It was a very interesting week indeed. All-time high records continued to fall on a daily basis, but the complexion of the market most definitely changed during the latter part of the week. First, I want to pull up an hourly RRG chart to track 10 key growth stocks, most of which have carried the overall S&P 500 higher throughout 2024:

This chart is tracking the relative rotation of these 10 growth stocks (vs. the benchmark S&P 500) over the last 20 periods, or roughly 3 days. Many of these stocks started their 3-day journey on the right side of this chart, which highlights tremendous relative strength at that time. But look where they finished on Friday. Not one of these 10 stocks finished in the leading quadrant. Not one. AAPL held up best, but TSLA, META, and COST tumbled to close out the week. That type of behavior among these growth juggernauts would likely send you to the conclusion that we had 3 really bad days in the market. Instead, look at how the S&P 500 performed over the past 3 days from this hourly chart:

So what happened? How did the S&P 500 hold up when its most-heavily-weighted stocks fell so quickly?

Rotation. Bullish rotation. This is what sustains bull markets. Even the biggest and best leaders fall from time to time. But does the money leave the stock market or does it simply rotate and drive prices higher elsewhere. Well, last week it was the latter. Let’s check out large-cap growth (IWF) and large-cap value (IWD) and then the 11 sectors on that same 20-period RRG chart:

IWF:IWD

Sectors

In this case, two pictures say two thousand words.

Could the relative performance of the IWF and IWD have shown more disparity over the past few days than they did? Growth was tossed out the window, while traders suddenly fell in love with value stocks. I believe the June CPI report was the primary trigger for this rotation. I viewed it as a “sell on news” for growth stocks after months of “buying on rumor”. I also view it as “warning shots fired” towards Fed Chief Powell and his band of hawks. This report was an absolute DAGGER for those Fed officials that believe we should remain on the current “higher rates for longer” bandwagon. Check out the latest chart on core inflation at the consumer level:

The 1-month and 12-month rate of change (ROC) have rapidly declined. I swear I think the Fed is looking at a different chart, or maybe someone needs to turn their computers right side up. They’ve made it clear that they want sustainability towards their 2% target level. It sure seems to me that monthly Core CPI is back in the normal range and has been moving sustainably towards 2% for at least the last year. Yet the Fed keeps waiting, even talking about the possibility of another hike. Personally, I’m sick of this Fed. As I said, warning shots have been fired over the past few weeks. The bond market is SCREAMING at the Fed to lower rates. And growth stocks have just had their second bout of significant selling. We’re teetering folks.

I’ve been steadfastly bullish throughout this secular bull market, suggesting to everyone to avoid all the noise about crashes and collapses. I am, however, growing worried about the Fed’s handling of monetary policy. There are already economic signals that are telling me the cracks in our economic foundation are growing and spreading and that hopes of a “soft landing” are dwindling. If this isn’t stopped SOON, it’ll be too late, and we could be staring at a SIGNIFICANT market meltdown in the weeks and months ahead.

On Saturday, July 27th at 10:00am ET, I will be hosting an extremely important event, “The Fed and The Presidential Election Cycle: Why the S&P 500 May Tumble”. This event is FREE, but you must register and capacity is limited. If you want to consider ways to protect your capital, then I am urging you to sign up EARLY. For more information and to register, CLICK HERE.

Happy trading!

Tom

In this edition of StockCharts TV‘s The Final Bar, Dave recaps a strong Monday for value stocks, with the Financial and Energy sectors leading the S&P 500 and Nasdaq to new highs. He shares an update on the Hindenburg Omen, how Bitcoin has regained its 200-day moving average, and key levels to watch for XLE, FANG, APA, XLF, GS, KEY, and AMZN.

See Dave’s chart on new 52-week highs and lows here!

This video originally premiered on July 15, 2024. Watch on our dedicated Final Bar page on StockCharts TV!

New episodes of The Final Bar premiere every weekday afternoon. You can view all previously recorded episodes at this link.

In this video from StockCharts TV, Julius looks at the markets from an asset allocation perspective using various RRGs. Stocks are (still) beating bonds, while commodities are rotating out of favor and the USD is losing steam. BTC is jumping higher off support, and the Yield Curve is steepening against the longer-term flattening trend.

This video was originally broadcast on July 16, 2024. Click anywhere on the icon above to view on our dedicated page for Julius.

Past episodes of Julius’ shows can be found here.

#StayAlert, -Julius

Seasonality is like a second opinion from a wise friend who knows something about the market’s historical tendencies. While you’re weighing current price action against the fundamental dynamics of the environment, seasonality tells you what things have typically gone on, by how much, where they’ve happened, and when they tend to happen. It’s a secondary context.

So, relative to the S&P 500 ($SPX), what might history reveal about seasonal sector performance from September to the end of the year?

Top Four Outperforming Sectors Relative to the S&P

Looking at all 11 S&P sectors’ performance against the S&P 500 over the last 10 years, four stand out for September through December—Financial, Industrial, Energy, and Materials. Let’s dive into the S&P Sector ETFs that represent these sectors.

Financial Select Sector SPDR Fund (XLF)

• 73% average higher-close rate
• 4.7% cumulative seasonal return
• Dividend 1.52%

Seasonality-wise, XLF is the strongest performer, with average returns and higher-close rates rising from September through November (see chart below).

CHART 1. 10-YEAR SEASONALITY CHART OF XLF VS S&P. Note the positive months of September through November.

Looking at XLF’s daily chart below, it broke above $42.50, catapulting into all-time high territory. Buying momentum, based on the Chaikin Money Flow (CMF) reading, appears to be increasing. Currently, XLF is outperforming the S&P 500 by over 29%. If the seasonality projections remain consistent, XLF may be headed for a breather before ending the year with a strong rally.

CHART 2. DAILY CHART OF XLF. The ETF launched into all-time highs!

Industrial Select Sector SPDR Fund (XLI)

• 56% average higher-close rate
• 2.2% cumulative seasonal return
• Dividend 1.47%

The Industrial sector has two months of seasonal strength and weakness. The strongest month, November, sees a 78% higher close rate relative to the S&P 500 and a 1.8% average return (see chart below).

CHART 3. 10-YEAR SEASONALITY CHART OF XLI VS S&P 500.  Note the two strong months and December’s negative average.

Looking at XLI’s daily chart below, we can see it broke above $126 into all-time high territory. Like XLF, it’s outperforming the S&P 500 by over 29%. However, the buying pressure appears to be dwindling, so maybe the August seasonal weakness will materialize this year. If it does, that might present a buying opportunity for investors looking to get into a position. Additionally, watch for instances where decreasing momentum foreshadowed pullbacks.

CHART 4. DAILY CHART OF XLI. Most of the time, buying/selling pressure was an indicator of pullbacks and rallies.

Energy Select Sector SPDR Fund (XLE)

• 42% average higher-close rate
• 2.1% cumulative seasonal return
• Dividend 3.18%

September is the Energy sector’s strongest month against the S&P 500 for the second half of the year (see chart below). From that point on, the seasonal returns become increasingly negative, and the higher-close rate falls under 50%.

CHART 5. 10-YEAR SEASONALITY CHART OF XLE vs. S&P 500. Most positive returns in the latter half tend to be made in September and October.

Looking at XLE’s daily chart, it’s clear that momentum (see blue rectangle) has decreased and shows no sign of directionality. XLE is outperforming the S&P 500 by over 29%, but what’s fueling the rally? If XLE surpasses the resistance level of $92.50, it will be important to monitor the subsequent three resistance levels (all swing highs). Keep in mind the seasonal pattern, where September has historically provided the highest returns, but a negative trend emerges toward the end of the year.

CHART 6. DAILY CHART OF XLE. Is the momentum sputtering?

Materials Select Sector SPDR Fund (XLB)

• 62% average higher-close rate
• 1.9% cumulative seasonal return
• Dividend 1.93%

Materials’ higher-close rates from September to December are high, but the returns (again, relative to the S&P 500) are generally low. November shows the most favorable month, seasonality-wise (see chart below).

CHART 7. 10-YEAR SEASONALITY CHART OF XLB vs. S&P. Regarding the higher-close rates, the last four months of the year tend to be steady, though the average returns fluctuate.

Looking at the XLB chart below, the ETF has two levels of resistance before launching into an all-time high. XLB is challenging the first level, $92. To establish a record high, XLB needs to surpass the second level, $93.

CHART 8. DAILY CHART OF XLB. Two levels of resistance ahead before entering record-high territory.

Buying pressure appears to be slowing, but, seasonality-wise, you might expect weakness in August and September (despite the latter’s higher closing rates) before anticipating steady performance until the end of the year.

At the Close

Seasonality can feel like a historical cheat sheet. The most favorable picks for September to December? XLF, XLI, XLE, and XLB have all outperformed the S&P 500 during this period over the last decade. But hold up—before diving in, check the technicals and fundamentals. Seasonality is a great guide, but a complete picture is key for making smarter investing decisions.

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.

In this edition of StockCharts TV‘s The Final Bar, Dave comments on the Newer Dow Theory signal, improving market breadth conditions, impact of lower interest rates, and key levels to watch for GLD, UNH, CAT, and BAC. He also breaks down today’s rally driven by small caps and value stocks as the technology sector registered a rare down day.

This video originally premiered on July 16, 2024. Watch on our dedicated Final Bar page on StockCharts TV!

New episodes of The Final Bar premiere every weekday afternoon. You can view all previously recorded episodes at this link.

It was a very interesting week indeed. All-time high records continued to fall on a daily basis, but the complexion of the market most definitely changed during the latter part of the week. First, I want to pull up an hourly RRG chart to track 10 key growth stocks, most of which have carried the overall S&P 500 higher throughout 2024:

This chart is tracking the relative rotation of these 10 growth stocks (vs. the benchmark S&P 500) over the last 20 periods, or roughly 3 days. Many of these stocks started their 3-day journey on the right side of this chart, which highlights tremendous relative strength at that time. But look where they finished on Friday. Not one of these 10 stocks finished in the leading quadrant. Not one. AAPL held up best, but TSLA, META, and COST tumbled to close out the week. That type of behavior among these growth juggernauts would likely send you to the conclusion that we had 3 really bad days in the market. Instead, look at how the S&P 500 performed over the past 3 days from this hourly chart:

So what happened? How did the S&P 500 hold up when its most-heavily-weighted stocks fell so quickly?

Rotation. Bullish rotation. This is what sustains bull markets. Even the biggest and best leaders fall from time to time. But does the money leave the stock market or does it simply rotate and drive prices higher elsewhere. Well, last week it was the latter. Let’s check out large-cap growth (IWF) and large-cap value (IWD) and then the 11 sectors on that same 20-period RRG chart:

IWF:IWD

Sectors

In this case, two pictures say two thousand words.

Could the relative performance of the IWF and IWD have shown more disparity over the past few days than they did? Growth was tossed out the window, while traders suddenly fell in love with value stocks. I believe the June CPI report was the primary trigger for this rotation. I viewed it as a “sell on news” for growth stocks after months of “buying on rumor”. I also view it as “warning shots fired” towards Fed Chief Powell and his band of hawks. This report was an absolute DAGGER for those Fed officials that believe we should remain on the current “higher rates for longer” bandwagon. Check out the latest chart on core inflation at the consumer level:

The 1-month and 12-month rate of change (ROC) have rapidly declined. I swear I think the Fed is looking at a different chart, or maybe someone needs to turn their computers right side up. They’ve made it clear that they want sustainability towards their 2% target level. It sure seems to me that monthly Core CPI is back in the normal range and has been moving sustainably towards 2% for at least the last year. Yet the Fed keeps waiting, even talking about the possibility of another hike. Personally, I’m sick of this Fed. As I said, warning shots have been fired over the past few weeks. The bond market is SCREAMING at the Fed to lower rates. And growth stocks have just had their second bout of significant selling. We’re teetering folks.

I’ve been steadfastly bullish throughout this secular bull market, suggesting to everyone to avoid all the noise about crashes and collapses. I am, however, growing worried about the Fed’s handling of monetary policy. There are already economic signals that are telling me the cracks in our economic foundation are growing and spreading and that hopes of a “soft landing” are dwindling. If this isn’t stopped SOON, it’ll be too late, and we could be staring at a SIGNIFICANT market meltdown in the weeks and months ahead.

On Saturday, July 27th at 10:00am ET, I will be hosting an extremely important event, “The Fed and The Presidential Election Cycle: Why the S&P 500 May Tumble”. This event is FREE, but you must register and capacity is limited. If you want to consider ways to protect your capital, then I am urging you to sign up EARLY. For more information and to register, CLICK HERE.

Happy trading!

Tom

The Nasdaq 100 is a major driver in the stock market and Nasdaq 100 breadth indicators should be part of our broad market analysis routine. 84 Nasdaq 100 stocks (16.8%) are also in the S&P 500 and their weighting accounts for over 30% of the S&P 500. In fact, the six largest stocks in the S&P 500 come from Nasdaq 100 and account for 31.26%. The chart below shows the holdings for each index. Also note that both are in long-term uptrends.

Nasdaq 100 stocks also represent the risk appetite within the stock market. These stocks typically have higher growth rates and higher Betas. Chartists can track performance for Nasdaq 100 stocks using Nasdaq 100 specific breadth indicators. I want to trade Nasdaq 100 stocks and be fully invested when these indicators are bullish. I want to shun Nasdaq 100 stocks and raise cash when these indicators are bearish. We use a similar model for our Dual-Momentum Rotation Strategies at TrendInvestorPro. To this end, I am using three long-term breadth indicators to quantify Nasdaq 100 conditions. The chart below shows the percentage of Nasdaq 100 stocks above their 150 and 200 day SMAs as well as 52-week High-Low Percent. The latter is the percentage of 52-week highs less the percentage of 52-week lows.

All three indicators are long-term oriented and I am using bullish/bearish thresholds for signals. Divergences do not figure into my analysis because these are, more often than not, just distractions. Notice how QQQ advanced even as bearish divergences formed throughout 2024 (red arrow-lines). I will stick to the signals and ignore the nuance. NDX %Above 200-day SMA turns bullish with a move above 60% and stays bullish until a bearish signal triggers with is a cross below 40%. Adding signal thresholds above/below the midpoint (50%) reduces whipsaws. NDX %Above 150-day turns bullish with a move above 70% and bearish with a move below 30%. These thresholds are wider because the moving average is shorter. And finally, NDX High-Low Percent turns bullish with a move above +10% and bearish with a move below -10%.

Using all three indicators, chartists can take a weight of the evidence approach for assessing the Nasdaq 100. The bulls rule when two of the three indicators are on bull signals and the bears rule when two of the three are on bearish signals. A bearish signal triggered in January 2022 and a bullish signal triggered in early February 2023.

TrendInvestorPro recently introduced a market timing model based on long-term breadth indicators for the S&P 500 and Nasdaq 100. We published an extensive report and video describing this model and how it compares to models that use small-cap breadth. This model will be used for our Dual Momentum Rotation Strategy that trade Nasdaq 100 and S&P 500 stocks. Click here to subscribe and gain immediate access.

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Good morning and welcome to this week’s Flight Path. It was another strong week for U.S. equities as we saw S&P hit new highs on a week of strong blue “Go” bars. Treasury bond prices had a good weeks as well with a string of blue “Go” bars and the U.S. commodity index was able to remain in a “Go” trend although we did see some weakness with aqua bars as the week came to a close. The dollar was the only asset this week that fell out of its “Go” trend. We saw some uncertainty as price dropped and GoNoGo Trend painted a couple of amber “Go Fish” bars.

$SPY Paints Countertrend Correction Icon at New Highs

Equity prices continued higher this week and GoNoGo Trend painted uninterrupted strong blue “Go” bars. Late in the week we saw a Go Countertrend Correction Icon (red arrow) at the high indicating that price may struggle to go higher in the short term. When we look at the oscillator panel we can see that it fell out of overbought levels but has quickly returned showing sustained market enthusiasm. We will watch to see if momentum wanes this week and will look for price to consolidate at these new higher levels.

Strong “Go” trend. That is the reading from the weekly chart. Another higher weekly close on a strong blue “Go” bar is what we are seeing here. If we look at the oscillator panel we see that we are staying in overbought territory and so we do not see momentum falling off enough to trigger a countertrend correction icon (red arrow) on the price chart.

Treasury Rates in Strong “NoGo” Trend

This week confirmed the “NoGo” picture that had emerged.  GoNoGo Trend painted a whole week of strong purple “NoGo” bars and price made a new lower low. When we look to the oscillator panel we can see that GoNoGo Oscillator fell back through the zero line after a few bars in a GoNoGo Squeeze and is now in negative territory at a value of -2. This tells us that momentum is resurgent in the direction of the “NoGo” trend and so we see a NoGo Trend Continuation Icon (red circle) on the price chart.

Dollar Displays Uncertainty

Last week GoNoGo Trend informed us that the “Go” trend was weak after it fell away from its most recent high and painted a number of weaker aqua “Go” bars. This week we saw price fall further, gapping lower mid week. This led to GoNoGo Trend painting a couple of amber “Go Fish” bars telling us that not enough of the GoNoGo criteria are being met to determine a trend in either direction. If we look to the GoNoGo Oscillator for clues, we can see that it has failed at zero, and is dropping fast toward oversold territory. There is negative momentum here.

The weekly chart still tells us that we are hanging on to the longer term “Go” trend. After a destructive week, we are trading close to levels that could well suggest support. As GoNoGo Oscillator falls toward the zero line, we will watch to see if it finds support at that level. If it does, we will expect the “Go” trend to continue.