Edition 0004. 02.05.2022.
This weekly commentary examines 9 U.S. equity Indices and ETFs to develop a clear picture of how the U.S. market is performing. We analyze performance, price, trend, and momentum.
While it is true that this is a market of stocks, looking at the major indices helps chartists and technicians by pointing to areas of the market that require further investigation, be it for strength, for weakness, or a potential future move. This chart list covers the great majority of the U.S. Equity landscape. We’ve spent a lot of time deciding which charts to include, more so which charts to exclude, and after a lot of analysis we believe this chart list is a comprehensive look at the U.S. equity landscape.
We start with performance tables that allow us to track how the symbols have performed over several rolling periods of time. We can see New high/low details, as well as determine trend and momentum using quantitative measures. Here are a few notes to help you interpret the tables.
They are grouped first by family, and then sorted by performance.
Quantitatively, the general trend is determined by price in relation to its 40-week simple moving average. 1 means the trend is up. 2 means the trend is vulnerable. 3 means the trend is down.
1 = close is above the ma and the ma is up.
2 = close is below the ma and the ma is up, close is above a flat or ma that is down.
3 = close is below the ma and the ma is down.
Quantitatively, the general momentum condition is determined by a 12,26,09 Price Percentage Oscillator – think MACD. 1 means the momentum condition is positive. 2 means the momentum condition is positive but decelerating. 3 means the momentum condition is negative but accelerating. 4 means the momentum condition is negative.
1 = the oscillator is above 0 and the histogram is above 0.
2 = the oscillator is above 0 but the histogram is below 0
3 = the oscillator is below 0 but the histogram is above 0.
4 = the oscillator is below 0 and the histogram is below 0.
The ranking of closing highs and lows is as follows:
1 = 5-week closing high or low.
2 = 13-week closing high or low.
3 = 52-week closing high or low.
4 = all-time closing high or low.
Please know, if I refer to weightings in symbols, these weights are constantly changing. They were current as of 01/15/2022, though they almost certainly have changed since then. See the links for the most up-to-date weights.
For more information about the symbols that are a part of this landscape, click here.
The U.S. Equity Landscape Summary
Performance table sorted by the 5-day rate-of-change.
This first table is sorted by the 5-day rate-of-change. Two weeks ago we saw 4 of our 9 symbols close with a gain. Last week we saw 9 of our 9 symbols close positively. Leading the pack was QQQ with a gain of 1.77%. Second was IWB with a gain of 1.76%. Third was IJH with a gain of 1.74%. The weakest symbol was the Dow Jones Utility Average.
A quantitative look shows the trends moving in a positive direction with DJI and SPY changing from 2s to 1s. The momentum condition unfortunately has deteriorated with IJH switching from 2 to 4.
Performance table sorted by the year-to-date rate-of-change.
Here is the table sorted by the year-to-date performance. Just like the entire year so far, we see all red.
Relative Comparison Chart. This shows the year-to-date performance.
Our relative comparison chart has not evolved much from last week. We continue to see the dow industrials and transports battle it out for least bad. We also see the Qs and IWM battle it out for biggest loser.
The U.S. Landscape Charts
QQQ: The Nasdaq 100 ETF
QQQ gained 1.73%. Price has popped back above $350, October 2021’s swing low. Price was rejected from the area of its 40-week simple moving average and the candle shows a week close with sellers selling more than buyers were buying. QQQ continues its range bound price action. Momentum continues to be in jeopardy of going negative after the break of its downward sloping trendline 3 weeks ago.
Standard & Poor’s ETFs
SPY: The S&P 500 ETF
SPY finished up 1.53%. Price managed to remount its 40-week simple moving average after buyers stepped in as price fell to its October 2021 swing low. The candle itself shows just as much, if not more, selling pressure than buying pressure. SPY is 1 of only 3 symbols with price still above a rising 40-week simple moving average. Price continues its range bound price action. Momentum continues waning.
IJH: The S&P 400 ETF
IJH was the strongest of the S&P ETFs and finished the week up 1.74%. That said, momentum has now turned negative with the PPO oscillator line crossing below its 0-line. If momentum truly leads price, this is an ominous development for mid-caps. Price continues to be rangebound.
IJR: The S&P 600 ETF.
IJR, the worst performing of the S&P ETFs, closed with a gain of 0.91% despite momentum turning negative on last week’s close. Price continues to be rangebound.
The Russell ETFs
IWB: The Russell 1000 ETF.
IWB finished with a healthy gain of 1.76%. That said, price was unable to remount its 40-week simple moving average or the $250 level. Price is still above its July 2021 swing low as momentum continues to weaken on increased volume.
IWM: The Russell 2000 ETF.
IWM finished with a gain of 1.60%. Price action is in a confirmed downtrend with price falling from its November 2021 highs and making a lower-low, lower-high, and now a lower-low. With a downward sloping 40-week simple moving average and the momentum decidedly negative, bears are looking to break below $191 which is the January 2021 low and roughly a 38.2% Fibonacci retracement from the 2020 Covid lows to the November 2021 highs.
Dow Jones Indices
DJT: Dow Jones Transportation Average.
The Dow Jones Transportation Average finished up 1.10% and lead the 3 dow averages higher. That said, the 40-week simple moving average is sloping down with momentum falling towards its 0-line and price breaking below a descending triangle. A measured move generates a price target down the 14,000 area which coincides with the September 2021 swing lows.
DJI: Dow Jones Industrial Average.
The Dow Jones Industrial Average finished in the middle of the group and gained 1.05%. Price was unable to close above its 40-week simple moving average as momentum weakens. Remains above in its trading range and above 33,515 which marks the bottom of its 8-month range.
DJU: Down Jones Utility Average.
The Dow Jones Utility Average is the only symbol in the entire 9 symbol landscape that has a positive trend and momentum condition from a purely quantitative perspective. The Average was however the weakest of the 3 Dow averages last week gaining 0.12%. While price was weak and closed in the lower portion of the candlestick, it does look to be breaking out of the a falling flag. Momentum remains strong and above its upward sloping trendline. Utility bulls have been waiting almost 2 years for price to break out of its ascending triangle and reclaim its pre-Covid price levels.
Conclusion
It’s a tough environment for US equites. They are all down YTD. While we did see a bounce across the landscape last week, the gains are on deteriorating momentum conditions. US equites are vulnerable, but still holding up.
About The Landscape
In the descriptions of the symbols that follow, I will reference the current weights of the component sectors to point out the makeup. These weight are constantly changing, and while the values are current as of the writing this edition, they will change when you look for yourself. Some families publish the current weightings quarterly, while others maintain real-time measurements. Links are provided to the source data.
QQQ: The Nasdaq 100 ETF
We look at the Nasdaq 100 Invesco ETF, QQQ, to get an idea of what tech is doing. Managed by Invesco, the Nasdaq 100 is a market-cap weighted ETF, launched in 1985, that tracks the top 100 non-financial companies listed on the Nasdaq Exchange. It is rebalanced quarterly. QQQ is dominated by tech which makes up roughly 50% of its cap weight. Next is communication services at 18.5% and consumer discretionary at 16.5%. The remaining non-financial sectors are less than 6% each of market cap.
Source - https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&ticker=QQQ
Standard & Poor’s ETFs
These ETFs are maintained by S&P Global. They are groups of companies based on the size of their market capitalization. To be included, the company must meet a financial viability criterion, so all companies included in these ETFs have at least 4 consecutive quarters of positive earnings. These are rebalanced quarterly.
Standard & Poor's define the cap tiers as follow:
Source: Source: https://www.spglobal.com/spdji/en/documents/methodologies/methodology-sp-us-indices.pdf
SPY: The S&P 500 ETF
SPY tracks US large. While not as heavily weighted with technology, like QQQ, tech does carry the largest weight in the 500 at roughly 30%. 13% heath care and consumer discretionary. 11% financials and 10% communication services. 8% industrials. The remaining sector are all less than 6% by weight.
IJH: The S&P 400 ETF
IJH tracks US mid-cap stocks. Industrials hold the largest weight at 19%. 16% for consumer discretionary, and 14% for tech and financials. 10% real estate and healthcare. The remaining sectors make less than 4% of cap weight each.
IJR: The S&P 600 ETF.
IJR tracks US small-cap stocks. Like the midcap ETF, Financials hold the largest weight at 19%. 17% industrials. 14% tech. 12% healthcare and consumer discretionary. 8% real estate. The remaining sectors make less than 5% of cap weight each.
The Russell ETFs
While the Russell Indices are maintained by FTSE Russell, these ETFs that track the indices are maintained by iShares. These are market-cap weighted, and much broader in number than the S&P ETFs and QQQ. These are rebalanced just once per year instead of quarterly like the S&P ETFs and QQQ. Unlike the S&P ETFs, there is no financial viability requirement to be included.
IWB: The Russell 1000 ETF.
The IWB tracks the performance of the largest 1000 companies from the Russell 3000. Mostly large with some mid-caps. 28% Tech. 13% health care. 12% consumer discretionary and financials. 10% communication services. 9% industrials. The remaining sectors are less than 6% each.
IWM: The Russell 2000 ETF.
The IWM tracks the performance of the next 2,000 US companies from the Russell 3000. It is made of small-caps. 17% healthcare and financials. 15% industrials. 14% tech. 11% consumer discretionary. 8% real estate. The remaining sectors are less than 5% each.
Dow Jones Indices
I cannot stress the importance of Charles H. Dow. His thinking and work is the springboard for way markets are viewed and price action is interpreted today. His work has led to the modern discipline of Technical Analysis. His importance cannot be overstated. His ideas must be studied.
He created the first modern stock index in the form of the transportation index, which was then the railroad index, in 1884. Next, he created the industrial average in 1896. Finally, when utility tocks were removed from the industrial average, the utility index was created in 1929. These averages are price-weighted and not cap weighted. The impact from the largest companies are still relevant, though less so than with a cap weighted index. These small, in number not market cap, indices track the companies considered most prominent in the economy today. Like the S&P ETFs and QQQ, these indices are maintained by S&P Global and rebalanced quarterly.
DJT: Dow Jones Transportation Average.
20 companies. 100% industrials.
DJI: Dow Jones Industrial Average.
30 companies. 22% tech. 18% healthcare. 16.% financials and consumer discretionary. 15% industrials. 8% consumer staples. The remaining sectors make up less than 4% of weight by price.
DJU: Down Jones Utility Average.
15 companies. 100% Utilities.
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