Weekend Review and Watchlist

Overview

Equities remain vulnerable to further weakness, as despite the major indices being relatively close to their highs, breadth continues to deteriorate, with transports and small-caps hitting multi-month lows.

Let's start with some context and the S&P over the last five years. Here it is without a 5% pullback since the 2016 lows, and just 2% off an all time high.


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This is the S&P YTD. From the top we now have a lower high and lower low in place, with a break back below the 50-day MA to 4-week lows. This is a short-term downtrend.

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In comparison, the equal-weight S&P (RSP) is hitting 3-month lows and is within 1.5% of its 200-day.

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Here's the S&P on a weekly. That's the second straight weekly close below its 10-week MA. It's a small sample, but over the last two years it's happened on four other occasions, April 2107, Sept 2016, June 2016, December 2015. In each case a short-term bounce followed, but on two occasions it hit new lows.

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The NASDAQ recorded a second straight week below its 10-wk MA, and a fourth straight weekly decline.

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The Dow is the strongest of the major indices, above its 10-week MA.

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The NYSE Composite hit 3-month lows.

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The Transports finished below its 40-wk MA for a second straight week.

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The Russell also closed below its 40-wk MA for a second straight week, and is now at 4-month lows.

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Midcaps fell for a 4th straight week.

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Microcaps fell for a 5th straight week.

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This is the Russell relative to the S&P. The post-election outperformance (the so-called 'Trump trade') has been erased entirely.

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The deterioration in breadth has accelerated in the last two weeks, shown here via the NYSE Cumulative Advance/Decline.

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Bottom line: Many indices appear to be in short-term downtrends and potentially rolling over longer-term. Perhaps the monthly charts of the Dow and S&P below can help confirm that in due course. Obviously the month isn't over yet, but for the moment higher highs and higher lows remain in place.

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Sector Analysis

Utilities remain the leading sector, followed by Technology. Those are the only two Sector SPDRs above their 50-day MA.

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They're followed by Financials, Real Estate, Staples, and Materials. Then it's Healthcare, Industrials, and Consumer Discretionary, which have started to weaken more significantly and are hitting multi-month lows.

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At the bottom is Energy, which has clearly foiled a few more attempts at picking the low, as it declined rapidly in a capitulation type of move to hit the lowest levels since April 2016.

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Beyond the Sector SPDRs another chart worthy of note is Biotech (IBB), which just 3 weeks ago was arguably the best looking sector chart of all, but is now back below its 50-day and retesting the breakout level from June.

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Alpha Capture Portfolio

A quiet week for our model portfolio, edging +0.1% while the S&P fell -0.7%.

There are just 5 open positions, with total open risk of 2.0%, and 62% cash.

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Watchlist

A reduced list again this week. Breadth has deteriorated further, and strength is mostly in some 'value' and/or foreign (but US listed) names, already present in our portfolio and trade ideas. That doesn't leave much for our watchlist unless I have the temerity to list 20 utilities or other bond-proxy stocks. I don't.

Here's a sample from the full list of 20 names:-

$CAT

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$FCX

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$CGNX

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$CSIQ

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$STZ

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Posted to Alpha Capture on Aug 18, 2017 — 7:08 PM

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