In this video from StockCharts TV, Julius takes a deep dive into US sector rotation, breaking it down into offensive, defensive and cyclical sectors. He first looks at the relative rotations that are shaping up inside the group, assessing each sector’s price chart in combination with the rotation on the Relative Rotation Graph to get a complete picture. This all culminates with the chart of SPY, which is showing a lot of strength recently. Going forward, the crucial question will be whether SPY can rally further without the participation of technology, the most important sector in the universe.

This video was originally published on November 27, 2024. Click anywhere on the icon above to view on our dedicated page for Julius.

Past videos from Julius can be found here.

#StayAlert, -Julius

In this video from StockCharts TV, Julius takes a deep dive into US sector rotation, breaking it down into offensive, defensive and cyclical sectors. He first looks at the relative rotations that are shaping up inside the group, assessing each sector’s price chart in combination with the rotation on the Relative Rotation Graph to get a complete picture. This all culminates with the chart of SPY, which is showing a lot of strength recently. Going forward, the crucial question will be whether SPY can rally further without the participation of technology, the most important sector in the universe.

This video was originally published on November 27, 2024. Click anywhere on the icon above to view on our dedicated page for Julius.

Past videos from Julius can be found here.

#StayAlert, -Julius

The 10-yr Treasury Yield reversed its upswing with a sharp decline and the Home Construction ETF (ITB) reacted with a noteworthy gap-surge. Today’s report analyzes the yield, the TBond ETF (IEF) and ITB.  The 10-yr Treasury Yield plunged as Treasury bonds surged on the heels of a new nomination for Treasury secretary. These moves lifted small-caps, banks and homebuilders. Banks have been leading for some time and small-caps started their move last week (as noted in Chart Trader last week). Homebuilders held out for interest rates and got their catalyst on Monday. The only concern here is that the move in Treasuries is a knee-jerk reaction. Follow through would confirm the validity of these short-term reversals.

The first chart shows the 10-yr Treasury Yield ($TNX) in the top window and the 7-10 Yr Treasury Bond ETF (IEF). $TNX is the yield multiplied by 10. I used this version because it is updated in real-time, as opposed to end of day. $TNX and IEF are mirror images. The 10yr Yield is within a large falling channel and the 7-10Yr T-Bond ETF is within a large rising channel. The yield falls when the bond price rises.

These two caught my eye because they reversed the swings within their respective channels. $TNX fell sharply to reverse the upswing, which extended from mid September to mid October. This means the short-term trend (down) is now aligned with the long-term trend (down). On the flip-side, IEF surged and reversed its downswing. This means the short-term trend (up) is now aligned with the long-term trend (up).

Small-caps reacted to the plunge in yields with a surge the last three days. Actually, small-caps started moving higher before the 10-yr Treasury Yield surged and we noted this in the Chart Trader report on Thursday before the open. Moving to this week, the Home Construction ETF (ITB) also caught a strong bid as the 10-yr Treasury Yield fell on Monday. ITB gapped up and surged 5% on Monday. 

Next we will analyze the charts for ITB and five home builder stocks. This members-only report covers the long-term trends, medium chart setups and the recent momentum thrusts. 

Click here to join and get two bonus reports!

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If you want big returns, I’m convinced you’ll find them in small caps. When I make bold predictions, and many of you know that I do fairly often, it’s usually supported by long-term perspective. Most everyone has a negative bias towards small caps right now, because they’ve underperformed so badly the past few years. But I use perspective on small caps just as I did in 2022 on the large caps. Let me use the S&P 500 as an example:

Do you remember how bullish sentiment was at the end of 2021? We had the most complacent readings EVER on the 253-day SMA of the equity only put call ratio. And we had an “overshoot” on the S&P 500 outside of the secular bull market channel. That left the likelihood of little upside and the potential of plenty of downside to test the “middle” channel level where most corrections and/or cyclical bear markets end. At MarketVision 2022 in January 2022, I discussed the very real possibility of a 20-25% cyclical bear market decline to last 3-6 months and this was a chart that supported my theory. There were other reasons as well, but I’m focused in this article on perspective and the benefits of having long-term perspective and not being overcome by short-term recency bias. We actually saw the cyclical bear market drop 28% and last 9 1/2 months. It wasn’t a perfect call, but it was pretty darn solid.

Notice that those tests of the blue-dotted “middle” upslope line are excellent opportunities to jump in for what’s likely to follow – a strong uptrend to return back to the upper channel line.

So how does the small cap IWM look right now:

The blue “percentage change” shows 52%, but this is measuring a 4-year period where price action simply follows the bottom of the slope. However, the maroon “percentage change” shows what happens if you increase at a much, more rapid pace from the blue-dotted “middle” upslope line to the upper solid blue upslope line, in this case rising 112% – more than twice the rate if you simply go along for the ride with the slope. I believe the IWM has just begun a very significant rise back towards its upper channel line. I won’t be surprised if the IWM hits 400 in 2025, which would represent nearly a 70% return. This type of a move would be no different that what we’ve seen in the past on both of the above charts.

Again, to make these types of predictions, you have to be willing to ignore what’s happened recently (check your recency biases at the door), and focus on what the long-term channel is telling you. Could I be wrong? Absolutely. But I firmly believe small caps will continue the leadership role we’ve seen of late, significantly outperforming the S&P 500 and NASDAQ 100.

I’m writing a special EB Digest on Friday and highlighting a small stock that I believe could TRIPLE over the next year. Our EB Digest is our FREE newsletter that requires no credit card. You may unsubscribe at any time. To claim this small cap stock on Friday, simply CLICK HERE to sign up for our FREE EB Digest newsletter.

Happy Thanksgiving everyone and happy trading!

Tom

In this video from StockCharts TV, Julius takes a deep dive into US sector rotation, breaking it down into offensive, defensive and cyclical sectors. He first looks at the relative rotations that are shaping up inside the group, assessing each sector’s price chart in combination with the rotation on the Relative Rotation Graph to get a complete picture. This all culminates with the chart of SPY, which is showing a lot of strength recently. Going forward, the crucial question will be whether SPY can rally further without the participation of technology, the most important sector in the universe.

This video was originally published on November 27, 2024. Click anywhere on the icon above to view on our dedicated page for Julius.

Past videos from Julius can be found here.

#StayAlert, -Julius

The day before Thanksgiving, the stock market took a little breather. But the weekly performance was still impressive.

The Dow Jones Industrial Average ($INDU) remains the broader index leader, rising 0.96% for the week. The S&P 500 ($SPX) and the Nasdaq Composite ($COMPQ) ended the week with smaller gains than the Dow. Earlier in the week, investors were more bullish, but Wednesday’s selloff didn’t disrupt the uptrend.

It may have been a short trading week, but we got a handful of economic data to chew on. The revised Q3 GDP data shows the US economy grew at a 2.8% annual rate, last week’s jobless claims came in lower than expected, and durable goods fell 0.2% in October.

The Fed’s preferred inflation gauge, PCE rose 2.3% year-over-year in October, which was in line with expectations but slightly higher than last month’s 2.1% rise. This indicates that inflation is moving away from the Fed’s inflation target of 2%. Core PCE came in higher at 2.8% year-over-year.

Earlier this week, we had the FOMC minutes. They indicated that the Fed will gradually cut interest rates if the economy continues to perform as expected. According to the CME FedWatch Tool, there’s now a 66.5% probability of a 25-basis-point rate cut in the December meeting.

The Stock Market’s Reaction

Looking at the 5-day change in performance using the StockCharts MarketCarpets, heavyweights NVIDIA Corp. (NVDA), Alphabet Inc. (GOOGL/GOOG), and Tesla Inc. (TSLA) were the largest decliners. The performance of these large-cap stocks would have been the tailwinds that held the Nasdaq and S&P 500 back.

FIGURE 1. 5-DAY PERFORMANCE OF THE S&P 500 THROUGH THE MARKETCARPET LENS. There’s a lot of green, but some large-cap stocks saw declines.Image source: StockCharts.com. For educational purposes.

This week, money rotated from energy and technology stocks into real estate, consumer staples, and financial stocks. Antitrust efforts against Alphabet and now Microsoft, along with tariff talks impacting semiconductor stocks, have hurt the stock prices of several mega-cap tech stocks. With cash leaving these stocks, small- and mid-cap stocks have benefited, although they, too, came off their highs by the end of Wednesday’s trading.

The Dow reached an all-time high on Wednesday but sold off, ending the day slightly lower. The uptrend is still intact, as seen in the daily chart below.

FIGURE 2. DAILY CHART OF THE DOW JONES INDUSTRIAL AVERGE ($INDU). The uptrend is still intact with the 21-day EMA, 50-and 100-day SMAs trending upward. The Dow is outperforming the S&P 500 slightly.Chart source: StockCharts.com. For educational purposes.

The Dow is trading well above its upward-sloping 21-day exponential moving average (EMA). It’s also slightly outperforming the S&P 500 by 1.27%. The S&P 500 has a similar pattern, but the Nasdaq Composite is struggling.

The daily chart of the Nasdaq below shows that it is underperforming the S&P 500, albeit slightly.

FIGURE 3. DAILY CHART OF NASDAQ COMPOSITE. Even though the Nasdaq is the weaker performer of the three broad indexes, its trend is still positively sloped and holding the 21-day EMA support. The Nasdaq is underperforming the S&P 500 slightly.Chart source: StockCharts.com. For educational purposes.

The long-term trend is still in play. The 21-day EMA is trending upward and continues to be a valid support level for the index.

In the Bond World

The biggest action this week was the sentiment shift in the bond market. Treasury yields were rising until last week. However, several events this week have eased inflation fears, resulting in declining Treasury yields and rising bond prices (bond prices and yields move in opposite directions). Wednesday’s PCE data didn’t change the directional move.

The chart below shows that the 10-Year US Treasury Yield ($TNX) met resistance at its July 1 close and reversed. It is now trading below its 21-day EMA.

FIGURE 4. DAILY CHART OF THE 10-YEAR US TREASURY YIELD. The 10-year yield hit a resistance level and, since then, has been trending lower. It is now trading below its 21-day EMA. The rate of change (ROC) indicates the decline is accelerating.Chart source: StockCharts.com. For educational purposes.

The rate of change (ROC) indicator in the lower panel is below zero. This means that yields are falling relatively quickly.

The bottom line: Equities may have sold off on Wednesday, but nothing to disrupt the uptrend. A little profit-taking ahead of the holiday shopping season shouldn’t come as a surprise. You deserve to celebrate consumerism once in a while.

Wishing everyone a happy, healthy Thanksgiving!

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Having used many technical analysis platforms over my career as a technical analyst, I can tell you with a clear conscience that the ChartList feature on StockCharts provides exceptional capabilities to help you identify investment opportunities and manage risk in your portfolio.

Once you get your portfolio or watch list set up using the ChartList feature, you can use these five powerful tools to break down the list of stocks or ETFs, identify patterns of strength and weakness, and anticipate where the next opportunities may arise!

Summary View to Identify Outliers

The Summary view is a great starting point, sort of like a high level menu of what all we can do with this list of charts.  All of the columns are sortable, so we can begin to find patterns and relationships by grouping similar stocks by sector or sorting by market cap.

One of my favorite things to do right off the bat is sort by “Next Earnings Date”.  Whether you’re a long-term investor or a swing trader or somewhere in between, you always want to know when earnings could create a sudden move in either direction!

ChartList View to Analyze Technical Patterns

Once I’ve made some general assessments about the stocks on my list using the Summary View, I like to use the ChartList view to review each chart, one by one.  This view uses the alphabetical order of the titles of your charts, so make sure to add numbers before the tickers if you prefer a particular order.

Especially when I’m reviewing a longer list of tickers, I’ll use the ChartList view to go through a bunch of charts, jotting down tickers on my notepad for further review later in the day.  It’s easy to switch all of the charts to a different ChartStyle, which comes in handy if you want to switch to weekly or monthly charts, for example.  Just select one of the charts, change the ChartStyle, then look for a link called “Apply ChartStyle to All” at the bottom!

CandleGlance View to Separate Into Buckets

When I worked at a large financial institution in Boston, I would print out a bunch of charts representing a particular fund’s holdings, then spread the charts out on a conference table.  I’d look for similar patterns and structures, and start to separate the charts into bullish, bearish, and neutral piles.  From there, I could focus my attention on the most actionable charts.

The CandleGlance view provides this capability without having to print out all of those charts!  We can easily detect similar patterns and signals, helping me spend my time on the most actionable charts within a larger list.  I can’t tell you how much time this one feature has saved me in terms of efficiently breaking down a list of charts!  Don’t forget that you can customize the ChartStyle you use for this view, allowing you to apply your own proprietary charting approach to this visualization.

Performance View to Focus on Consistent Winners

What if you just want to analyze the performance of a group of stocks or ETFs, to better understand which charts have been the most and least profitable over a period of time?  The Performance View shows a series of time frames in tabular format, allowing you to focus on top and bottom periods over multiple time frames.

This can be a fantastic way to break down your portfolio, helping you better understand which positions have been helping your performance, and which ones may actually have been holding you back!

Correlation View to Understand Price Relationships

Finally, we come to one of the most underutilized features of ChartLists, and that’s the Correlation View.  This can help better define the relationship between two different data series, and identify which stocks or ETFs could help us diversify our portfolio.

I like to sort this view in ascending order based on the 20-day correlation as a starting point.  Which stocks demonstrated a very different return profile from the S&P 500?  When it feels as if all stocks are doing about the same thing, this one feature can help you quickly identify outliers and positions which could help you improve your performance through diversification.

I’ve found the ChartList capabilities to be some of the most powerful features on the StockCharts platform.  Once you get into the habit of using these incredible list management and analytical tools, I hope you’ll enjoy a greater amount of market awareness in your life!

RR#6,

Dave

PS- Ready to upgrade your investment process?  Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice.  The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.  

The author does not have a position in mentioned securities at the time of publication.    Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.