Due to my professional experience, I like thinking in frameworks or mental models. They provide me with the foundational principles to guide my thinking processes, methods, and routines. To come up with these frameworks, I like to question everything, to deconstruct the problem to its essence, and check the hidden assumptions that we, sometimes involuntarily, make.

When it comes to the Stock Market, I believe that the first, and one of the major, assumptions is to think about the act of “trading shares of public companies in an open exchange” is similar to a market. Yes, I do not agree with the word market. I prefer think about trading and investing more as a the Stock Relay Races or, for short, the Stock Races.

Once you think about the investing and trading as relay races, it is more natural to reach to the conclusion that “The Secret of Trading” is “buy high and sell higher”. You can read about my thoughts in this short page in my site:

And now let’s do the weekly review.

Context: Why is it happening?

Economic Production: ISM PMI vs. SPX

Analysis: No changes since last week.
Outlook: Bullish

Economic Activity: Regional Banks Performance

Analysis: KRE weekly Money Flow has a bearish divergence more clearly seen in the daily chart, where we also see that the trend is losing strength in ADX. Momentum in the daily chart is also showing a bearish divergence between MACD and price. All of this indicates near-term bearish forces but we shall still be confident on the long-term bullish trend that remain well in place in both weekly and daily charts.
Outlook: Bullish

Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: Strong uptick in all interest rates. Zooming further out, we haven’t seen these 30Y levels since 2007.
Outlook: Neutral

Context: Why is it happening? Summary

Economic Production: Bullish
Economic Activity: Bullish
Interest Rates: Neutral

Market: What is happening?

Price Action: Weekly & Daily SPY, QQQ, and IWM

Analysis: All three index are in clear downtrends confirmed by ADX and Moving Averages, bear momentum by MACD, and under selling pressure volumes as seen in the MFI indicator.
Wyckoff Stage: Distribution

Breadth: % Stocks above SMAs

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs vs. RSP

Analysis: % stocks above their 200D and 50D remains elevated. 20D numbers reflect the current downtrends in the indexes.
Outlook: Broadening.

Volatility: Ratio Low Vol. Stocks / SPY vs. RSP & SPY

Analysis: The bearish signal is clear now with the ratio falling further away from its 50D SMA.
Outlook: Bearish

Volatility: VIX vs. RSP & SPY

Note: This chart is mainly to detect extreme volatility situations that, once they reverse, offer great long opportunities in the market.

Analysis: VIX bounce back up to the 19 level. Elevated volatility shall be expected if the observed price trends continue bearish.

Options: (Inverted) Put/Call Ratio vs. SPY

Analysis: P/C ratio continues its downward trend, as predicted. We will remain bearish until we don’t see this ratio improving.
Outlook: Bearish

Options: Gamma Exposure – SPY

Analysis: GEX in clear negative territory with negative outlook for August.
Outlook: Bearish

Market: What is happening? Summary

Price Action: Distribution (Bearish trend, momentum, and money flow)
Breadth: Broadening
Volatility: Bearish
Options: Bearish

Sectors: Where is it happening?

Sectors Rotation

Analysis: Focus on XLV and XLF for mid- to long-term opportunities. XLE is heavily influenced by Iran’s war and oil’s price.

SPX Pct. Bullish Indicator shows us a Bullish Outlook.

Scanners: Scanning for opportunities

S&P500 and Nasdaq New Highs in Leading Sectors

Descriptive
Index: S&P 500 and Nasdaq | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Price: >$10
(order by Market Cap desc.)
Technical
50-Day New High

XLV: Healthcare:

None

XLF: Financials:

Disclaimer: The content on AMAT Investing is strictly for educational and learning purposes. The author is not a licensed financial advisor and holds no formal financial education. This post does not constitute professional financial advice. All investing involves risk of loss. Always conduct your own research and consult a licensed professional before making any investment decisions.

Last week, I had the privilege to take some days off in Greece and spend quite a bit of hours reading and taking notes from this amazing book. As a result, I will update my weekly reviews and other areas of AMAT Investing. Learning and adapting to changes is a great way to improve and as long as I don’t see that Ferrari on the driveway… there is room for improvement :)

One of the ideas that I refreshed during my reading, is the Wyckoff Market Cycle: https://www.wyckoffanalytics.com/wyckoff-method/

According to Wyckoff, the market can be understood and anticipated through detailed analysis of supply and demand, which can be ascertained from studying price action, volume and time. As a broker, he was in a position to observe the activities of highly successful individuals and groups who dominated specific issues; consequently, he was able to decipher, via the use of what he called vertical (bar) and figure (Point-and-Figure) charts, the future intentions of those large interests. An idealized Wyckoff schematic of how he conceptualized the large interests’ preparation for and execution of bull and bear markets is depicted in the figure above. The time to enter long orders is towards the end of the preparation for a price markup or bull market (accumulation of large lines of stock), while the time to initiate short positions is at the end of the preparation for price markdown.

Context: Why is it happening?

Economic Production: ISM PMI vs. SPX

Analysis: No changes since last week.
Outlook: Bullish

Economic Activity: Regional Banks Performance

Analysis: KRE weekly stochastics and BB indicate that price is overbought. We had some correction last week but nothing major. Still the uptrend is clear.
Outlook: Bullish

Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: Terms refuse to drop. The Fed may be forced to raise, which will certainly cool down the market. We prefer seeing those long and mid-term rates drop quickly.
Outlook: Neutral

Context: Why is it happening? Summary

Economic Production: Bullish
Economic Activity: Bullish
Interest Rates: Neutral

Market: What is happening?

Price Action: Cap. Weighted & Equal Weighted

Analysis: SPY is facing difficulties to advance while RSP continues its uptrend. Breadth is expanding into the broader market, while big-cap stocks are facing difficulties to advance. SPY fell below both 20D and 50D SMAs on Friday.
Wyckoff Stage: Distribution

Momentum: Stochastics and MACD

Analysis: Both indexes are having coming down from overbought territories.
Outlook: Bearish

Breadth: % Stocks above SMAs

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs vs. RSP

Analysis: Breadth is expanding and we have room to run. We remain on bullish territory.
Outlook: Bullish

Volatility: Ratio Low Vol. Stocks / SPY vs. RSP & SPY

Analysis: This very reliable ratio seems bound to reverse the bearish signal into a bullish one.
Outlook: Bearish

Volatility: VIX vs. RSP & SPY

Note: This chart is mainly to detect extreme volatility situations that, once they reverse, offer great long opportunities in the market.

Analysis: VIX entering the bullish 15 level area.

Options: (Inverted) Put/Call Ratio vs. SPY

Analysis: Low spot reading (gray) which will push lower the signal (black) line, and the market with it.
Outlook: Bearish

Options: Gamma Exposure – SPY

Analysis: GEX in clear negative territory with negative outlook for August.
Outlook: Bearish

Market: What is happening? Summary

Price Action: Distribution
Momentum: Bearish
Breadth: Bullish
Volatility: Bearish
Options: Bearish

Sectors: Where is it happening?

Sectors Rotation

Analysis: Focus on XLV and XLF for mid- to long-term opportunities. XLE is heavily influenced by Iran’s war and oil’s price.

SPX Pct. Bullish Indicator shows us Bullish Outlook.

Scanners: Scanning for opportunities

S&P500 and Nasdaq New Highs in Leading Sectors

Descriptive
Index: S&P 500 and Nasdaq | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Price: >$10
(order by Market Cap desc.)
Technical
50-Day New High

XLV: Healthcare:

XLF: Financials:

XLE: Energy

Disclaimer: The content on AMAT Investing is strictly for educational and learning purposes. The author is not a licensed financial advisor and holds no formal financial education. This post does not constitute professional financial advice. All investing involves risk of loss. Always conduct your own research and consult a licensed professional before making any investment decisions.

Comment: SPY found support in both 20D and 50D SMAs and seems ready to tackle new highs again soon. Interestingly, neither DIA, QQQ, nor IWM are in the same pattern. These 3 indexes have found support on their shorter SMAs but they are not in the position to take out previous highs. Just be looking at these correlations we could think that breadth is expanding as something else than technology and the big names is supporting the SPY.

Level 1: Why is it happening?

Economic Data: Production: ISM PMI vs. SPX

Analysis: No changes since last week.
Current Situation: Bullish
Future Outlook: Bullish

Economic Data: Activity: Regional Banks Performance

Analysis: KRE weekly stochastics and BB indicate that price is overbought. We had some correction last week but nothing major. Still the uptrend is clear.
Current Situation: Bullish
Future Outlook: Bullish

Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: Terms refuse to drop. The Fed may be forced to raise, which will certainly cool down the market. We prefer seeing those long and mid-term rates drop quickly.
Current Situation: Bearish
Future Outlook: Neutral

Context Investors Sentiment: Credit Spreads

Note: Credit spreads move in tandem with the S&P, but when they diverge, that’s often an early warning signal.

Analysis: Spreads continue their uptrend after a bit of correction during June.
Current Situation: Bullish
Outlook: Bullish

Level 1: Why is it happening? Summary

Economic Data: Bullish/Bullish
Interest Rates: Bearish/Neutral
Investors Sentiment: Bullish/Bullish

Level 2: What is happening?

Price Action: SPX – Long Trend – 20 & 10 years

Analysis: Price continues the ascend above both 20Y and 10Y channels, which historically precedes a downturn at some point. Despite the current situation is bullish, our future outlook must remain bearish
Current Situation: Bullish
Future Outlook: Bearish

Price Action: RSP – Trend – Weekly & Daily

Analysis: Daily prices found support in the 20D SMA and the bullish trends continues. Indicators still show overbought conditions, so we keep our bullish current situation and bearish future outlook ratings.
Current Situation: Bullish
Future Outlook: Bearish

Breadth: RSP vs. SPY relative performance

Analysis: Ratio (black) decreased and seemed have formed a local top. This could mean the return of breadth contraction with the big market cap stocks taking the lead again.
Current Situation: Expansion to Contraction
Future Outlook: Contraction

Breadth: % Stocks above SMAs vs. RSP

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs

Analysis: Breadth is expanding and we have room to run. We remain on bullish territory.
Current Situation: Bullish
Future Outlook: Bullish

Breadth: New Highs vs. RSP & SPY

Analysis: Lower new highs yet far away from any extreme.
Current Situation: Bullish
Future Outlook: Bullish

Volatility: Ratio Low Vol. Stocks / SPY vs. RSP & SPY

Analysis: This very reliable ratio seems bound to reverse the bearish signal into a bullish one.
Current Situation: Bearish
Future Outlook: Bearish-to-Bullish

Volatility: VIX vs. RSP & SPY

Note: This chart is mainly to detect market bottoms.

Analysis: VIX entering the bullish 15 level area.
Current Situation: Bullish
Future Outlook: Neutral

Options: (Inverted) Put/Call Ratio vs. SPY

Analysis: Low spot reading (gray) which will push lower the signal (black) line, and the market with it.
Current Situation: Bearish
Future Outlook: Bearish

Options: Gamma Exposure – SPY

Analysis: GEX has flipped from negative to positive for 17th of July with the negative GEX moving to mid-August. Surprises late-September high positive readings.
Current Situation: Bullish
Future Outlook: Bullish (looking at September)

Level 2: What is happening? Summary

Price Action: Bearish/Bearish
Breadth: Bullish/Bullish
Volatility: Bullish/Bearish
Options: Neutral/Neutral

Level 3: Where is it happening?

Bulls vs. Bears: RSP vs. RSPD (Cons. Disc. – Bulls) and RSPS (Cons. Sta. – Bears)

Analysis: Ratio (yellow) failed to break above the 200D SMA and also broke below the 50D SMA.
Current Situation: Bearish
Future Outlook: Bearish

Sectors Rotation

Sectors Performance

Forget XLE where everything is about Iran’s war. The true star is XLI. If only we could see XLF breaking to new highs, that could be the final confirmation of a healthy market diversification and bull market.

Transportation (XTN) is breaking to ATH. Old time technicians used this sector to tell the overall health of the economy. Is still a good indicator in the digital era? We’ll see…

Sectors Bullish Percent Index

Growth Sectors

Value Sectors

Note: Any sectors below their red levels are good opportunities to find great companies at good valuations or buy sector ETFs (buy cheap). Those sectors above their Green levels are candidates to be sold (sell expensive).

Current Situation: Bullish - & - Future Outlook: Bullish:
Industrials, Materials, Financials, Utilities, Technology

Current Situation: Bullish - & - Future Outlook: Bearish:
Healthcare, C. Disc., Real Estate

Current Situation: Bearish - & - Future Outlook: Bullish:
C.Staples, Energy

Current Situation: Bearish - & - Future Outlook: Bearish:
Communications

SPX has a Bullish Current Situation and a Bullish Future Outlook.

Note: XLK moved to have both bullish current conditions and future outlook.

Level 3: Where is it happening? Summary

Bulls vs. Bears: Bearish

All Levels Summary and Final Thoughts

Level 1 Summary - The Why

Economic Data: Bullish/Bullish
Interest Rates: Bearish/Neutral
Investors Sentiment: Bullish/Bullish

Level 2 Summary - The What

Price Action: Bearish/Bearish
Breadth: Bullish/Bullish
Volatility: Bullish/Bearish
Options: Neutral/Neutral

Level 3 Summary - The Where

Bulls vs. Bears: Bearish

Level 4: Scanning for opportunities

Great Companies with Great Technicals

Descriptive
Index: Any | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Relative Vol.: Over 1 | Price: >$10
Fundamental
EPS Growth Next Year: >15% | EPS Growth Past 3 Years: >5% | Sales Growth Past 3 Years: >5%
- Sorted by P/E
Technical
Performance: Quarter Up | Price above 20D SMA & 50D SMA | Beta: >1 | ATR: > 1

None!

S&P500 and Nasdaq New Highs

Descriptive
Index: S&P 500 and Nasdaq | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Price: >$10
(order by Market Cap desc.)
Technical
50-Day New High

Chart of the week:

Railroads! You hear it here first. All that construction and industry production has to move somehow.

Disclaimer: The content on AMAT Investing is strictly for educational and learning purposes. The author is not a licensed financial advisor and holds no formal financial education. This post does not constitute professional financial advice. All investing involves risk of loss. Always conduct your own research and consult a licensed professional before making any investment decisions.

Comment: SPY rallied to rebound above the 50D and 20D SMA levels. Looking at the DIA, QQQ, and IWM charts we see that the play at hand is the rotation out from QQQ into more “traditional” assets in DIA and IWM. QQQ bounced out of the 50D SMA and broke above the 20D to fall back below it again on Thursday (last trading day). The 50D SMA supported the index, at least for now.

Level 1: Why is it happening?

Economic Data: Production: ISM PMI vs. SPX

Analysis: Mute evolution of US PMI, yet on a bullish trend with room to run.
Current Situation: Bullish
Future Outlook: Bullish

Economic Data: Production: Dallas & Philadelphia Manufacturing vs. SPX

Analysis: No updates since last week.
Current Situation: Neutral
Future Outlook: Bullish

Economic Data: Activity: Regional Banks Performance

Update: I’m replacing the Consumer Sentiment indicator by the Regional Banks ETF performance. As the Consumer Sentiment is highly politicized, as it is based on opinions, I prefer to look at the performance of the regional banks, which are the ones carrying small & medium business credits. The correlation of the YoY% change of the KRE ETF maps the S&P and IWM performance quite closely.

If we look at KRE price chart we see a clear uptrend:

In the weekly chart, I would like to see a breakout above previous ATH and a firm consolidation above $80. Stochastics indicate that we may need to wait a while for that to happen, while MACD seems to confirm the future ATH.

Analysis: KRE performance fuels both SPY and IWM performance, and I see a bullish trend in KRE that could even accelerate once previous ATH are surpassed.
Current Situation: Bullish
Future Outlook: Bullish

Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: Terms refuse to drop. The Fed may be forced to raise, which will certainly cool down the market. We prefer seeing those long and mid-term rates drop quickly.
Current Situation: Bearish
Future Outlook: Neutral

Context Investors Sentiment: Credit Spreads

Note: Credit spreads move in tandem with the S&P, but when they diverge, that’s often an early warning signal.

Analysis: Spreads have turned lower, aligned with market’s price action.
Current Situation: Bearish
Outlook: Bearish

Level 1: Why is it happening? Summary

Economic Data: Bullish/Bullish
Interest Rates: Bearish/Neutral
Investors Sentiment: Bearish/Bearish

Level 2: What is happening?

Price Action: SPX – Long Trend – 20 & 10 years

Analysis: Price inside the 10Y channel and finding resistance. The 20Y channel is still quite far down (circa 7,200 area). We can expect prices to coast along the upper side of the channel or even trending towards the middle (Weekly 50 SMA).
Current Situation: Bearish
Future Outlook: Bearish

Price Action: RSP – Trend – Weekly & Daily

Analysis: The equal weight market is telling such a different story from the market cap. weight. RSP continue on a bullish trend breaking to ATHs this week. The current situation is bullish but weekly RSI and PPO are near overbought values. Also, price is over-extended relative to its 20 SMA. For these reasons, my outlook is bearish (correction).
Current Situation: Bullish
Future Outlook: Bearish (correction)

Breadth: RSP vs. SPY relative performance

Analysis: RSP (green) vs. SPY (blue) ratio (black) increased, meaning we are in a “Breadth Expansion” situation with an outlook of “Expansion” as per the 20D SMA slope.
Current Situation: Expansion
Future Outlook: Expansion

Breadth: % Stocks above SMAs vs. RSP

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs

Analysis: Breadth is expanding and we have room to run. We remain on bullish territory.
Current Situation: Bullish
Future Outlook: Bullish

Breadth: New Highs vs. RSP & SPY

Analysis: Last week’s local top impacted only SPY. RSP continues its bullish rally. The new highs signal is a bullish trend with still room to rally.
Current Situation: Bullish
Future Outlook: Bullish

Volatility: Ratio Low Vol. Stocks / SPY vs. RSP & SPY

Analysis: This very reliable ratio have just triggered the bearish signal.
Current Situation: Bearish
Future Outlook: Bearish

Volatility: VIX vs. RSP & SPY

Note: This chart is mainly to detect market bottoms.

Analysis: VIX quickly drop from level 20.
Current Situation: Bullish
Future Outlook: Neutral

Options: (Inverted) Put/Call Ratio vs. SPY

Analysis: Low spot reading (gray) which will push lower the signal (black) line, and the market with it.
Current Situation: Bearish
Future Outlook: Bearish

Options: Gamma Exposure – SPY

Analysis: Open interest GEX is negative with the last support at 720. July the 17th has the most negative GEX accumulation.
Current Situation: Bearish
Future Outlook: Bearish

Level 2: What is happening? Summary

Price Action: Bearish/Bearish
Breadth: Bullish/Bullish
Volatility: Bullish/Bearish
Options: Bearish/Bearish

Level 3: Where is it happening?

Bulls vs. Bears: RSP vs. RSPD (Cons. Disc. – Bulls) and RSPS (Cons. Sta. – Bears)

Analysis: Ratio (yellow) failed to break above the 200D SMA and also broke below the 50D SMA.
Current Situation: Bearish
Future Outlook: Bearish

Sectors Rotation

Sectors Performance

Healthcare (XLV) has been this week’s star and is about to break out of a long-term high. Industrials (XLI) continue with the bullish trend. Energy (XLE) is feeling the pain from the Iran war ceasefire. Both Communications (XLC) and Technology (XLK) are dragging the main indexes down.

Transportation (XTN) is breaking to ATH. Old time technicians used this sector to tell the overall health of the economy. Is still a good indicator in the digital era? We’ll see…

Sectors Bullish Percent Index

Growth Sectors

Value Sectors

Note: Any sectors below their red levels are good opportunities to find great companies at good valuations or buy sector ETFs (buy cheap). Those sectors above their Green levels are candidates to be sold (sell expensive).

Current Situation: Bullish - & - Future Outlook: Bullish:
Industrials, Materials, Financials, Utilities

Current Situation: Bullish - & - Future Outlook: Bearish:
Healthcare, C. Disc., Real Estate

Current Situation: Bearish - & - Future Outlook: Bullish:
C.Staples, Energy

Current Situation: Bearish - & - Future Outlook: Bearish:
Technology, Communications

SPX has a Neutral Current Situation and a Neutral Future Outlook.

Level 3: Where is it happening? Summary

Bulls vs. Bears: Bearish

All Levels Summary and Final Thoughts

Level 1 Summary - The Why

Economic Data: Bullish/Bullish
Interest Rates: Bearish/Neutral
Investors Sentiment: Bearish/Bearish

Level 2 Summary - The What

Price Action: Bearish/Bearish
Breadth: Bullish/Bullish
Volatility: Bullish/Bearish
Options: Bearish/Bearish

Level 3 Summary - The Where

Bulls vs. Bears: Bearish

Level 4: Scanning for opportunities

Great Companies with Great Technicals

Descriptive
Index: Any | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Relative Vol.: Over 1 | Price: >$10
Fundamental
EPS Growth Next Year: >15% | EPS Growth Past 3 Years: >5% | Sales Growth Past 3 Years: >5%
- Sorted by P/E
Technical
Performance: Quarter Up | Price above 20D SMA & 50D SMA | Beta: >1 | ATR: > 1

S&P500 and Nasdaq New Highs

Descriptive
Index: S&P 500 and Nasdaq | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Price: >$10
(order by Market Cap desc.)
Technical
50-Day New High

Chart of the week:

Crowdstrike for being a company that benefits from AI but is not an AI play. CRWD has a unique way to participate in the cyber security market with their innovative offering. CRWD is indeed an “world of tomorrow” portfolio (coming soon) stock.

Disclaimer: The content on AMAT Investing is strictly for educational and learning purposes. The author is not a licensed financial advisor and holds no formal financial education. This post does not constitute professional financial advice. All investing involves risk of loss. Always conduct your own research and consult a licensed professional before making any investment decisions.

Comment: SPY felt not only below its 20D but as well under the 50D SMA. QQQ held above its 50D but also broke below the 20D. Meanwhile DIA and IWM are helding their bullish trends. Interesting to see that high inflation expectations are not impeding IWM advancement. Economic growth is winning over inflation.

As we pointed out last week, the market was sending signals for correction (mainly looking at the options market and volatility signals) and we are finally seeing that. Breadth is expanding, seen by the different performance in SPY and QQQ vs. DIA and IWM. So, tech is taking a break for the summer and letting the other parts of the market take the lead.

Level 1: Why is it happening?

Economic Data: Production: ISM PMI vs. SPX

Analysis: No changes since last week.
Current Situation: Bullish
Future Outlook: Bullish

Economic Data: Production: Dallas & Philadelphia Manufacturing vs. SPX

Analysis: Philadelphia’s reading improved and puts back our bullish future outlook.
Current Situation: Neutral
Future Outlook: Bullish

Economic Data: Consumption: Consumer Sentiment

Analysis: Another drop in this highly politically bias indicator. Yet, high energy prices and overall high prices are making nobody happy.
Current Situation: Bearish
Future Outlook: Bullish

Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: Long term rates had a bearish reversal due to the end of Iran’s war. If “the deal” holds, energy prices shall drop, which will impact inflation, and possibly distance the Fed from raising rates.
Current Situation: Bearish
Future Outlook: Neutral

Context Investors Sentiment: Credit Spreads

Note: Credit spreads move in tandem with the S&P, but when they diverge, that’s often an early warning signal.

Analysis: Spreads have turned lower, aligned with market’s price action.
Current Situation: Bearish
Outlook: Bearish

Level 1: Why is it happening? Summary

Economic Data (long-term): Bullish/Bullish
Interest Rates: Bearish/Neutral
Investors Sentiment: Bearish/Bearish

Level 2: What is happening?

Price Action: SPX – Long Trend – 20 & 10 years

Analysis: Price re-entered the 10Y channel again this week, but more conviction. The 20Y channel is still quite far down (circa 7,200 area). We can expect prices to aim to the middle of the channel for a good correction in the overall bullish trend.
Current Situation: Bearish
Future Outlook: Bearish

Price Action: RSP – Trend – Weekly & Daily

Analysis: Having failed to break above previous ATH, the equal weight index is still holding above its 20D SMA but with a PPO trending lower.
Current Situation: Neutral
Future Outlook: Bearish

Breadth: RSP vs. SPY relative performance

Analysis: RSP (green) vs. SPY (blue) ratio (black) increased, meaning we are in a “Breadth Expansion” situation with an outlook of “Expansion” as per the 20D SMA slope.
Current Situation: Expansion
Future Outlook: Expansion

Breadth: % Stocks above SMAs vs. RSP

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs

Analysis: Breadth is expanding and we have room to run. We remain on bullish territory.
Current Situation: Bullish
Future Outlook: Bullish

Breadth: New Highs vs. RSP & SPY

Analysis: We see a new highs extreme high, which may signal a local top. The EMA signal line (yellow) slope is bullish. We remain on a bullish outlook.
Current Situation: Bearish
Future Outlook: Bullish

Breadth & Volatility: Bullish Pct. Index & McClellan Summation Index

Analysis: Both indicators continue in their bullish areas with quite a mute week.
Current Situation: Bullish
Future Outlook: Bullish

Volatility: Ratio Low Vol. Stocks / SPY vs. RSP & SPY

Analysis: This very reliable ratio have just triggered the bearish signal.
Current Situation: Bearish
Future Outlook: Bearish

Volatility: VIX vs. RSP & SPY

Note: This chart is mainly to detect market bottoms.

Analysis: Increase in volatility from the two-weeks ago lows.
Current Situation: Bearish
Future Outlook: Neutral

Options: (Inverted) Put/Call Ratio vs. SPY

Analysis: Low spot reading (gray) which will push lower the signal (black) line, and the market with it.
Current Situation: Bearish
Future Outlook: Bearish

Options: Gamma Exposure – SPY

Analysis: Open interest GEX is negative with the last support at 720. July the 17th has the most negative GEX accumulation.
Current Situation: Bearish
Future Outlook: Bearish

Level 2: What is happening? Summary

Price Action: Bearish/Bearish
Breadth: Neutral/Bullish
Volatility: Bearish/Bearish
Options: Bearish/Bearish

Level 3: Where is it happening?

Bulls vs. Bears: RSP vs. RSPD (Cons. Disc. – Bulls) and RSPS (Cons. Sta. – Bears)

Analysis: Ratio (yellow)failed to break above the 200D SMA and also broke below the 50D SMA.
Current Situation: Bearish
Future Outlook: Bearish

Sectors Rotation

Sectors Performance

Healthcare (XLV) has been this week’s star and is about to break out of a long-term high. Industrials (XLI) continue with the bullish trend. Energy (XLE) is feeling the pain from the Iran war ceasefire. Both Communications (XLC) and Technology (XLK) are dragging the main indexes down.

Sectors Bullish Percent Index

Growth Sectors

Value Sectors

Note: Any sectors below their red levels are good opportunities to find great companies at good valuations or buy sector ETFs (buy cheap). Those sectors above their Green levels are candidates to be sold (sell expensive).

Current Situation: Bullish - & - Future Outlook: Bullish:
Industrials, Materials, Financials, Utilities

Current Situation: Bullish - & - Future Outlook: Bearish:
Healthcare, C. Disc., Real Estate

Current Situation: Bearish - & - Future Outlook: Bullish:
C.Staples, Energy

Current Situation: Bearish - & - Future Outlook: Bearish:
Technology, Communications

SPX has a Neutral Current Situation and a Neutral Future Outlook.

Level 3: Where is it happening? Summary

Bulls vs. Bears: Neutral

All Levels Summary and Final Thoughts

Level 1 Summary - The Why

Economic Data (long-term): Bullish/Bullish
Interest Rates: Bearish/Neutral
Investors Sentiment: Bearish/Bearish

Level 2 Summary - The What

Price Action: Bearish/Bearish
Breadth: Neutral/Bullish
Volatility: Bearish/Bearish
Options: Bearish/Bearish

Level 3 Summary - The Where

Bulls vs. Bears: Neutral

Level 4: Scanning for opportunities

Great Companies with Great Technicals

Descriptive
Index: Any | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Relative Vol.: Over 1 | Price: >$10
Fundamental
EPS Growth Next Year: >15% | EPS Growth Past 3 Years: >5% | Sales Growth Past 3 Years: >5%
- Sorted by P/E
Technical
Performance: Quarter Up | Price above 20D SMA & 50D SMA | Beta: >1 | ATR: > 1

S&P500 and Nasdaq New Highs

Descriptive
Index: S&P 500 and Nasdaq | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Price: >$10
(order by Market Cap desc.)
Technical
50-Day New High

Chart of the week:

Welltower, both in Healthcare and in Real Estate.

Disclaimer: The content on AMAT Investing is strictly for educational and learning purposes. The author is not a licensed financial advisor and holds no formal financial education. This post does not constitute professional financial advice. All investing involves risk of loss. Always conduct your own research and consult a licensed professional before making any investment decisions.

Last Week’s Comment: Sometimes the market doesn’t care about “bad” news and sometimes it doesn’t care about “good” news. The week started strong in the back of the end of Iran’s war and SpaceX’s IPO but ended again below the 20D SMA level that I highlighted last week. The technical indicators are showing a short-term bearish setup, which we shall welcome to give a rest to this bull market.

Level 1: Why is it happening?

Economic Data: Production: ISM PMI vs. SPX

Analysis: No changes since last week.
Current Situation: Bullish
Future Outlook: Bullish

Economic Data: Production: Dallas & Philadelphia Manufacturing vs. SPX

Analysis: Philadelphia’s reading improved and puts back our bullish future outlook.
Current Situation: Neutral
Future Outlook: Bullish

Economic Data: Consumption: Consumer Sentiment

Analysis: Increase on sentiment, yet still below this year’s highs.
Current Situation: Neutral
Future Outlook: Bullish

Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: Long term rates had a bearish reversal due to the end of Iran’s war.
Current Situation: Bearish
Future Outlook: Neutral

Context Investors Sentiment: Credit Spreads

Credit spreads move in tandem with the S&P, but when they diverge, that’s often an early warning signal.

Analysis: Spreads continue trending higher, after last week’s hesitation.
Current Situation: Bullish
Outlook: Bullish

Level 1: Why is it happening? Summary

Economic Data (long-term): Bullish/Bullish
Interest Rates: Bearish/Neutral
Investors Sentiment: Bullish/Bullish

Level 2: What is happening?

Price Action: SPX – Long Trend – 20 & 10 years

Analysis: Price re-entered the 10Y channel and quickly broke out again on the upper side. The 20Y channel is still quite far down (circa 7,200 area). We can consider the current situation as extreme with price action outside the upward channel in both 20Y and 10Y.
Current Situation: Bullish
Future Outlook: Bearish

Price Action: RSP – Trend – Weekly & Daily

Analysis: Red week in the weekly chart with a full red week in the daily chart. Daily price found support on the 20D SMA, as in the recent past.
Current Situation: Bullish
Future Outlook: Bearish

Breadth: RSP vs. SPY relative performance

Analysis: RSP (green) vs. SPY (blue) ratio is represented by the black line. RSP reached ATH last week but retraced during the week more than SPY. Relatively breadth was expanding from mid-May lows. As the ratio is above its 20D SMA, we are currently in a “Breadth Expansion” situation with an outlook of “Expansion” as we come out from the “Concentration” lows in mid-May.
Current Situation: Expansion
Future Outlook: Expansion

Breadth: % Stocks above SMAs vs. RSP

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs

Analysis: Breadth is expanding and we have room to run. We remain on bullish territory.
Current Situation: Bullish
Future Outlook: Bullish

Breadth: New Highs vs. SPY & RSP

Analysis: No extreme signal, yet we remain on a bullish outlook.
Current Situation: Neutral
Future Outlook: Bullish

Breadth & Volatility: Bullish Pct. Index & McClellan Summation Index

Analysis: Both indicators continue in their bullish areas and turning to point higher.
Current Situation: Bullish
Future Outlook: Bullish

Volatility: Ratio Low Volatility Stocks / SPY vs. SPY and RSP

Analysis: The signal reset in just two weeks from an over-extended situation with a bearish outlook (due to that over-extension) to touch and bounce off the signal line, so coming back to a neutral position, yet remaining in the bullish area.
Current Situation: Bullish
Future Outlook: Bullish

Volatility: VIX vs. SPY & RSP

This chart is mainly to detect market bottoms.

Analysis: Last week’s action made a spike in VIX and broke the downward trend.
Current Situation: Bullish
Future Outlook: Neutral

Options: (Inverted) Put/Call Ratio vs. SPY

Analysis: As explained last week (second chart) we previously had situations similar to the current scenario. As the ratio is expected to lower from the recent highs, we may see a local high in the market followed by a correction during the summer months. Our current situation is bullish but with a bearish outlook.
Current Situation: Neutral
Future Outlook: Bearish

Options: Gamma Exposure – SPY

Analysis: Short-term GEX is negative with support at 735. Long-term GEX is positive with a call-wall at 800.
Current Situation: Bearish
Future Outlook: Bullish

Level 2: What is happening? Summary

Price Action: Bullish/Bearish
Breadth & Volatility: Bullish/Bullish
Options: Neutral/Bearish

Level 3: Where is it happening?

Bulls vs. Bears: RSP vs. RSPD (Cons. Disc. – Bulls) and RSPS (Cons. Sta. – Bears)

Analysis: Ratio (yellow) formed a lower-high pattern last week and it is about to break above its 200D SMA, having already broken up the 50D. Discretionary (green) is also forming a bullish pattern.
Current Situation: Neutral-to-Bullish
Future Outlook: Bullish

Sectors Rotation

Sectors Performance

The market bullish momentum is expanding as we can see in the 1 week performance and even in the 1 month, as technology is not the top performer (despite being the heaviest by market cap., hence driving the S&P and the Nasdaq along with it).

Sectors Bullish Percent Index

Growth Sectors

Value Sectors

Any sectors below their red levels are good opportunities to find great companies at good valuations or buy sector ETFs (buy cheap). Those sectors above their Green levels are candidates to be sold (sell expensive).

Current Situation: Bullish - & - Future Outlook: Bullish:
C. Disc., Industrials, Materials, Financials, Real Estate

Current Situation: Bullish - & - Future Outlook: Bearish:
Healthcare

Current Situation: Bearish - & - Future Outlook: Bullish:
Utilities, C.Staples

Current Situation: Bearish - & - Future Outlook: Bearish:
Technology, Communications, Energy

SPX has a Bullish Current Situation and a Bullish Future Outlook.

Level 3: Where is it happening? Summary

Bulls vs. Bears: Neutral-to-Bullish/Bullish

All Levels Summary and Final Thoughts

Level 1 Summary - The Why

Economic Data (long-term): Bullish/Bullish
Interest Rates: Bearish/Neutral
Investors Sentiment: Bullish/Bullish

Level 2 Summary - The What

Price Action: Bullish/Bearish
Breadth & Volatility: Bullish/Bullish
Options: Neutral/Bearish

Level 3 Summary - The Where

Bulls vs. Bears: Neutral-to-Bullish/Bullish

Level 4: Scanning for opportunities

Great Companies with Great Technicals

Descriptive
Index: Any | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Relative Vol.: Over 1 | Price: >$10
Fundamental
EPS Growth Next Year: >15% | EPS Growth Past 3 Years: >5% | Sales Growth Past 3 Years: >5%
- Sorted by P/E
Technical
Performance: Quarter Up | Price above 20D SMA & 50D SMA | Beta: >1 | ATR: > 1

S&P500 and Nasdaq New Highs

Descriptive
Index: S&P 500 and Nasdaq | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Price: >$10
(order by Market Cap desc.)
Technical
50-Day New High

Disclaimer: The content on AMAT Investing is strictly for educational and learning purposes. The author is not a licensed financial advisor and holds no formal financial education. This post does not constitute professional financial advice. All investing involves risk of loss. Always conduct your own research and consult a licensed professional before making any investment decisions.

Last Week’s Comment: Touch & Go at the 50D SMA. Friday price failed to break above 20D SMA, which will be the level to watch next week/s.

Level 1: Why is it happening?

Economic Data: Production: ISM PMI vs. SPX

Analysis: No changes since last week.
Current Situation: Bullish
Future Outlook: Bullish

Economic Data: Production: Dallas & Philadelphia Manufacturing vs. SPX

Analysis: No changes since last week.
Current Situation: Neutral
Future Outlook: Bullish

Economic Data: Consumption: Consumer Sentiment

Analysis: Increase on sentiment, yet still below this year’s highs.
Current Situation: Neutral
Future Outlook: Bullish

Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: May the worst be over? Inflation was high, as expected, but also known to be temporary due to the Iran war. If that gets resolved (and it seems so) then we may be headed towards a deflationary period were we could see the Fed even lowering rates.
Current Situation: Bearish
Future Outlook: Neutral

Context Investors Sentiment: Credit Spreads

Credit spreads move in tandem with the S&P, but when they diverge, that’s often an early warning signal.

Analysis: Spike on Friday after a yo-yo week.
Current Situation: Bullish
Outlook: Bullish

Level 1: Why is it happening? Summary

Economic Data (long-term): Bullish/Bullish
Interest Rates: Bearish/Neutral
Investors Sentiment: Bullish/Bullish

Level 2: What is happening?

Price Action: SPX – Long Trend – 20 & 10 years

Analysis: Price re-entered the 10Y channel. The 20Y channel is still quite far down (circa 7,200 area).
Current Situation: Bullish
Future Outlook: Bearish

Price Action: RSP – Trend – Weekly & Daily

Analysis: Shooting star on the weekly chart right at the top and with a bearish divergence with RSI. In the daily chart we see how MACD is about to create a bearish cross at high levels. I’m downgrading the outlook from neutral to bearish.
Current Situation: Bullish
Future Outlook: Bearish

Breadth & Volatility: % Stocks above SMAs vs. RSP

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs

Analysis: Breadth is expanding and we have room to run. We remain on bullish territory.
Current Situation: Bullish
Future Outlook: Bullish

Breadth & Volatility: Bullish Pct. Index & McClellan Summation Index

Analysis: Both indicators continue in their bullish areas and turning to point higher.
Current Situation: Bullish
Future Outlook: Bullish

Breadth & Volatility: Ratio Low Volatility Stocks / SPY vs. SPY and RSP

Analysis: The signal reset in just two weeks from an over-extended situation with a bearish outlook (due to that over-extension) to touch the signal line, so coming back to a neutral position, yet remaining in the bullish area.
Current Situation: Bullish
Future Outlook: Bullish

Breadth & Volatility: New Highs vs. SPY & RSP

Analysis: No extreme signal, yet we remain on a bullish outlook.
Current Situation: Neutral
Future Outlook: Bullish

Breadth & Volatility: VIX vs. SPY & RSP

This chart is mainly to detect market bottoms.

Analysis: VIX touched level 23 and sharply dropped below 18. This opens up a neutral-to-bullish outlook, but resets the current trend. To decide if we have entered a new trend, we zoom in to the 1 hour level and we can see how the upward trend was broken and we could possibly be on a downward trend.

Current Situation: Bullish
Future Outlook: Neutral-to-Bullish

Options: (Inverted) Put/Call Ratio vs. SPY

Analysis: For this week, I wanted to compare a similar situation where the indicator is above (below as it is inverted) the 0.5 level (dotted red line) and trending downwards. For that I had to go back to the last two times we had a similar situation. End of 2021 and summer 2023. Both instances where having a bullish situation but ended up leading towards a bearish situation, long in the first case, and quite short on the second case. In 2022 the Fed raised rates at the fastest pace ever, so I tend to believe that in 2026 we may repeat 2023, more than 2022.
Current Situation: Bullish
Future Outlook: Bearish

Options: Gamma Exposure – SPX

Analysis: We are in positive GEX territory, yet very close to the GEX flip.
Current Situation: Bullish
Outlook: Neutral

Level 2: What is happening? Summary

Price Action: Bullish/Bearish
Breadth & Volatility: Bullish/Bullish
Options: Bullish/Bearish

Level 3: Where is it happening?

Bulls vs. Bears: RSP vs. RSPD (Cons. Disc. – Bulls) and RSPS (Cons. Sta. – Bears)

Analysis: Ratio (yellow) just closed a higher low pattern, correlated with the higher low seen at the bulls (green).
Current Situation: Bearish-to-Neutral
Future Outlook: Bullish

Sectors Rotation

Market & Economy Rotation

US Sectors order by ISM PMI Correlation (between parenthesis)
Growth Sectors - shall outperform when the market is bullish:
XLK: Technology (71%)
XLY: Cons. Discretionary (67%)
XLI: Industrials (66%)
XLB: Basic Materials (66%)
XLF: Financials (59%)

Value Sectors - shall outperform when the market is bearish:
XLV: Healthcare (55%)
XLC: Communications (49%)
XLE: Energy (44%)
XLU: Utilities (35%)
XLP: Cons. Staples (30%)
XLRE: Real Estate (16%)

Analysis:
With a market moving at this speed is difficult to decide in which moment of the cycle we are. We know that the economy is improving from lower levels, so we could consider it “Early Recovery”. The market, after the noise brought by the Iran war, is signalling towards a Bull Market as we shall see Technology and Industrials leading.

Sectors Performance

The market bullish momentum is expanding as we can see in the 1 week performance and even in the 1 month, as technology is not the top performer (despite being the heaviest by market cap., hence driving the S&P and the Nasdaq along with it).

Sectors Bullish Percent Index

Growth Sectors:

Value Sectors:

Any sectors below their red levels are good opportunities to find great companies at good valuations or buy sector ETFs (buy cheap). Those sectors above their Green levels are candidates to be sold (sell expensive).

Current Situation: Bullish & Future Outlook: Bullish:
C. Disc., Industrials, Financials, Communications, C.Staples, Real Estate

Current Situation: Bullish & Future Outlook: Bearish:
Healthcare, Energy

Current Situation: Bearish & Future Outlook: Bullish:
Materials, Technology, Utilities

Current Situation: Bearish & Future Outlook: Bearish:
None

SPX has a Bullish Current Situation and a Bullish Future Outlook.

Level 3: Where is it happening? Summary

Bulls vs. Bears: Bearish-to-Neutral/Bullish
Market & Economy Rotation: Bull Market

All Levels Summary and Final Thoughts

Level 1 Summary - The Why

Economic Data (long-term): Bullish/Bullish
Interest Rates: Bearish/Neutral
Investors Sentiment: Bullish/Bullish

Level 2 Summary - The What

Price Action: Bullish/Bearish
Breadth & Volatility: Bullish/Bullish
Options: Bullish/Bearish

Level 3 Summary - The Where

Bulls vs. Bears: Bearish-to-Neutral/Bullish
Market & Economy Rotation: Bull Market

Level 4: Scanning for opportunities

Great Companies with Great Technicals

Descriptive
Index: Any | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Relative Vol.: Over 1 | Price: >$10
Fundamental
EPS Growth Next Year: >15% | EPS Growth Past 3 Years: >5% | Sales Growth Past 3 Years: >5%
- Sorted by P/E
Technical
Performance: Quarter Up | Price above 20D SMA & 50D SMA | Beta: >1 | ATR: > 1

None

S&P500 and Nasdaq New Highs

Descriptive
Index: S&P 500 and Nasdaq | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Price: >$10
(order by Market Cap desc.)
Technical
50-Day New High

Highlights: C, CVS, MAR, SPG, NUE, STT, STLD, IBKR

Looking at these stocks, it seems to me that Steel is really trending higher. Guess, what requires a lot of steel? Yes, data centers and… Space X!

Disclaimer: The content on AMAT Investing is strictly for educational and learning purposes. The author is not a licensed financial advisor and holds no formal financial education. This post does not constitute professional financial advice. All investing involves risk of loss. Always conduct your own research and consult a licensed professional before making any investment decisions.

Last Week’s Comment: Finally! The drop that we seen coming for the last few weeks seems that is finally here. Once this correction is over, we will have a better place to enter the market.

Level 1: Why is it happening?

Economic Data: Production: ISM PMI vs. SPX

Analysis: ISM PMI points higher and Chicago PMI sharply increased last week.
Outlook: (very) Bullish

Economic Data: Production: Dallas & Philadelphia Manufacturing vs. SPX

Analysis: No changes since last week.
Outlook: Neutral

Economic Data: Consumption: Consumer Sentiment

Analysis: No changes since last week.
Outlook: Neutral

Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: Strong employment numbers have increased the probabilities of a rate hike by the Fed this year. US economy is so strong that rates are calling for an increase. Markets will price in this possibility rather quickly (a possible explanation for Friday’s drop), after that, expect a mute reaction is the hike ends up happening and a positive reaction if it doesn’t.
Outlook: Neutral

Context Investors Sentiment: Credit Spreads

Credit spreads move in tandem with the S&P, but when they diverge, that’s often an early warning signal.

Analysis: Spreads dived on Friday, mirroring the market. I’m downgrading the outlook from bullish to neutral.
Outlook: Neutral

Level 1: Why is it happening? Summary

Economic Data (long-term): Bullish
Interest Rates: Neutral
Investors Sentiment: Neutral

Level 2: What is happening?

Price Action: SPX – Long Trend – 20 & 10 years

Analysis: Price re-entered the 10Y channel. The 20Y channel is still quite far down (circa 7,200 area).
Outlook: Bearish

Price Action: RSP – Trend – Weekly & Daily

Analysis: Shooting star on the weekly chart right at the top and with a bearish divergence with RSI. In the daily chart we see how MACD is about to create a bearish cross at high levels. I’m downgrading the outlook from neutral to bearish.
Outlook: Bearish

Breadth & Volatility: % Stocks above SMAs vs. RSP

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs

Analysis: Believe it or not… the amount of stocks above their MAs has increased since last week. This past week was bad for big names but good for the rest of the market. We remain bullish.
Outlook: Bullish

Breadth & Volatility: Bullish Pct. Index & McClellan Summation Index

Analysis: Both indicators continue in their bullish areas but pointing lower. Downgrading the outlook from bullish to neutral.
Outlook: Neutral

Breadth & Volatility: Ratio Low Volatility Stocks / SPY vs. SPY and RSP

Analysis: Sharp drop in this key signal. I’m downgrading the outlook from bullish to neutral-to-bearish
Outlook: Neutral-to-Bearish

Breadth & Volatility: New Highs vs. SPY & RSP

Analysis: Very low New Highs (grey line behind the yellow) with a downward trend (yellow). I’m leaving the outlook in neutral.
Outlook: Neutral

Breadth & Volatility: VIX vs. SPY & RSP

This chart is mainly to detect market bottoms.

Analysis: VIX shot from 15 to 21. We can see a similar scenario on last year’s October, where the pull back was very brief. I’m downgrading the outlook from bullish to bearish.
Outlook: Bearish

Options: (Inverted) Put/Call Ratio vs. SPY

Analysis: Last week we had an extreme P/C read (grey) and average at historically top highs and this week the market finally drop. I would like to see an extreme P/C on the other side to start getting bullish. I’m keeping the outlook as Bearish.
Outlook: Bearish

Options: Gamma Exposure – SPX

Analysis: Sharp GEX reversal from last week’s very positive to this week negative. I’m downgrading the outlook from bullish to bearish.
Outlook: Bearish

Level 2: What is happening? Summary

Price Action: Bearish
Breadth & Volatility: Neutral
Options: Bearish

Level 3: Where is it happening?

Bulls vs. Bears: RSP vs. RSPD (Cons. Disc. – Bulls) and RSPS (Cons. Sta. – Bears)

Analysis: Ratio (yellow) was about to make a bullish cross and turned around to continue in bearish territory.continues in bearish territory. I’m leaving the outlook in neutral.
Outlook: Neutral

Sectors Rotation

Market & Economy Rotation

US Sectors order by ISM PMI Correlation (between parenthesis)
Growth Sectors - shall outperform when the market is bullish:
XLK: Technology (71%)
XLY: Cons. Discretionary (67%)
XLI: Industrials (66%)
XLB: Basic Materials (66%)
XLF: Financials (59%)

Value Sectors - shall outperform when the market is bearish:
XLV: Healthcare (55%)
XLC: Communications (49%)
XLE: Energy (44%)
XLU: Utilities (35%)
XLP: Cons. Staples (30%)
XLRE: Real Estate (16%)

Analysis:
With a market moving at this speed is difficult to decide in which moment of the cycle we are. We know that the economy is improving from lower levels, so we could consider it “Early Recovery”. The market, after the noise brought by the Iran war, is signalling towards a Bull Market as we shall see Technology and Industrials leading.

Sectors Performance

In the US market, there is a predominant group above everything else, technology. As W. Buffet said, do not bet against America - so do not bet against technology.

Sectors Bullish Percent Index

Growth Sectors:

Value Sectors:

Any sectors below their red levels are good opportunities to find great companies at good valuations or buy sector ETFs (buy cheap). Those sectors above their Green levels are candidates to be sold (sell expensive).

Buy Opportunities: Utilities, Consumer Discretionary, Materials
Sell Opportunities: Real Estate

Level 3: Where is it happening? Summary

Bulls vs. Bears: Bearish
Market & Economy Rotation: Bull Market

All Levels Summary and Final Thoughts

Level 1 Summary - The Why

Economic Data (long-term): Bullish
Interest Rates: Neutral
Investors Sentiment: Neutral

Level 2 Summary - The What

Price Action: Bearish
Breadth & Volatility: Neutral
Options: Bearish

Level 3 Summary - The Where

Bulls vs. Bears: Bearish
Market & Economy Rotation: Bull Market

Level 4: Scanning for opportunities

Stock Screener for Great Companies with Great Technicals

Descriptive
Index: Any | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Relative Vol.: Over 1 | Price: >$10
Fundamental
EPS Growth Next Year: >15% | EPS Growth Past 3 Years: >5% | Sales Growth Past 3 Years: >5%
- Sorted by P/E
Technical
Performance: Quarter Up | Price above 20D SMA & 50D SMA | Beta: >1 | ATR: > 1

And look who’s back for a short while:

Disclaimer: The content on AMAT Investing is strictly for educational and learning purposes. The author is not a licensed financial advisor and holds no formal financial education. This post does not constitute professional financial advice. All investing involves risk of loss. Always conduct your own research and consult a licensed professional before making any investment decisions.

Last Week’s Comment: Daily double top broken out. And the low volume rally continues.

Level 1: Why is it happening?

Economic Data: Production: ISM PMI vs. SPX

Analysis: Sharp increase in Chicago’s PMI.
Outlook: (very) Bullish

Economic Data: Production: Dallas & Philadelphia Manufacturing vs. SPX

Analysis: Small increase in Dallas Manufacturing Index.
Outlook: Neutral

Economic Data: Consumption: Consumer Sentiment

Analysis: No changes since last week.
Outlook: Neutral

Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: Slight reduction on rates, yet elevated in comparison with Fed’s reference rate. If the Fed is forced to elevate the rates it could be bad for stocks.

Comment: As this push to higher rates and higher inflation comes from the supply side of the economy (prices are going up because there is less supply not more demand), the Fed may consider, rightly so, to not increase rates and wait for the supply shock to pass. This ‘no-movement’ by the Fed will be seen as good for the markets. Based on this alternative point of view, I’m upgrading the outlook from bearish to neutral.

Outlook: Neutral

Context Investors Sentiment: Credit Spreads

Credit spreads move in tandem with the S&P, but when they diverge, that’s often an early warning signal.

Analysis: Spreads continue to advance.
Outlook: Bullish

Level 1: Why is it happening? Summary

Economic Data (long-term): Bullish
Interest Rates: Neutral
Investors Sentiment: Bullish

What is happening? – Level 2

Price Action: SPX – Long Trend – 20 & 10 years

Analysis: Both channels broken on the upper side. Despite the action being bullish, this shall be considered late in the cycle and our outlook shall be bearish. We shall be selling positions here, not entering new ones.
Outlook: Bearish

Price Action: RSP – Trend – Weekly & Daily

Analysis: Equal weight jumped above previous S/R level (daily). Weekly RSI is still not overbought. This rally could continue for a while, expanding the number of stocks participating in the rally.
Outlook: Neutral to Bullish

Breadth & Volatility: % Stocks above SMAs vs. RSP

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs

Analysis: With Above 200D (red) in bullish territory, and above 20D (green) and 50D (blue) above their 50 level, I’m upgrading the outlook from neutral to bullish.
Outlook: Bullish

Breadth & Volatility: Bullish Pct. Index & McClellan Summation Index

Analysis: Both indicators continue in their bullish areas. I’m keeping the bullish outlook.
Outlook: Bullish

Breadth & Volatility: Ratio Low Volatility Stocks / SPY vs. SPY and RSP

Analysis: Sharp increase in the ratio. In retrospective, I shall have kept my bullish outlook for longer.

Comment: The ratio’s distance to its 50D MA is very elevated. Looking into previous years, in 2023 we have a similar situation developing during the month of June. Markets rallied until the end of July, with a first scare drop on June 15th.

Outlook: Bullish

Breadth & Volatility: New Highs vs. SPY & RSP

Analysis: Very low New Highs (grey line behind the yellow) with a downward trend (yellow). I’m leaving the outlook in neutral (definitely not bearish).
Outlook: Neutral

Breadth & Volatility: VIX vs. SPY & RSP

This chart is mainly to detect market bottoms.

Analysis: VIX getting too low. Yet it can remain there for weeks as it happened before (for example during summer 2025).
Outlook: Bullish

Options: (Inverted) Put/Call Ratio vs. SPY

Analysis: Extreme P/C read (grey) and average at historically top highs. I’m keeping the outlook as Bearish.
Outlook: Bearish

Options: Gamma Exposure – SPX

Analysis: First time that we see such a high GEX at 8,000, which is 420 points away.
Outlook: Bullish

Level 2: What is happening? Summary

Price Action: Neutral
Breadth & Volatility: Bullish
Options: Neutral (one Bearish and one Bullish reading)

Where is it happening? – Level 3

Bulls vs. Bears: RSP vs. RSPD (Cons. Disc. – Bulls) and RSPS (Cons. Sta. – Bears)

Analysis: Ratio (yellow) continues in bearish territory but improving rapidly (as we have seen in the RSP price action). Bulls (green) seem also to start reacting positively. I’m upgrading the outlook to neutral.
Outlook: Neutral

Sectors Rotation

Market & Economy Rotation

US Sectors order by ISM PMI Correlation (between parenthesis)
Growth Sectors - shall outperform when the market is bullish:
XLK: Technology (71%)
XLY: Cons. Discretionary (67%)
XLI: Industrials (66%)
XLB: Basic Materials (66%)
XLF: Financials (59%)

Value Sectors - shall outperform when the market is bearish:
XLV: Healthcare (55%)
XLC: Communications (49%)
XLE: Energy (44%)
XLU: Utilities (35%)
XLP: Cons. Staples (30%)
XLRE: Real Estate (16%)

Analysis:
With a market moving at this speed is difficult to decide in which moment of the cycle we are. We know that the economy is improving from lower levels, so we could consider it “Early Recovery”. The market, after the noise brought by the Iran war, is signalling towards a Bull Market as we shall see Technology and Industrials leading.

Sectors Performance

In the US market, there is a predominant group above everything else, technology. As W. Buffet said, do not bet against America - so do not bet against technology.

Sectors Bullish Percent Index

Growth Sectors:

Value Sectors:

Any sectors below their red levels are good opportunities to find great companies at good valuations or buy sector ETFs (buy cheap). Those sectors above their Green levels are candidates to be sold (sell expensive).

Buy Opportunities: Utilities, Consumer Discretionary, Materials (soon)
Sell Opportunities: Real Estate

Level 3: Where is it happening? Summary

Bulls vs. Bears: Bearish
Market & Economy Rotation: Bull Market

All Levels Summary and Final Thoughts

Level 1 Summary - The Why

Economic Data (long-term): Bullish
Interest Rates: Neutral
Investors Sentiment: Bullish

Level 2 Summary - The What

Price Action: Neutral
Breadth & Volatility: Bullish
Options: Neutral (one Bearish and one Bullish reading)

Level 3 Summary - The Where

Bulls vs. Bears: Bearish
Market & Economy Rotation: Bull Market

Level 4: Scanning for opportunities

Stock Screener for Great Companies with Great Technicals

Descriptive
Index: Any | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Relative Vol.: Over 1 | Price: >$10
Fundamental
EPS Growth Next Year: >15% | EPS Growth Past 3 Years: >5% | Sales Growth Past 3 Years: >5%
- Sorted by P/E
Technical
Performance: Quarter Up | Price above 20D SMA & 50D SMA | Beta: >1 | ATR: > 1

Disclaimer: The content on AMAT Investing is strictly for educational and learning purposes. The author is not a licensed financial advisor and holds no formal financial education. This post does not constitute professional financial advice. All investing involves risk of loss. Always conduct your own research and consult a licensed professional before making any investment decisions.

Last Week’s Comment: A MACD on a bear setup and a double top occurring at ATH on a rally with lower volume than average… but trends go longer than anyone expects.

Level 1: Why is it happening?

Economic Data: Production: ISM PMI vs. SPX

Analysis: No changes since last week.
Outlook: Bullish

Economic Data: Production: Dallas & Philadelphia Manufacturing vs. SPX

Analysis: Sharp decline in Philadelphia’s manufacturing index.
Outlook: Neutral to Bearish

Economic Data: Consumption: Consumer Sentiment

Analysis: Sentiment continues to decrease (yet this data series is based on online surveys and heavily politically biased). Yet this week we had bad forward guidance by Walmart, warning about the pain the consumer is experiencing due to inflation.
Outlook: Neutral

USD & Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: Slight reduction on rates, yet elevated in comparison with Fed’s reference rate. If the Fed is forced to elevate the rates it could be bad for stocks.
Outlook: Bearish

USD & Interest Rates: USD vs EEM ILF and S&P500

Analysis: USD up = ILF down. A long war is not a great outlook for ILF.
Outlook: Neutral (the longer the war the higher the oil & gas disruption)

Context Investors Sentiment: Credit Spreads

Credit spreads move in tandem with the S&P, but when they diverge, that’s often an early warning signal.

Analysis: Sharp increase in Spreads. I keep the bullish outlook.
Outlook: Bullish

Level 1: Why is it happening? Summary

Economic Data (long-term): Neutral
USD & Interest Rates: Bearish (due to Interest Rates)
Investors Sentiment: Bullish

What is happening? – Level 2

Price Action: SPX – Long Trend – 20 & 10 years

Analysis: Both channels broken on the upper side. Despite the action being bullish, this shall be considered late in the cycle and our outlook shall be bearish. We shall be selling positions here, not entering new ones.
Outlook: Bearish

Price Action: RSP – Trend – Weekly & Daily

Analysis: Price (equal weight index) jumped above previous S/R level. If sustained could signal a bullish move to new ATH. I’m improving the outlook from Bearish to Neutral
Outlook: Neutral

Breadth & Volatility: % Stocks above SMAs vs. RSP

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs

Analysis: Last week, the Above 200D (red) did trigger the bearish signal, but this week it triggered the bullish signal again. The above 20D (green) and 50D (blue) have crossed below their 50 level. I’m upgrading the outlook from bearish to neutral, as I want to see continuation of this new signal to confirm the bullish outlook.
Outlook: Neutral

Breadth & Volatility: Bullish Pct. Index & McClellan Summation Index

Analysis: Bullish Pct. Index has crossed back above the 50 level. I’m updating the outlook from bearish to bullish.
Outlook: Bullish

Breadth & Volatility: Ratio Low Volatility Stocks / SPY vs. SPY and RSP

Analysis: We are still in bullish territory, but the ratio has lost momentum, which could signal a local top. I keep the outlook in neutral.
Outlook: Neutral

Breadth & Volatility: New Highs vs. SPY & RSP

Analysis: Very low New Highs (grey line behind the yellow) with a downward trend (yellow). I’m leaving the outlook in neutral (definitely not bearish).
Outlook: Neutral

Breadth & Volatility: VIX vs. SPY & RSP

This chart is mainly to detect market bottoms.

Analysis: Downtrend resumed. I’m upgrading the outlook to bullish
Outlook: Bullish

Options: (Inverted) Put/Call Ratio vs. SPY

Note: Updating this chart to overlay SPY behind the ratio.

Analysis: Historically, at this levels in the P/C ratio, the market finds difficulties to advance. A downward slope in the P/C ratio 10D SMA historically means that the market (SPY) will go down. I’m keeping the outlook as Bearish.
Outlook: Bearish

Options: Gamma Exposure – SPX

Analysis: Positive Gamma keeps increasing to higher levels at 7,500, 7,600, 7,700 and 7,800. We don’t see much support in lower levels. In case of a sudden drop in the markets, prices will fall sharply. I’m keeping the bullish outlook as we still are in a positive gamma environment.
Outlook: Bullish

Level 2: What is happening? Summary

Price Action: Bearish
Breadth & Volatility: Neutral
Options: Neutral (one Bearish and one Bullish reading)

Where is it happening? – Level 3

Bulls vs. Bears: RSP vs. RSPD (Cons. Disc. – Bulls) and RSPS (Cons. Sta. – Bears)

Analysis: Ratio (yellow) continues in bearish territory. Bulls (green) are extremely weak, any recovering from these very low levels could be seen as a bullish development.
Outlook: Bearish

Sectors Rotation

Market & Economy Rotation

US Sectors order by ISM PMI Correlation (between parenthesis)
Growth Sectors - shall outperform when the market is bullish:
XLK: Technology (71%)
XLY: Cons. Discretionary (67%)
XLI: Industrials (66%)
XLB: Basic Materials (66%)
XLF: Financials (59%)

Value Sectors - shall outperform when the market is bearish:
XLV: Healthcare (55%)
XLC: Communications (49%)
XLE: Energy (44%)
XLU: Utilities (35%)
XLP: Cons. Staples (30%)
XLRE: Real Estate (16%)

Analysis:
With a market moving at this speed is difficult to decide in which moment of the cycle we are. We know that the economy is improving from lower levels, so we could consider it “Early Recovery”. The market, after the noise brought by the Iran war, is signalling towards a Bull Market as we shall see Technology and Industrials leading.

Sectors Performance

Sectors Bullish Percent Index

Growth Sectors:

Value Sectors:

Any sectors below their red levels are good opportunities to find great companies at good valuations or buy sector ETFs (buy cheap). Those sectors above their Green levels are candidates to be sold (sell expensive).

Buy Opportunities: Utilities, Consumer Discretionary, Materials (sson)
Sell Opportunities:

Level 3: Where is it happening? Summary

Bulls vs. Bears: Bearish
Market & Economy Rotation: Bull Market

All Levels Summary and Final Thoughts

Level 1 Summary - The Why

Economic Data (long-term): Neutral
USD & Interest Rates: Bearish (due to Interest Rates)
Investors Sentiment: Bullish

Level 2 Summary - The What

Price Action: Bearish
Breadth & Volatility: Neutral
Options: Neutral (one Bearish and one Bullish reading)

Level 3 Summary - The Where

Bulls vs. Bears: Bearish
Market & Economy Rotation: Bull Market

Level 4: Scanning for opportunities

Stock Screener for Great Companies with Great Technicals

Descriptive
Index: S&P500 | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Relative Vol.: Over 1 | Price: >$20
Fundamental
EPS Growth Next Year: >15%
Technical
Performance: Quarter Up | Price > 50D SMA | Price > 200D SMA | Beta > 1 | ATR > 1

Stock Screener for New Highs

Descriptive
Index: Any | Market Cap.: +Mid (+$2B) | Option/Short: Yes/Yes
Avg. Volume: >1M | Relative Vol.: Over 1 | Price: >$10
Fundamental
Sorted by P/E
Technical
Signal: New High

Disclaimer: The content on AMAT Investing is strictly for educational and learning purposes. The author is not a licensed financial advisor and holds no formal financial education. This post does not constitute professional financial advice. All investing involves risk of loss. Always conduct your own research and consult a licensed professional before making any investment decisions.

Last Week’s Comment: To better understand my current thinking let’s review Bob Farrell’s 10 market rules:

1. Rule #01: Markets tend to return to the mean over time

2. Rule #02: Excesses in one direction will lead to an opposite excess in the other direction

3. Rule #03: There are no new eras - excesses are never permanent

4. Rule #04: Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways

5. Rule #05: The public buys the most at the top and the least at the bottom

6. Rule #06: Fear and greed are stronger than long-term resolve

7. Rule #07: Markets are stronger when they are broad, and weakest when they narrow to a handful of blue-chip names

8. Rule #08: Bear markets have three stages - sharp down, reflexive rebound, and a draw-out fundamental downtrend

9. Rule #09: When all the experts and forecasts agree - something else is going to happen

10. Rule #10: Bull markets are more fun than bear markets

Lance Roberts (from Real Investment Advice) has a fantastic paper on these rules: https://realinvestmentadvice.com/resources/blog/the-rules-of-bob-farrell-an-updated-illustrated-guide/

I think that we are in Rule #04.

Level 1: Why is it happening?

Economic Data: Production: ISM PMI vs. SPX

Analysis: No changes since last week.
Outlook: Bullish

Economic Data: Production: Dallas & Philadelphia Manufacturing vs. SPX

Analysis:No changes since last week.
Outlook: Bullish

Economic Data: Consumption: Consumer Sentiment

Analysis: No changes since last week.
Outlook: Neutral-Bullish

USD & Interest Rates: FED, 2yr, 10yr, and 30yr Rates

Analysis: No much change since last week. This is really not good. Interests keep increasing. Long-term (30 year) have a psychological resistance at 5% and we are at 5.120%. Markets may embrace this narrative and drag down everything.

Devils Advocate View: As market returns are accelerating rapidly, driven by raising earnings, if the government wants to sell bonds, they need to raise the returns to make them attractive. So, high yields are a result of a strong market.
Outlook: Bearish (?)

USD & Interest Rates: USD vs EEM ILF and S&P500

Analysis: USD up = ILF down. A long war is not a great outlook for ILF.
Outlook: Neutral (the longer the war the higher the oil & gas disruption)

Context Investors Sentiment: Credit Spreads

Credit spreads move in tandem with the S&P, but when they diverge, that’s often an early warning signal.

Analysis: Spreads moved in parallel with the market this past week. As spreads keep trending higher I keep my bullish outlook.
Outlook: Bullish

Level 1: Why is it happening? Summary

Economic Data (long-term): Bullish (with a neutral note on that consumer confidence)
USD & Interest Rates: Bearish (due to Interest Rates)
Investors Sentiment: Bullish

What is happening? – Level 2

Price Action: SPX – Long Trend – 20 & 10 years

Analysis: Both channels broken on the upper side. Despite the action being bullish, this shall be considered late in the cycle and our outlook shall be bearish. We shall be selling positions here, not entering new ones.
Outlook: Bearish

Price Action: RSP – Trend – Weekly & Daily

Analysis: Price crossed below the 20D SMA and both RSI and MACD confirm the down turn.
Outlook: Bearish

Breadth & Volatility: % Stocks above SMAs vs. RSP

Above 200 Daily SMA

Above 20, 50, and 200 Daily SMAs

Analysis: Above 200D did trigger the bearish signal. The above 20D (green) and 50D (blue) have crossed below their 50 level.
Outlook: Bearish

Breadth & Volatility: Bullish Pct. Index & McClellan Summation Index

Analysis: Bullish Pct. Index has crossed below the 50 level. I’m updating the outlook from neutral to bearish.
Outlook: Bearish

Breadth & Volatility: Ratio Low Volatility Stocks / SPY vs. SPY and RSP

Analysis: Volatility ratio impacts more SPY than RSP. We can see the price divergence between SPY (blue) and RSP (green). It is still not clear who will push or pull the other.
Outlook: Neutral

Breadth & Volatility: New Highs vs. SPY & RSP