end of the week.

 

Opposite the new highs, on Tuesday and Wednesday, the pink began to diminish, but Friday it started to come back. Monday was also a considerably poor showing for the first day of the quarter, at least for the broad markets. The rub here is these last two sheets bouncing back and forth with color across the time frames for a couple of weeks now is a different way of showing the indecision in the broader markets. We are still in RSI bull ranges, but not going anywhere fast.

The Wrap Up

The week was sideways to down again to start the new quarter or strong if you were in the right capitalization weighted ETFs. If you were in the wrong ETFs, cap weighted or not, you underperformed. If you are not as concentrated as the $S&P 500 right now, you probably are underperforming, at least in the short term. Keep your head about you and keep executing your plan on your best ideas. Leaders will pull back or consolidate in time and eventually they will be on the best idea list, but until then, try not to chase, and if you do chase (which is necessary with the right conviction sometimes), make sure your plan is tight, you know where it is wrong without a doubt, AND you are ready to execute without hesitation. If not, concentrate on waiting for your particular edge to return.

This information is for educational purposes only and is not a recommendation. Please see the full disclosure in the footer.

As always, I hope this helps!