Key Takeaway: Indexes caught up to and are now catching down to the median stock. Price and pessimism can fuel a snowball of volatility. The weight of the evidence argues for caution.
Financials moved back into the top spot in this week’s rankings. It holds the top spot in the equal-weight version of the large-cap rankings as well, suggesting broad strength within the sector. Utilities & Materials saw big drops in the rankings and relative weakness in those sectors is present across various capitalization levels.
Sector-level weakness in Utilities is confirmed in our industry group heatmap. Other areas of broad deterioration include Capital Goods, Tech Hardware, and Real Estate.
Welcome back to our latest "Under The Hood" column, where we'll cover all the action for the week ended September 17, 2021. This report is published bi-weekly and rotated with our "Minor Leaguers" column.
What we do here is analyze the most popular stocks during the week and find opportunities to either join in and ride these momentum names higher or fade the crowd and bet against them.
We use a variety of sources to generate the list of most popular names. There are so many new data sources available that all we need to do is organize and curate them in a way that shows us exactly what we want: a list of stocks that are seeing an unusual increase in investor interest.
The game plan in the markets over the past several quarters has been to buy the dip whenever the S&P 500 approached its 50-day moving average of prices.
So naturally, I spent the weekend thinking about some long trades that I wanted to put on today -- thinking the same old game plan was likely to continue.
Then I woke up to S&P Futures showing the largest gap down opening we've seen in a while and $SPY indicated to open significantly below its 50-day moving average for the first time in seemingly forever.
In other words, the market was telling me to rethink my bullish ideas.
For those with a shorter timeframe, the bias is higher above 47,500 toward the former crash highs of 53,000:
Otherwise, if this breakout fails to hold, expect more messy action in the coming days.
And fail it did...
As the old saying suggests, from failed moves come fast moves in the opposite direction:
This 46,000-47,000 level wasn't just an important inflection point in the near-term, but it also coincided with Bitcoin's last level of defense before crashing in May.
If we're below this zone of overhead supply, the bias is sideways to lower.
This week we’re looking at a long setup in the Energy sector. Nifty Energy broke out above its overhead resistance. While this stock has been an absolute outperformer, the sector-specific breakout can only add more strength to the existing move.
We retired our "Five Bull Market Barometers" in mid-July last year to make room for a new weekly post that's focused on the three most important charts for the week ahead.
This is that post, so let's jump into this week's edition.
Our Top 10 report was just published. In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.
Is This Drawdown Any Different?
The S&P 500’s 50-day moving average has garnered some attention this year, and for good reason.
During every month except April, the S&P 500 has tested its 50-day average. Only after the initial test in February did the index fall further below the moving average than where it is today. Every other instance has ended with a sharp reaction higher. Whether that happens this time remains to be seen. With investors re-evaluating their bullish views on stocks, the dollar pressing on new highs, and the action beneath the surface showing increasing vulnerability, bulls want to see more evidence of risk-seeking behavior. Seeing stocks dig in at this key level would be a great place for that to start.
Check out this week's Momentum Report, our weekly summation of all the major indexes at a Macro, International, Sector, and Industry Group level.
By analyzing the short-term data in these reports, we get a more tactical view of the current state of markets. This information then helps us put near-term developments into the context of the big picture and provides insights regarding the structural trends at play.
Let's jump right into it with some of the major takeaways from this week's report:
* ASC Plus Members can access the Momentum Report by clicking the link at the bottom of this post.
Nifty 50 has been making new highs, moving past the early 2021 high in May and continuing to rise further. That's well and good. But if these new highs aren't coming through in Banks and Financials, then that's an issue.
Financial stocks make up 37.58% of Nifty 50. So it's safe to say that Nifty50 can't get very far for too long without the cooperation of Bank Nifty and Financial Services.
Every year in the Spring we hear about "Sell in May and Go Away".
And this year that would have worked out well for you. That's when the NYSE Advance-Decline line peaked. That's when the NYSE stocks really began their drawdowns. That's when the new 52-week high list peaked on the NYSE.
