Yet another week where the data shows us the move into emerging markets is for real. U.S. markets remain bullish, although perhaps ready for a pullback. Bonds, gold and dollar at odds with each other, surely a winner has to emerge at some point in the near(ish)-term.
Watch todays video to see how we use Chaikin Analytics to develop our weekly 30,000 ft. view.
This week, weakening relative strength in QQQ forced us out of half of our position. We found plenty of opportunities to put (paper) money to work on the internations side. So much so we were forced to make a few hard decisions and get a little creative, adding 1/2 trounches in order to stay at our investment cap. In addition to three international ETs, we added the solar ETF, TAN and more copper to our macro holdings. Watch todays video to see how we use Chaikin Analytics to manage a simulated ETF portfolio.
It's macro-Monday! During todays pre-open trading meeting, we point of that the Chaikin Bll:Bear ratio is now 3.0. Over the six years we have been recording Chaikin data, a ratio of 3.0 or better has signaled a short-term top - as seen below. While the market rally does appear to have breadth, it also appears to be ready to take a breath. Today we point out several oscillator divergences, another cautionary data point. Watch todays video for our complete macro monday analysis, including an in-depth review of Mike's favorite, RSMK.
This week we focused on our U.S. sectors and sub-sectors. We sold a few and added a few ETFs. Based on a relative strength failure, we sold our entire position in XLC. We were also forced to sell half of our positions in XHB, XHE & XRT based on 3 month under-performance. Although we free'd up a fair amount of cash, we only found two ETF's that met our acquisition rules. WE added XHS, XLI & XLB. We imagine we will see more relative strength next week when we turn to international ETFs.
relative strength wednesday
This week, since it's been a bit of a crazy week we have included the one week RS chart below. Our Relative Strength Wednesday analysis revealed a nice move in energy, in the shortest time-frames. Nothing suggests to us us that our posture should be anything but bullish. However, we would expect overbought conditions to clear in the coming days or weeks.
Macro Monday! We met before the market open, just after news of an effective PFE vaccine hit.
Using our RSMK based relative strength ranking of key stocks, we track the RS trend of the most liquid optionable stocks (These come from a Chaikin-subscriber-only list from Option Play released once a week). Only stocks with Power Gauges rated "Very Bullish" are included below. This would be one of the final steps when deciding about stocks to put in the watchlist. The market is at resistance but possibly poised to break out of an intermediate term consolidation. I'm looking for stocks accelerating and overtaking the SPY and ACWI price performance on a relative basis, transitioning from red to green in relative rank comparison to these indexes. Look at PHM, already a trade candidate top performing XHB (homebuilder) subsector. After a couple month's consolidation, Pulte may be a stock gathering speed ahead of a market breakout.
OptionPlay most liquid and Chaikin Very Bullish rated stock Relative rank trend
Another stock that looks interesting from an acceleration standpoint is Alcoa. Better current money flow and stronger upside momentum exhibited by the recent OB/OS oscillator reversal outside of the oversold zone, along with a near perfect Chakin Checklist make this a strong candidate for a trend trade over the intermediate term. The 21 EMA - 1.5 ATR would be both my stop and level for defining trade risk. I'd watch for any signs of strength in the US dollar or weakness in the XLB, both of which would be bearish for this stock.
We put all the noise aside and completed our weekly ETF management with a few acquisitions. All of our acquisitions were in our macro holdings. We also added a third position to our delta neutral trades. Watch out video to learn how we manage our simulated ETF portfolio.