Summary: Markets rose with strong gains in small caps, new highs in the S&P and Nasdaq, positive sector rotation, and leadership from clean energy and solar, while volatility fell to its lowest level since December and risk gauges moved fully risk-on. Neutral signals include mixed market internals, even distribution/accumulation volume, and short-term overbought conditions in large-cap foreign equities, with Bitcoin, gold, and fixed income remaining range-bound.
Risk On
- Markets were up between 0.5% and 3.1% on the week with a surge in small caps and new all-time highs in S&P and Nasdaq. (+)
- Sector rotation looks positive with consumer staples down and transports, retail, biotech, and consumer discretionary all up strong on the week. (+)
- Solar and Clean energy were among the strongest performers this week. Clean energy has been lagging for years. (+)
- The new high new low ratio for the S&P is above the 10 Day Moving Average with positive slopes across the board. (+)
- Risk gauges improved to fully risk-on. (+)
- Volatility continued to come off this week, reaching its lowest levels since last December. (+)
- Value still is under its all-time highs while growth has pushed to new highs. Both value and growth are in bull phases. (+)
- The modern family improved significantly with strength in IWM, IBB, and XRT, while semiconductors took a bit of a breather from its strong recent price action. (+)
- Large cap foreign equities, on a short-term basis, regained its leadership over the S&P benchmark but hit overbought levels and may be subject to some mean reversion. (+)
- Seasonality for the major indexes is still positive going into the latter half of the month, though we have already outpaced average returns for August. (+)
Neutral
- Volume was neutral with about even distribution and accumulation days between the major indexes. (=)
- Market internals continue to lag the overall market rally, a trend for the last month. The McClellan Oscilator has a slightly negative reading of -30. We would like to see the S&P hold its 10 Day Moving Average for the short-term bullish trend to remain intact. (=)
- The 52 week new high new low ratio is more neutral for the Nasdaq. (=)
- The color charts (moving average of stocks above key moving averages) remain positive across the board on the 200-Day periods, with much more mixed signals on the 50 and 20 Day periods. IWM has the only positive 20-Day reading. (=)
- Soft commodities were strong on the week with DBA breaking out above both its major moving averages. It is outperforming the S&P on triple play for the first time since April. (=)
- Gold is still in a massive compression range since April. A breakout to the upside would likely be a negative sign. (=)
- Intraweek, Bitcoin made a new all-time high before backing off into the close of the week. A break below its 50-Day Moving Average could be a risk-off signal. (=)
- Fixed Income remains in a trading range, though getting a short-term rate cut seems likely. Unclear if the longer-end of the yield curve will respond positively to such a cut. (=)
Risk Off
