Happy Halloween! The market has been a little less spooky in the final days of October, after experiencing a pretty deep sell-off, at least in the context of recent years. The sell-off was accompanied by some rotation, which we flush out in todays Relative Strength Wednesday video. The newly released Chaikin ETF Power Gauge has recently turned bearish on the XLE and remains bearish on the XLI. Both underperforming the SPY and providing negative returns in each of the time frames we track. Sectors remaining or turning bullish are all very defensive, including XLP, which in addition to recently earning a bullish ETF Power Gauge, has made a bullish technical move, which we discuss. XLRE also earns a bullish Power Gauge, but the powerbar ratio is pointing to weaker performance ahead. Join us for our weekly Relative Strength analysis HERE
We have been tracking the Chaikin bull-bear powerbar ratio every trading day since January 2014. Showing the range of SPY power bar differentials is one more way to know when we're near a market low and when we're overextended. With a ratio of .27 in Market Conditions prior to the start of today's trading, the SPY may be a candidate for basing over the coming days and weeks. When the Bull Bear ratio gets near .20, we generally see a mean reversion (though often a subsequent retest of lows). This gives us a chance to nibble at Very Bullish stocks in strong sectors and industry groups showing signs of accumulation. With the amount of technical damage done to stocks, we may wish to consider stocks with Neutral + ratings showing signs of accumulation (money flow and relative strength). Today's trading video is here.
Here is today's Chaikin Power User trading video. With the market through key technical support levels, negative money flow, and a roll-over on the OB/OS oscillator, we were inclined to fade today's rally and did so around noon today. The $VIX didn't reflect the jump in prices, so we were able to get good premium for some OTM call spreads at around 2800. Our market posture remains bearish. Market conditions according to Chaikin here.
Relative Strength Wednesday
D-Fence! Our Relative Strength Wednesday analysis shows more cracks. The 3 and 6 month timeframes are catching up with the short-term, as only 3 sectors now have gains greater than the market in the longest timeframe we monitor. And they are mostly defensive. Basic Materials remains the most bearish sector, however Energy and Industrials are not far behind. For the second week we have incorporated the new Chaikin ETF Power gauge into our weekly Relative Strength analysis. Join our Wednesday meeting here and watch as we look at the markets before the open and observe several technical signs of a bearish market, then go through our weekly Relative Strength Wednesday analysis to help us determine our market posture! Click HERE to watch our process.
To learn more about this new feature on the Chaikin Analytics platform check out the release notes from the folks at Chaikin HERE
With only defensive sector ETF's outgunning the market with Bullish and Very Bullish Power Gauge ratings and both powerbar differentials and price-moving average metrics on the S&P bearish, we maintain conservative about a possible market bottom. Remember, power gauge ratings predict future relative strength vs. the top 3000 US stocks, so a Very Bullish rating can still deliver negative returns but outperform the market. We're at a critical level and we discuss the likelihood of moving higher from here in today's video. (Video Here)
Relative Stregnth Wednesday
We have included the newly released Chaikin ETF PowerGauge Rating to our weekly Relative Strength Wednesday Analysis. While we haven't received any detailed information on the new ETF PG Rating, or it's proprietary formula, we do think it's a big deal for the platform and we are anxious to put it to work. Last weeks sell off has had an effect on most of the SPY sectors. Despite its pullback in price, XLV remains the only sector with positive powerbars, outperforming the SPY, although posting a negative return in the short-term, just less of one than the SPY and now with a Very Bullish Chaikin ETF PowerGauge Rating. Materials ( XLB) is the most bearish sector, a designation it has had for several weeks now. Join us for our complete Relative Strength Analysis and a look at the markets pre-market Wednesday, 10/17. Watch / Listen HERE
The market sell-off has shown up in a big way in our weekly Sector Trend analysis. The leaders are defensive. The SPY power gauge ratio remains bearish, however less so than late last week. Which got us thinking. What is typically, the lowest power gauge ratio we have seen over the last several years during these type of market events and what has the market looked like 6 months later.
So, we did some quick math. Since we started tracking the bull bear ratio back in 2014, during pull backs, the ratio has been bottoming around .20 ( sometimes lower, sometimes higher) Taking the 5 worst power-bar ratios since 2014, what did the market look like 6 months later. Join us to follow along with our analysis. WATCH HERE
Here are Friday's market conditions. Despite the rally in the futures overnight, our market conditions tracking suggests more downside ahead. We combine Power Gauge ratios of S&P stocks from Chaikin Analytics with price relative to long-term and short-term Chaikin moving average trend to make our call - which as of today remains Market Down.
Personal note: that's the fastest transition to red Ihat I've seen since tracking the Power Bar ratio of the large cap index. We hit a peak of 2.69 on September 24th and have plummeted to a ratio of .32 in that time. Power Gauge metrics are largely fundamental in nature. The market is convinced that forward earnings guidance is going to be tough during earnings season calls. If that hypothesis is incorrect, we'd expect earnings season to be the catalyst of the Christmas rally. If interest rates spike and tariff related layoffs start happening with greater frequency, we'd expect the correction to be far longer lasting. It's all about the forward guidance on earnings. We'll assume the market is right and trade accordingly,
On Thursday, we reviewed market conditions and updated our Relative Strength Wednesday analysis with a special edition to gage what sectors were especially dragging the market down. The Answer: Tech is the downside star so fare. Video Here
Relative Strength Wednesday
1 month and 3 month returns vs the SPY are turning negative in many sectors. Despite the recent increase move in interest rates XLU remains strong with positive returns in all 3 time-frames and bullish power bar ratio. At the same time finacials are showing somestregnth and health care is little changed at the top of the order.
We will return to video next Wednesday with a slightly more in depth Relative Strength Wednesday. We are excited to show you some of the things we have been working on behind the scenes the last few weeks!
As we continue to refine our trading plans for Q4 and beyond, you can always find our weekly analysis in the MARKET CONDITIONS section of ChaikinPowerUser.com
While the XLRE continues to weaken following the strongest week we've seen for interest rates in some time, curiously, XLU remains strong. As you might expect, financials showed strength as the Bull / Bear ratio on the XLF shot from below 2 to the 5 you see here.
Speaking of Bull ? Bear ratios, the ratio of bullish to bearish stocks on the SPY has dropped below 1.5 from the recent high of nearly 2.7 (9/24/18). While the technicals on the SPY are beginning to show some of those "red splotches" we talk about. As money flow has turned slightly negative price has now fallen below the LT Chaikin avg. In this weeks note to subscribers, Marc Chaikin identifies 287 and 280 as key levels of support on the SPY.
We will continuously update the Market Conditions section of ChaikinPowerUser.com. Join us Wednesday for our next Relative Strength Wednesday. We have a feeling it could be an important one.