Weekly Macro Review

January 28, 2024

The expectations were low for this week coming off last week’s big OpEx with many expecting us to start a correction in earnest. That didn’t happen and all the majors gained on the week. Overall, you have to be impressed with the resilience here, which suggests to us that when we do pullback, it will more likely be a pause that refreshes. As always, this can change with the data, but the data is very supportive here for most timeframes.

Triple Play Review

Beginning with the weekly chart, we can see that all three made gains this week. $SPY $QQQ are extending their breakouts after a tiny back test. $IWM held where it needed to and lead the rotation again this week completing its candle reversal pattern. Now it just needs follow through in the coming weeks. RSIs are all in strong bull ranges pointing higher with the larger two currently on Nitrous and the small caps almost there. This hints, while many are crying overbought, we have just as good a chance of seeing acceleration for a few weeks. Will be fun to watch which comes about.

The daily view shows us that even with the weekly gains, it wasn’t a cake walk. $SPY looked the strongest, but the leader $IWM was a mess after Monday and $QQQ put in a small reversal pattern on Friday. This small reversal is worth watching how it develops with things extended; but it is in the context of strong RSI bull ranges that have $SPY $QQQ on Nitrous with $IWM holding its own RSI bull range and shoring up quickly. With such concentrated weightings, it would be easy to see $SPY $QQQ pullback with weakness in the mega-cap Tech names that have run so hard.  While at the same time seeing great rotation under the surface in names large to small as confidence comes back and concentration can morph into participation into the spring. This is just one scenario among many that could play out and provide some great opportunities under the surface.

Looking at the action over the last week on the 65 minute level, you can see it was a volatile week with a strong start that was challenged through Friday. Post OpEx weakness was expected and the markets resilience showed as sellers tried to take hold and never really got traction. $QQQ faded the most after a strong start with some of the Major names finally showing some fatigue and may be ready for a rest soon. We would continue to look for rotation and pay attention to the participation during any headline weakness that develops. 

World and Intermarket

Looking over the World ETF rankings, we see $ARGT Argentina has taken over as the RS leader and makes some sense if you listen to their new President. Most of the US majors are also making a showing in the top lists. The RS Movers list below it gives a little different set of ideas depending on what you are looking for. $ARGT breaking to highs with an improving outlook.

Intermarket and Size & Style

Intermarket list remains more than favorable for equities. We just want them in the top half of the list, leading in the top four positions is as good as it gets. Size and Style list showed a little jockeying this week, but the message is still pretty clear. Growth is leading top down and value is just taking it’s shots where they can. It’s a strong uptrend lifting all boats, values are just less buoyant right now. In a pause or digestion with a strong structure like we have could be targeted to the names that have run the most while spreading out among other worthy, but less noticed names improving the breadth picture even while the majors rest. 

Sector ETF by Size

So, these three sector ETF lists are at the bottom of the Macro Page. I believe this section is a hidden gem giving a solid look at where major sector movement is happening. Looking at these three sets of sector ETF RS lists side by side can give a deeper view of the internal rotations in the markets without the skew from the Mega-cap names. Using these as a market guide even if you don’t trade them helps set you up to focus on the right areas. In the Weekly Sector Reviews, we go deeper and look at our EW sector lists and drill down further into the subsectors and industries leading them. Currently we have had Health Care, Financials and Information Technology leading, but if Tech or the other two decide to take a rest, it’s starting to look like Energy, Communication Services and maybe Industrials warming up in the wings. On the sector level there are many individual spots doing well, but these are the best looking on the sector level at the moment.

Power Universe

The Power Universe EW index held up well this week, but remains below the highs. This 3000+ index we build daily is in its own RSI bull range and pulling higher after finding support on the rising MA bands. The breadth picture also gained ground during the choppy week. We can see here the MA Breadth measures improving on all 3 levels, while the McClellan Summation Index has flattened and could turn higher soon if the McClellan Oscillator just below it can keep its head above zero here.

Wrap Up

Markets sputtered a bit at the end of the week if looking at the major indexes while breadth under the hood not only held strong, it actually improved in the chop. That suggests to us there are more setups if we can get beyond the popular names. Yes, most stocks move in the direction of the “markets,” but these days with the concentration we have in many indexes, that definitely depends on what you use for that market proxy.  When drilling down, don’t forget, these markets are still growth driven and size has mattered a lot for a while now giving the biggest companies a big edge. Many are talking about the broadening of the markets lessening that edge which we agree with, but the question really is how much will it lessen with such a big gap between the two segments on many levels. 

You can find many of these and other charts throughout the power-investing.com site and through our Stocktwits and Twitter feeds @gtlackey and @power1nvesting.com. Anything mentioned is for education purposes only and 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!