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03/28/2024
Thomas Thornton
info@hedgefundtelemetry.com

Sector Focus

Today's note is focused on US sectors.  Had several calls today with subscribers and am sorry for the late note today.  

Notable:

  • US Markets - A little increase in bullish sentiment but still under 50%
  • Nasdaq 100 Attribution Studies - It's amazing how concentrated the attribution has been recently
  • US Sector - Focus on daily charts of what's working and what isn't
  • Soybeans - Upside exhaustion combined with extremely overly bullish sentiment setup
  • DeMark Screens

US Markets

SPX bullish sentiment is at 41% up from 30% the previous day.  It's still in the concerning zone under 50%

 

SPX daily hasn't been able to move above the 50 day and there still is a downside wave pattern.  Not terribly concerned for some runaway market at this point.  

 


SPY same story.  The potential downside wave 3 price objective is 239.73... if this remains below the all time high in January.  

 

Nasdaq bullish sentiment is at 40% and really is diverging with NDX price which is not so far from January highs.  

 


NDX Index has been for sure the strongest with very few stocks doing the heavy lifting.  (see below)  The 50 day at 6719 is a support level people will be watching

 


QQQ same story.  

 

SPY vs TLT (Bond ETF) ratio has made another upside exhaustion signal well into upside wave 5.  There still is some work to do with the TLT ETF (on day 7 of 13 with a daily Countdown) but I could see a fairly sharp reversal with this ratio.  By the way in 2017 both stocks and bonds traded with tight correlation until September.  

 


Yesterday's closing prices on my PPO monitor saw nearly all the sectors up on the day but also many under the day's VWAP - a sign of sellers late in the day.  

 
Nasdaq 100 Attribution Studies


Here's some attribution studies showing how the biggest NDX names are doing the majority of attribution.  This is the YTD of the NDX and it shows the top 3 companies combined have attributed 52% and the top 10 attributing 82%. AMZN is 30.75%.  One stock doing nearly 1/3 of the work. 

 

Here's the data from the recent low on 2/9.   The top 5 = 50%

 

From the last significant bottom in the market from February 2016.  The top 5 = 50%   Think about when these start to top or fall?   They will eventually as we've seen all of these big weights drop many times by substantial amounts.  

 
US Sector Focus


SMH Semiconductors were one of the strongest sectors last year and the chart is reemerging on day 4 of 13 with an upside Countdown.  I would be long most of the top 10 except NVDA and Taiwan Semiconductor.  One of the potential positives ahead is if QCOM buyout happens with QCOM at 4.4% weight.  INTC is the largest weight at 10% and trades well too.  

 


XHB Homebuilders have collapsed and the bounce failed under the 50 day moving average.  The down 3rd wave did get locked in when it closed under the first down wave.  Even if the downside price objective is not reached there will be a wave 4 bounce and then a wave 5 lower low

 

OIH Oil Drillers is trying to base between 23-25.  My bet would be lower before higher.  Not an optimal entry to short in my view

 

XOP Oil and Gas Exploration also has been crushed and is trying to base.  I believe it will go lower before higher.  

 

VNQ Real Estate broke down from a defined range and recently made a wave 5 low and has a downside exhaustion 13.  With big drops like this it takes time to rebuild but if you were looking for a bond proxy this could be a decent entry on the long side.  I would like to see it above the 50 day which is going to be resistance so small size for now with a 70-73 stop.

 


XLP Staples has had very good success with the DeMark indicators on both the upside and downside.  This is another that I believe will go lower before higher.  

 


IYR REITS  like VNQ has been crushed but had a recent downside exhaustion in wave 5 so I'd nibble on this with moderate size 70 stop.  

 

IYT Transports also has good success with the DeMark indicators.  The bounce off the initial lows failed at the 50 day moving average and this is another one I see lower before higher.  

 


XLU Utilities has been mashed down hard and I went long with the red 13 on the downside because I needed a long vs my shorts.  It moved lower and I could see it move a little lower still but my thought is that a bond bounce is ahead.  This chart also shows when there is a downside 50 day moving average it serves as resistance.  

 


XLI Industrials is the most important sector for the overall market health.  The massive blowoff top late last year topped out with many longer term monthly exhaustion signals too.

 


XLV Healthcare also had a blow off top late in the year finishing off with an upside exhaustion.  Bounce off the lows seems to be weakening.  

 


XRT Retail was "dead" last year but there were several downside exhaustion signals in the summer and there was an upside exhaustion in November that actually was a deferred 12+ sloppy upside exhaustion that stopped out as a bad signal quickly.  There were several move with minor pullbacks (remember those from 2017?)  It still seems to have risk to the downside but could see a move over the 50 day get a squeeze going.  

 


XLF Financials had a strong bounce off the lows and nearly made a new but failed and gave back about half the bounce.  I go into the Broker Dealer index below on several time frames for more context

 


IBB Biotech like XLV had a blow off top that I'm please to have caught on the long side with those downside exhaustion signals and took profits at the green Setup 9.  It seems to be in no mans land right now.  

 


XLY Consumer Discretionary has AMZN as it's largest weight at 20% vs the next largest HD at 7% and it's struggling unlike  AMZN.  

 


XLK Tech has been the strongest and has the chance of making a new high with the strength of Semi's perhaps.  If the 50 day breaks then it will give some people pause.  Today's action with this group isn't so great as AAPL, MSFT, FB, IBM, QCOM, and CSCO down in the top 10 holdings.  

 
Broker Dealer Index - Daily Weekly and Monthly
 
XBD daily has a pink Combo upside exhaustion after last week's red Sequential upside exhaustion.  I am always cautious buying breakouts when there are upside exhaustion signals present.  Could these stall out for a while or will this mark the top?  
 
The weekly had upside exhaustion in January.  It's achieved the upside wave 5 price objective.  
 


The monthly has an upside pink Combo exhaustion in play with a red Sequential on month 11 of 13 therefore it's possible within a quarter that signal will occur.  

 
Soybeans


Soybean bullish sentiment is at 86% and is in the extreme zone now

 


Soybean daily has an upside red Sequential 13 Countdown yesterday.  If you're long Soybeans this would be a good time to ring the register or perhaps sell short

 
DEMARK SCREENS - Daily, Weekly, Monthly Upside/Downside Exhaustion Signals

Daily/Weekly DeMark upside/downside exhaustion signals (Sequential) Weekly updated on Monday's.  Price flips occur when a stock closes higher/lower than four previous closes.    

S&P 1500 Universe: 

DAILY UPSIDE 13:   ASGN, BOFI, DIN, RUTH, STX, VRTX
DAILY DOWNSIDE 13:  NWN, OGS, VVC

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    NONT
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   AIV, AKR, CMS, DAKT, DRE, EGP, FF, FII, GXP, HCP, HIW, IRM, LSI, MAC, MSA, NFG, NNN, NWE, NWN, NX, OFC, RBCN, REG, SAFT, SKT, UBA, UPS, VNO, WEC

Updated: 3/5/18
WEEKLY UPSIDE 13:   AFG, APH, BBT, EL, HSC, ISRG, HW/A, MCO, MINI, MSFT, VRTU, WEX, ZBRA
WEEKLY DOWNSIDE 13:   CRZO, HR, MSTR, RNR, SUP

Updated: 3/1/1
MONTHLY UPSIDE 13:     BDX, BMY, CAT, COL, CW, EBIX, GNCMA, IRBT, MMSI, NFLX
MONTHLY DOWNSIDE 13:    CHK, SVU, WIN

Euro Stoxx 600 Universe: 

DAILY UPSIDE 13:   NONE
DAILY DOWNSIDE 13: MS IM

DAILY UPSIDE WITH PRICE FLIP REVERSAL DOWN:    OCDO LN, SKY LN
DAILY DOWNSIDE WITH PRICE FLIP REVERSAL UP:   FGP LN, ICP LN, ISS DC, UU/ LN

Updated: 3/5/18
WEEKLY UPSIDE 13:    BKT SM, LSE LN, RMS FP
WEEKLY DOWNSIDE 13:   SNH GR, TCH FP

Updated: 3/1/18
MONTHLY UPSIDE 13:    ASML NA, ENX FP, FI/N SW, INVP LN, SAB SM, SCR FP, US IM
MONTHLY DOWNSIDE 13:   NONE


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