Weekly Macro Review

July 8, 2024

Charts That Matter

The rotation toward the broader market didn’t happen once again. The new quarter didn’t bring much new in the first week. $IWM got hit hard Monday and then stayed within that range the rest of the week. It had a little fight, but closed the week closer to the lows than the highs. $SPY and $QQQ kept moving higher as more Mega Caps join the party pushing these indexes higher with rather narrow participation. As I mentioned in the Power Snapshots, $IWM remains in a bull range on all levels, but can’t seem to get anywhere right now as the weekly symmetrical triangle continues to coil. Right now, all the flow is going to the largest companies. If/when that changes, it should seep into other areas, but we can’t say when that will happen. Most have expected it for months now and it continues to push out. The whole gap between the Large and Small caps is the widest it has every been, and is likely to close a portion of that gap at some point, but there is a question if it can fully be closed at this point with the momentum and structure the markets are moving to.

$TLT had a horrible Monday continuing the previous week’s dive, but it came right into the downtrend line we have watched for so long and bounced. That also happened to be right at the RSI testing the 40 level and the bull range. It held for now and bonds bounced hard the rest of the week. The weekly chart continues to try and negotiate its larger downtrend line and the MA bands that it keeps getting rejected by. There is a lot of congestion in this area, but if bonds can clear it should test the 100 level and then beyond as the FED begins to acquiesce on rates. Improvement here should be a tailwind to the broader market and could be a bigger catalyst if the breakout occurs.

During this malaise, it seems the new lows continue to fall, but are still outpacing highs. Speaking of highs, they just aren’t going anywhere showing the narrow nature of the current move. It’s interesting to see the longest timeframe (1yr highs) has seen its new highs slowly climb in the last couple of weeks, but Friday also saw this measure slightly break the trendline on the readings. Slightly. The rest of the measures are just not getting any spikes worth noting on the up days, only on the down right now.

Power Universe

As much as it stinks to watch the broader market languish while the large cap indexes and the hot names run the way they are, the Power Universe isn’t really doing bad here. It’s just not participating much in the upside. It’s also not participating much in the downside staying in a pretty tight range around 3% or so over the last month and still well above any concerning retracement levels. It really is just stuck in the mud for now.

The breadth picture was mostly neutral this week after showing some improvement in the shorter measures in the previous two weeks. This was enough to keep the NHNL and its moving averages positive and it also was enough to get a buy signal out of the McClellan Summation Index right at the flatline which can be a great signal, but once in a while it can fail like we saw in September 2023. Most of these indicators are currently in no-man’s land though, just waiting for the next catalyst to usher in some change. That change can come in either direction, but the major trend continues to be higher even in the muck.

Relative Strength Rundown

Global Relative Strength

World ETF leaders put in solid weeks with many of the same names returning this week. Happy to see $SPY and $QQQ still on here. We also saw $EWUS and $EWO join the mix. RS Movers are a smaller list this week. $EPU showed up on the list as a previous leader trying to re-emerge after a healthy pullback into a small base that is now breaking back higher.

Intermarket and Size & Style

The Intermarket picture continues to be more bifurcated than I have seen it in a long time. It seems like a free for all right now with very little asset class clustering happening. Hopefully, the new month and quarter can get some clarity soon. Right now, it’s just a hodge podge. $SPY and $QQQ are up at the top with $SLV. Commodities as a whole had a good week. Even $DBA was just not enough to move the RS needle.

Big Growth names are leading the way. It is more than seven names moving this, but there is a lot of size still in this trend. Look at how far out in front they are on the monthly and quarterly basis. These spreads are really big versus normal. There is no limit on how big the spreads can be, but I am on watch for some narrowing, one way or the other.

EW Sector RS Rankings

Information Technology is a pretty clear leader over the last month and has now taken the top spot performance wise for the quarter. Communication Services moved up the ladder to the second spot this week. Real Estate and Financials rounded out the top four RS rankings. The Losers for the week were Industrials and Consumer Discretionary, but as mentioned in the Power Snapshots, don’t tell $XLY as it broke out on the backs of $TSLA and $AMZN. There were other performers, but these two dominate the ETF in weighting. Utilities ETFs have pulled back to an interesting spot, but so far the sector as a whole is playing defensive again.

Wrap Up

The week went to the large caps again, no more broadening from a performance perspective. The breadth actually showed a couple of positive signs we noted, but not enough to move our equal weighted universe or any of the small or midcap ETFs. Mega caps and Large growth continued to soak up the funds. The breadth may be a precursor to a little rotation back to the broad market, we will have to wait and see. Large Caps are getting stretched a little and could weigh on things if they decide to see more profit taking, but it is still to be seen if those funds will go to cash or into the broader tape. It could be fast and sharp or meandering. With lighter summer volume, volatility could increase more from day to day, but I am looking for some type of digestion in the near future after this last extension from $SPY and $QQQ, at least at the top.

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!