Weekly Macro Review

June 24, 2024

Charts That Matter

The majors started the OpEx week with some strength, but as the week went on a little air started coming out of some of the big AI names as well as other Info Technology larger names. It wasn’t enough to turn it negative for the week, but it did lay down some interesting groundwork for the week to come. There was a lot of option premium that rolled off this week giving a chance for some softness into the end of the week/month/quarter. This would not be unusual at all for June. $SPY was right there with the $QQQ, but didn’t give back as much due to the broader nature of the index. We will see below, and even better in the Power Snapshots, that breadth actually improved each day this week, even as markets retreated a little towards the end. $IWM started the week on the defensive and put in a bullish engulfing pattern right on the top MA Band. Some follow through from the little guys this week would be welcome as the large cap indexes rest. A little worry in the large cap indexes while the markets broaden out underneath the surface would be perfect, but right now that is just a wish. We have strong uptrends in two of the three and the third one is not ugly, just treading water recently, so at this point any weakness would still be considered a counter trend here as breadth remains neutral overall.

$TLT is consolidating the big move up to 94 with a pennant this week on the daily after the RSI solidified the RSI bull range. On the weekly we are just now peeking above the down trend line and into the top MA band here. This is the first time since this down trendline was drawn that we closed two weeks above it, now we need to move away from it.

This week’s breadth action is hinting at the markets broadening back out here. We saw sideways action all week in the Power Universe while the new lows contracted across all measures, not just the shorter ones.

Power Universe

The Power Universe went sideways most of the week after drifting down with small caps recently. It is still in a RSI bull range and came down near a test to end the last week before turning up a bit this week on RSI and CFG.  The CFG put in a divergence versus the Price and RSI which also hints at momentum moving back here potentially.

All the measures are and have been fairly neutral over the recent weeks with only the shorter measures reacting more, but even those could be considered more neutral than bearish. This week saw all those shorter measures improve all week. While it didn’t invigorate the intermediate and longer measures, it’s a start. A lot of money has been made in runs like $NVDA, just simple profit taking there that spreads to smaller names can fuel this bull market for a while if it has the confidence in the trend to stay involved.

Relative Strength Rundown

Global Relative Strength

$US large caps stayed on the list this week again, but the African ETFs showed the largest gains and joined the top RS list this week. I would also note that EEM joined the list as the chart continues to shape up after back testing the weekly breakout level successfully.

Intermarket and Size & Style

Intermarket RS is a good bit more mixed at this point than we are used to. We have commodities all over the place. $USO shined this week as a big RS mover while $DBA got whacked. $IYR is levitating with $TLT finally here and in the EW Sector RS Rankings. $SPY and $QQQ held onto their top spots while $DIA and $IWM remain in the bottom half. Finally, $TLT has made its way up to the 3rd spot.

Value saw the best gains for the week as large and mega growth both were positive, but not leading. As much as we want to see rotation, it is only going down so far. $VBK and $IWC were still the worst performers even with $IWM holding up a little better at the end of the week. If the markets do broaden out, it doesn’t have to go all the way down the chain. It could stop at mid caps or even broaden out just in larger names, there are still plenty of those that haven’t been getting any love either. This list will help us track the movement regularly. It can be especially helpful to pay attention on big up and down days to see where that money went to or came from.

EW Sector RS Rankings

The sector world was still a bit of a mess this week, but with the Power Universe eking out a slight gain, the negative tilt here is interesting. Only two sectors showed gains, Financials and Consumer Staples, and 4 of the 11 were down over 1%. Real Estate almost made it green as it jumped up to the top of the RS rankings list. This is a good case study to show why we use RS and not just price action alone. Over the 3mo, Utilities have performed better than Real Estate on an absolute basis, but when we use our RS overlay to weight the performance during that time period, the reason Real Estate takes the top spot is the distribution of returns are showing decidedly better returns over the more recent price action.  Real Estate is something I have mentioned for a couple of weeks now and it has performed well; now I am seeing many prominent names in the space show big weekly patterns being challenged as the whole space improves with the expectations for lower rates.

Wrap Up

It took us deep into OpEx week before we started seeing some cracks in the hot names that have seen so much options flow this quarter. It wasn’t a major issue, but the jockeying left some profit taking that built on itself into the end of the week. Under the surface, the $IWM and our Power Universe were shoring up a bit as the myopic attention in the markets started to widen out. We enter this week with a little caution going into the quarter end, so we aren’t expecting too much as far as direction, but we very well could get a lot of information on any potential rotation going into the second half of the year.

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!