Big Picture Asset Class Update
When you look at multiple markets in multiple timeframes, you can develop a good feel for big picture trends. To combat more frequent government intervention and market volatility, one of the recent changes we made to our systems was to add visual models in an easy to review format – you just have to click a mouse button to go to the next chart. Below are some notes from Saturday morning’s clicking. We continue to work on the dividend stock research – it is a big project; one that will take some time.
The common themes from an intermediate-term perspective continue to be risk on, commodities weak relative to stocks, precious metals weak relative to stocks, strength in banks, homebuilders, technology, and a few select Euro-zone countries (mainly Germany). The market has the look of one that will experience a two to three week correction sometime in the next two to five weeks, but it may not occur until after another leg higher, possibly as into the 1,430 to 1,440 range.
- Natural gas is worth watching this year from a DeMark perspective.
- Recent weekly laggards, IYM, EWC, EWD and EWA, are showing improvement, but in a somewhat tentative manner. How they act next week could be important for risk in general (bullish or bearish). They still look weak relative to the S&P 500.
- The recent move in the U.S. dollar has not generated strong trending signals on weekly charts.
- The strength of stocks relative to bonds popped in Q1 in a similar manner to spring 2009 and fall 2010 (leans bullish for risk).
- Weekly ADX on the chart of stocks relative to shorting stocks (SPY:SH) gave a strong trending signal (bullish) in February. Looking back five years, it was the best signal of its kind. Similar, but weaker bullish signals were given in summer 2009 and fall 2010 (leans bullish for risk).
- Consumer Discretionary (XLY) stocks flashed a bullish weekly signal relative to consumer staples (XLP) in Q1. The signal was supported by Wm %R and MACD .
- Consumer staples are nearing a bearish Bollinger band cross on monthly chart – has not happened yet.
- Crude oil is weakening vs. stocks on a weekly chart, but not with significant momentum – more neutral than bearish at this point.
- Silver relative to the S&P 500 (SLV:SPY) recently failed in a bid to clear the monthly Bollinger Band centerline, has dropped below RSI 50 monthly, has a bearish MACD monthly. SLV:SPY also looks weak on a weekly chart – RSI recently failed to recapture 50 in a way that did not occur during the entire bull run from the 2000 lows.
- Mid-caps and small-caps are still showing weakness relative to S&P 500 intermediate-term.
- Weak relative to S&P 500 from intermediate-term perspective (in no particular order): AAXJ, AMJ, EEM, EFA, EPI, EWS, EWW, EWZ, FXI, HYG, JJC, KOL, LQD, PFF, PIN, IYM, XLV, TIP, TLT XME.
- Agriculture, RJA, has some good DeMark looks relative to the S&P 500 – worth watching - needs to show something.
- Market leaders: strong or neutral relative to S&P 500 from intermediate-term perspective (in no particular order): EWG, EWI, EWQ, GAZ, KRE, PSP, XLF, QQQ, XLK, XHB.
- The daily AMJ:SPY chart got a DeMark 9 up on Friday, but not much exciting from a long-term perspective yet. Similar “worth watching” in EWM, GLD, but not that great longer-term.
- Commodities (DBC, DBA) still look weak relative to stocks (on weekly charts).
- Biotech (IBB) has a toppy feel to it relative to the S&P 500, but it still has a chance to stabilize.
- Gold mining stocks (GDX) have very little in the way of positives – thankfully we sold a few weeks ago - they have been hammered dropping 14.2% in the last three weeks.
