Welcome to The Market’s Compass US Index and Sector ETF Study, Week #571. As always it highlights the technical changes of the 30 US Index and Sector ETFs that I track on a weekly basis and normally publish every third week. Past publications can be accessed by paid subscribers via The Market’s Compass Substack Blog.
This week, in celebration of Thanksgiving, free subscribers will also receive this week’s entire Study in a not so veiled attempt to lure them to become paid subscribers.
To understand the methodology used in constructing the objective U.S. Index and Sector ETF Individual Technical Rankings visit the MC’s Technical Indicators page at www.themarketscompass.com and go to “us etfs”. What follows is a Cliff Notes version* of the full explanation…
*The technical ranking system is a quantitative approach that utilizes multiple technical considerations that include but are not limited to trend, momentum, measurements of accumulation/distribution and relative strength of each individual 30 U.S Index and Sector ETFs that can range between 0 and 50.
Total US ETF Ranking or “TER” rose sharply last week, rising +46.20% to 1057 from 723 which was the fifth week of declines in the “TER”.
In a broad-based technical improvement of the thirty US ETFs we track twenty-nine showed gains in their Technical Rankings or “TR”, and one was unchanged. That was the SPDR Health Care Select Sector Fund ETF (XLV), but it should noted, despite being unchanged, its TR was nonetheless only just 4.5 points of near perfect. Fourteen ETFs made double-digit gains in their TRs. Sixteen ETF TRs ended the week in the “green zone” (TRs from 35 to 50) and fourteen ended in the “blue zone” (TRs from 15.5 to 34.5) vs. the previous week when there were only five in the “green zone”, seventeen in the “blue zone”, and eight were in the “red zone” (TRs between 0 and 15). Last week was the first time in four weeks when there wasn’t at least one TR in the “red zone”. The average TR gain on the week was +11.19 (the largest average TR gain in recent memory) vs. the week before average TR loss of -3.53.
*The Technical Condition Factors are derived from a calculation of the total Individual US Index and Sector ETF Technical Rankings. What is shown in the excel panel below is the total TCFs of all thirty TRs. A few TCFs carry more weight than the others, such as the Weekly Trend Factor and the Weekly Momentum Factor in compiling each individual TR of each of the 30 ETFs. Because of that, the excel sheet below calculates each factor’s weekly reading as a percentage of the possible total.
To fully understand the construction the of The Technical Condition Factors visit the MC’s Technical Indicators page at www.themarketscompass.com and go to “us etfs”.
One technical takeaway would be for example, if the DMC Factor or DMCTF rises to an extreme between 85% and 100%, it would suggest a short-term overbought condition. Conversely, a reading in the range of 0% to 15% would suggest an oversold condition was developing. This past week a reading of 80.95% was registered in the DMCTF or 170 out of a total of 210 positive points, which was up from 30.00% the previous week.
As a confirmation tool, if all eight TCFs improve on a week over week basis, more of the 30 ETFs are improving internally on a technical basis confirming a broader market move higher (think of an advance/decline calculation). Conversely if all eight TCFs fell over the week it confirms a move lower in the broader market. Last week all eight TCFs gained ground confirming the broad-based rally in the S&P 500 Index.
The Total US ETF Technical Ranking (“TER”) Indicator is a total of all 30 ETF rankings and can be looked at as a confirmation/divergence indicator as well as an overbought oversold indicator.
The S&P 500 Index rallied 3.73% last week to close at a new weekly closing high, thus avoiding a lower low and keeping the series of higher lows and higher highs on a weekly closing basis since April low intact. The Total US ETF Technical Ranking or “TER” rose sharply to a higher high to end the week at 1,057 confirming last week’s rally in the large cap index.
The Weekly Average Technical Ranking (“ATR”) is the average Technical Ranking of the 30 US Index and Sector ETFs we track. Like the TER, it is a confirmation/divergence as well as an overbought/oversold indicator.
When I last published the US Index and Sector ETF Study on November 10th for the week ending November 7th, the SPX had pulled back at the Median Line (red dotted line) of the Standard Pitchfork* (red P1-P3). Two weeks ago the index fell and closed below the Tenkan Plot (red line) which had cradled prices on an weekly closing basis since early May but by the end of that week the Lower Parallel (solid line) held a further selloff and last week the SPX rallied impulsively, suggesting that short term correction from the record intra-week high at 6,910 had run its course. Like the Total Technical Ranking the “ATR” by rising from a lower low to a higher high in concert with the 9-Week SMA (red line in lower panel) avoiding a violation of the 45-Week EMA (blue line). These technical features point to a challenge of the Median Line and the all-time intra-week high at 6,910 in the weeks and perhaps days to come.
*An in-depth comprehensive lesson on Pitchforks is available on my website…
www.themarketscompass.com
*Does not include potential dividends if any
All thirty US Index and Sector ETFs we track in this Study gained ground on an absolute basis at the end of the holiday shortened week. Seventeen of the ETFs outperformed the +3.73% gain in the S&P 500 Index on a relative basis and thirteen underperformed. The standout gainers last week were gold and metals / mining ETFs. The average 4-Day absolute price gain last week was -4.79%, vs. the average absolute 5-Day loss the week before of -1.40%.
A week ago, last Friday, the SPX Index held support at the bottom of the Cloud respecting the oversold signal in all three oscillators and on Monday the large cap index retook the ground above the Cloud leading me to draw a second shorter-term Schiff Pitchfork (violet P1-P3). On Tuesday the SPX followed through to the upside again slicing through potential resistance at the Kijun Plot (green line) and the Upper Parallel (solid gold line) of the somewhat longer-term Standard Pitchfork (gold P1-P3) drawn from the all-time closing high. Last Wednesday the SPX rallied and closed above the Upper Parallel (solid violet line) of the newly drawn Schiff Pitchfork. The “icing on the cake” was yet another higher close at the end of the shortened trading session on Friday that came close to bettering the October 29th all-time closing high. I five trading days my SPX Daily Momentum / Breadth Oscillator (just below the price panel) has totally (and then some) the oversold condition. Although it signals a short-term overbought condition that my lead to a measure of “backing and filling” potentially testing support at the overtaken Upper Parallel it confirms the impulsive price move higher. That said the three wave ABC correction is likely complete with both the Fisher Transform and the Stochastic Momentum Index leaving nary a suggestion of an immediate decline.
The YTD Average Absolute Price precentage gain jumped back to +25.29% from +18.63% last week.
For readers who are unfamiliar with the technical terms or tools referred to in the comments on the technical condition of the SPX can avail themselves of a brief tutorial titled, Tools of Technical Analysis and an in-depth comprehensive lesson on Pitchforks is available on my website…
www.themarketscompass.com
Charts are courtesy of Optuma whose charting software allows the Technical Rankings to be calculated and back tested.
To receive a 30-day trial of Optuma charting software go to…
www.optuma.com/TMC