Power Snapshots

June 5, 2024

Highlights:

    • Small caps are testing the gap with Energy, Metals and Regional Banks a big drag.
    • Big RS Rotation on the Sector level.

Not really a lot to say. $IWM trying to drag things down while $SPY and $QQQ hold on tight. It was a pretty narrow today from a breadth standpoint, which makes sense with the $IWM weakness. I thought we might avoid a hard test of the RSI bull range for $IWM, but if it loses the top of this gap, a hard test gets a lot more likely along with a big gap close.

On the intraday level, you can see $IWM tested the 60 level on RSI on the gap up failure showing a rejection of the potential RSI bull range shift. Broader markets weren’t ready.  Large caps are pretty narrow too, but it is more than just $NVDA working. In the last couple of days, the rotation we saw into small caps last week is trying to leak out already.

There were no sector winners, but the least losers were Utilities and Real Estate while Materials (led by metals) and Energy were the anchors. What is a little more interesting to me is just how much rotation we are seeing in the RS rankings now that we are about more than a week in to this chop. We will see if it sticks, the shift is showing under the surface for now.

The selling today saw a lot of concentration in commodity subsectors and it is showing here. No short term strong spaces left at the moment and only a few still reading strong on the longer term measure. We have been basically sideways long enough for many moving averages to flatten out causing more crosses, but we still don’t want to start seeing too much pink or red on here. Regional Banks being an example; this looks like more than just flat moving averages, the space has been struggling even when the sector shows strength.

Moving more to trendless for the moment. Technology still the only oversold readings as of yet. More just stuck in the middle.

Sellers are still outpacing the buyers here to put some pressure on. Materials and Energy look the worst with Financials and Industrials just behind. 

Same spaces already mentioned got most of the selling pressure. Only buying pressure was in Telecom which is seeing some turnaround attempts by some of the big names and Water, Utilities subsector which has been lagging in the strong sector, but also only has nine components, so any changes there often seem magnified compared to other subsectors.

Telecom one of the stronger sectors here and in recent days has been sneaking up. It is a defensive with the other few instances of green here. That said, they are still worth looking closer as they show strength in a tough market.

Unfortunately, today’s hit job on the broader markets has pushed it back to recent lows and the percentage of new lows is starting to spread to the longer time frames. Unless you are looking for short term washout plays, I would be looking where the least are showing. Health Care seems to have made a shift recently after being a weak link here for a couple of months. Utilities strength has been noted and Real Estate is holding up ok on this sell day as well. Small, but incremental clues we can use to sharpen our watchlists for the next move.

The Wrap up

It was another sell day in the broader markets, but small pockets of strength helped $SPY and $QQQ eke out a gain, the rest of normal selling in most places with another day of heavy pressure on commodity plays. Today Energy selling took a back seat to Metals. These were notable days of selling and could usher in a character change in these two if it continues. This would go with the big character change in the equal weight sectors as a whole over the last week. The number and magnitude of shifts on the list today are striking and do fit with what we have been noticing in these reports along the way. 

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As always, I hope this helps!