By Ryan Gorman, CFA, CMT, BFA
1/ The Big Picture
2/ Digging into the S&P 500
3/ Large Cap
4/ Mid Cap
5/ Small Cap
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1/ The Big Picture
Over the weekends, I try to take a top-down look and drill into many charts. The focus is on what is in favor now. Other authors over the last few months have highlighted the relative rotation graph tool. This is a great way to look at momentum trends to see what sectors are in favor. This can often tell a lot about where in the market cycle we are.
Here, we see that Stocks as measured by the S&P 500 have turned back up into the leading quadrant. This can happen, while there is often a movement clockwise into the quadrants like a changing of the seasons, there are other times where the course changes. As Stocks are moving, we will drill down further here.
Interestingly, various commodity indices are rounding out and heading into the improving quadrant. They are also taking a wide circle which can often indicate a persistent trend. This will be worth following for clues about inflation.
2/ Digging into the S&P 500
The next weekend/Monday drill down is into the sectors of the S&P 500.
Here we see that the leaders are Real Estate, Financials, and Tech. These are considered risk on sectors and have a fair amount of interest rate sensitivity. As rates have fallen on the hopes that the Federal Reserve begins cutting interest rates, it makes sense economically that these sectors have led.
Utilities and soon Consumer Staples have turned back down into the lagging quadrant, these are deemed risk off or more defensive sectors. This shows that market participants to looking for more aggressive positioning for now.
3/ Large Cap
Each week I like to look for stocks with positive 20-week momentum. This can help identify trends. I had 16 stocks come through the screen based on my criteria from the S&P 500. One that is from the financial sector, which we saw above is a leader and is recently breaking out if COF.
As we can see, the 20-day moving average is above the 50-day, which is in turn above the 200-day. This shows a persistent uptrend. For looking day to day, you may notice my bar chart is multi -color, I like to use the Elder Impulse system. This helps me identify quickly stocks that are in gear, you can read more about this tool here: https://school.stockcharts.com/doku.php?id=chart_analysis:elder_impulse_system
In addition to having a green elder impulse bar and just recently breaking to new highs, the Pring KST is just turning up as well. This can indicate a move is beginning and we are not jumping on the trend too late. Know Sure Thing (KST) [ChartSchool] (stockcharts.com)
4/ Mid Cap
I look at each of the major indices to find ideas by market cap. Smaller companies are often deemed more volatile and aggressive but may present larger opportunity. Looking at the S&P 400 midcap index, there were 15 meeting my criteria.
SLM is a consumer finance stock, in one of the sectors we have seen as a leader. Though the last two days reversed and could show a false breakout, we are still above the breakout line. Further the Elder impulse bar is still green and the KST is moving up.
5/ Small Cap
Finally, let us look at the S&P 600 small cap index, 25 stocks showed up in this screen.
Another financial JXN has not fully broken out but the 20- and 50-day moving average are close together providing potential support. Elder bar is green and KST is turning up.
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Originally posted 29th January 2024
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