The Disconnect Continues

July 11, 2021

Weekly Market Outlook

By Keith Schneider


blankBoth the S&P500 and the NASDAQ l00 continued their leadership by hitting new All-time highs while Grandpa Russell (IWM) continues to lag. Market Cap heavy FANG stocks are masking poor market internals and the Modern Family is showing lackluster relative performance.

However, overall, good volume, record money inflows with positive price action is still the narrative…. Meanwhile, KRE (Regional Banks aka the Prodigal Son) had monster performance on Friday which could indicate that the recent rally in US long bonds is over and higher rates are on the way, which could derail the current rally.

 

This Week’s Highlights are the following:

  • Risk Gauges remain Risk-On
  • There were significant improvements in volume patterns across all 4 key indices, with a combined 12 accumulation days vs. only 6 distribution days over the last 2 weeks
  • Small-Caps (IWM) got oversold in both price and momentum, so watch for the possibility of continued mean reversion
  • Dow Jones (DIA) is showing signs of a potential death-cross on Real Motion
  • Over the last 5-day trading period, IWM was the only major indices to have a negative performance
  • McClellan Oscillator on SPY continues to lag price movement, although now bouncing from moderately oversold levels from earlier in the week
  • The 52-week new high-new low ratio has been deteriorating, failing to confirm new highs
  • High Yield Debt (HYG) continues to lag vs Treasuries (TLT), a risk off indication
  • Treasuries (TLT) nonetheless failed its 200-dma
  • Yield Curve continues to flatten
  • Value (VTV) continues to lag Growth (VUG) which is bullish
  • This week’s strongest sector was Real Estate (IYR) was up 3%, followed by Technology (XLK) with a 2.2% gain
  • Even with ongoing infrastructure talks, Transportation (IYT) was still down over the last week, once again giving a mixed picture
  • Gold (GLD) recovered by 1.81% on the week, improving from a bear phase to a distribution phase
  • On a relative basis, every member of the Modern Family is underperforming the SPY benchmark according to our Triple Play Indicator, on a shorter-term basis
  • Despite Friday’s bounce, Asian markets have been under quite a bit of pressure over the last 3-6 months, mainly in China (FXI), Thailand (THD) and Korea (EWY)
  • The Australian and Japanese currency cross (AUDJAP) is indicating Risk-Off for equities

 

This Week in Crypto:

  • Bitcoin is looking to have a new 6-month calendar range set on July 14th, which is expected to be inside the previous 6-month range which held support at $27,678 and resistance at $41,986, watch for an explosive breakout from this tighter range.
  • Ethereum is expected to have its new 6-month range take a step-up from the previous 6-month range that held support at $1,199 and resistance at $1,630, showing a sign of strength compared to the new setup of Bitcoin
  • Neither Bitcoin nor Ethereum violated their previous 6-month support levels throughout the entire first half of the year
  • Looking at ETH.… Price action, Real Motion, the 200-dma, and the 6-month calendar range high all converged and offered tremendous support at the $1,630 level in mid to late June.

What does this all mean? The 2 leaders of the crypto market (BTC & ETH) have respected technical analysis since the beginning of the most recent bull market and look to continue to do so.

There is no video this week.

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