Due to travel schedules, this week’s Market Outlook will be exclusively the Big View bullets and the “one thing.”

The “one thing” is an exercise I practice in our weekly members-only mentoring sessions, which involves answering the question, “If you could only focus on one thing in the coming day (or in this case - week) to keep you on the right side of the market, what would it be?”

Then make sure you don’t lose sight of your one thing since you’ve deemed it as important!

The market has a pretty clear message in the Sector Summary this week. I’ve highlighted it in the image below.

This table is ordered by 6-month change. As you can see, the top performing sectors last week (5 days) were all at the top of the table which is where the 6-month leaders and, not surprisingly, the YTD leaders are found.

As you can see by the boxes drawn on the table…

Leaders continued to lead.

The sectors at the bottom of the table were the worst performers, with the exception of the XLP, which eked out a small gain.

The laggards fell.

Additionally, the column labeled “RM 10/50” displays an intermediate-term momentum measure called Real Motion, which looks at the 10 and 50-day trends. A “Bull” in this category is analogous to a price chart that has the close over the 10-day average and the 10-day average over the 50-day average.

This indicator is often an early diverging indicator of intermediate tops and bottoms. It’s noteworthy that 11 of the 14 sectors are bullish.

One simple application of this indicator is to anticipate that a chart with a Bullish “RM 10/50” condition that moves above its 50-day MA from below will break out and follow through.

This measure suggests the leaders are in decent shape, and there’s hope for the laggards as long as this momentum measure stays bullish.

One thing to watch out for this week is bearish action at the top of this table. I don’t expect it, and without it, now is a prudent time to follow the leaders.

Bullets by Holden Milstein

Risk-On

• The key US indices continued to bounce off of the support of their 50-day moving averages except for the Russell 2000 which backed off the entire week and ended -3% over the past 5-trading days. (+)
• Volume Patterns continue to improve across the board with each of the 4 key US indices now showing more accumulation days than distribution days over the past two weeks. (+)
• With only about half of the major market sectors that we track performing positively over the past week, it is a good sign to see the two leaders being spec sectors like Semiconductors (SMH) and Technology (XLK). (+)
• Metals got crushed this week across the board with Silver (SLV), Palladium (PALL), and Gold Miners (GDX) all now negative over the past 5-day, 3-month, and 6-month periods. (+)
• Market Internals are holding up well for both the S&P500 and Nasdaq Composite which each saw the McClellan Oscillator revert from overbought levels before catching a healthy bounce this week. (+)
• Risk Gauges have improved to Risk-On for the first time in several weeks. (+)
• The short vs. mid-term Volatility ratio (VIX/VXV) improved along with equities over the past two weeks. (+)
• Growth stocks (VUG) have extended their leadership relative to Value stocks (VTV), with VUG now in a Bull phase and VTV failing to break out from its Bear phase. (+)
• Both emerging and more established Foreign Equities continue to improve this week each regaining a bullish phase on the daily chart. (+)

Risk-Off

• Except for Semiconductors (SMH), the remaining members of Mish’s Modern Family all lost ground this week. (-)
• During a week of consolidation that concluded with a strong breakout to the upside in the SPY and QQQ, the new 52-high and low data told a different story. In both markets, the number of stocks making new 52-week lows increased as the week progressed and closed with Friday being the weakest day.

Neutral

• Although SPY, QQQ, and DIA are all in a bullish phase on both a daily and a weekly timeframe, IWM remains in a bearish phase on both timeframes. (=)
• The number of stocks above key moving averages saw a rapid correction on all timeframes to start the week before finding support and beginning to bounce again by the week’s end. (=)
• 20+ Year Treasury Bonds (TLT) caught a bounce but failed to end the week above the 50-day moving average despite seeing a single-day close above that level for the first time since July. (=)
• US Oil (USO) has closed down for the third week in a row as it is now in the process of seemingly bouncing from the support of the 200-day moving average. (=)

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