The Printing Continues

This week’s move to new all-time highs in both the S&P500 (SPY) and the Dow industrial (DIA)masked deteriorating underpinnings as both the Russell 2000 (IWM) and the Nasdaq (QQQ) lagged. Values stocks led the run-up once again while big cap NASDQ stocks remain stuck in first gear. In fact, the once leading NASDQ100 was down -1.12% for the week, and is lagging on year-to-date performance by more than 6% against other key equity indexes.

Our Alpha rotation model took advantage of the run-up by taking partial profits in SPY and moving up stops. Also noteworthy is the fact that dollar got smoked, while all commodities ripped higher…. including soft commodities, gold and silver.

It’s starting to feel a bit like the 70’s, only this time the stakes are higher as central banks, fiat currencies and the current world order is under attack. Global Government debt verses GDP is at record levels as banks and governments are operating as if the real world is a Monopoly game.   Most disturbing is that the Dollar is getting hammered despite rising rates. The Fed is now stuck between a rock and a hard place, as higher rates that are needed to combat inflation could unhinge equities.

Just talk to most Cryptocurrency supporters and they will tell you that Crypto and Blockchain
technologies are the perfect replacement for the broken banking system. Of course, do not mention Crypto to Warren or Charlie.

This week’s highlights are the following:

  • Across the 4 major indices the Dow Jones Industrials (DIA) and S&P closed the strongest, with NASDAQ down 1% on the week showing a rotation in the indices.
  • On weekly charts, QQQs are hanging on while SPY is seeing healthy growth. DIA is running a bit rich with a move up this week.
  • Volume shows improvement from negative to neutral across major indices
  • For the week, Utilities backed off and underperformed stocks, which is a Bullish intermarket relationship for the stocks
  • Technology and Semiconductors (SMH) continue to underperform against the S&P benchmark
  • Energy and homebuilders are the two strongest sectors, signaling mounting inflationary pressures
  • Risk Gauges have improved to Risk-On
  • VXX came off 8.42% over 5 days, a positive development for the market as a whole
  • USD down 1.26% over the last 5 days, the lowest since late February. If USD continues to drop it will slide to its lowest levels since April 2018
  • Positive sentiment on SPY with McClellan oscillator turning positive to end the week.
  • TLT has a bearish engulfing pattern and despite a poor unemployment report bonds are still in a weak recovery phase with inflationary pressure weighing in
  • Big cap DIA value-stocks are outperforming, while small caps that were previously strong are now under pressure. The baton is being passed from growth to value stocks
  • XRT looks to be holding over its 50 and 10-dma, currently in a compression configuration looking to breakout
  • IBB could breakdown into a distribution phase if it cannot hold over 200-dma
  • KRE potentially helped by the prospect of higher rates looks poised for continued strength
  • Commodities are all looking poised for more upside as inflationary pressures continue
  • Gold had a strong week, look for confirmation of bullish breakout next week if price takes out 200-dma and a critical trend line (GLD)
  • Look for Silver (SLV) to continue to outperform vs Gold if inflationary pressures remain intact

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