Edition 0001. 01.15.2022.
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 can certainly help chartists and technicians by revealing areas of the market that call for further study. 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 from a very high level.
We start with a performance table that allows us to track how the symbols have performed over several rolling periods of time. Here are a few notes to help you interpret the table.
It is grouped first by family, and then sorted.
Quantitatively, the general trend is determined by a rising 40-week simple moving average.
Quantitatively, the general momentum condition is determined by a 12,26 PPO oscillator and its relation to the 0 line.
The ranking of closing highs and lows is as follows: 4 = all-time closing high or low. 3 = 252 day closing high or low. 2 = 63 day closing high or low. 1 = 21 day closing high or low.
Last 52 W.C.H. is a column that returns the amount of bars since the last 52-week closing high. 1 indicates the current bar.
For more information about the symbols that are a part of this landscape, click here.
The U.S. Equity Landscape Summary
Summary table. Sorted by the 5-day rate-of-change.
This first table is sorted by the 5-day rate-of-change. This shows us the performance over the last 5 days of trading. We see a lot of red, with 7 out of 9 symbols showing a loss of value. The biggest losers last week were the Dow Transports giving back -2.24%, the Dow Industrials giving back -1.55%, and then the Dow Utilities giving back -.88%. The winner, gaining a meagre 29 basis points, was IJR – the S&P 600 small caps. The only other symbol to finish in the green was QQQ, essentially flat gaining just 4 basis points of value. It is noteworthy that the IWM, Russell 2000, is in a quantitative downtrend with a negative momentum condition.
Summary table. Sorted by the year-to-date rate-of-change.
This second table is sorted by the year-to-date rate-of-change. This shows us the performance since the first day of trading in 2022. All 9 of our symbols are red. QQQ is leading the way lower giving back almost -4.5%, while IJR, the S&P small caps, are showing the least relative weakness because its performance is the least poor. IJR has given back only -89 basis points of value this year-to-date.
Relative Comparison Chart. This shows the year-to-date performance.
The above comparison chart shows the 9 symbols and their percentage change YTD in a more visual style than the above table. Not one symbol in our universe has a positive performance this year, so far.
The U.S. Landscape Charts
QQQ: The Nasdaq 100 ETF
QQQ, the largest 100 non-financial stocks on the Nasdaq Composite, bottomed during the Covid low of March 2022, and then it rallied with incredible momentum for almost 6 months. We saw the first bout of selling in early September 2020 where price formed an ascending triangle. This pattern makes perfect sense, as early buyers sold into the strength while new buyers acted on the opportunity to join the trend. The sellers stopped bringing shares to market the volatility and volume dried up just before the breakout in early December 2020. The rally that followed lasted almost a year from December 2020 until the last all-time closing high made the week ending November 19th, 2021. Since the 19th, price has been sideways. Bulls want to see price above its rising 40-week moving average, and especially stay above the last swing low at $350. Momentum remains positive. Look for price to break above $409 with the PPO oscillator confirming the move with a new high of its own. Bears are looking for price to break below the $350 level.
Standard & Poor’s ETFs
SPY: The S&P 500 ETF
SPY, the S&P 500 large-cap stocks, bottomed during the Covid low of March 2022, and then it rallied with incredible momentum for almost 6 months. Spy peaked about a week earlier than QQQ into its initial bout of selling in late August 2020. SPY also formed an ascending triangle. This pattern makes perfect sense as early buyers sold into the strength while new buyers acted on the opportunity to join the trend. Buyers here in SPY were more aggressive than in QQQ. This can be seen by volume and volatility not drying up before the breakout. Also, SPY broke out 3 weeks ahead of QQQ in mid-November 2020. With price, momentum also broke above its resistance line. The rally that followed was on sustained momentum, as opposed to the falling momentum in QQQ. QQQ made its last all-time closing high the week ending November 19th, 2020, while SPY made its last all-time closing high the week ending December 31st, 2020. Bulls want to see price above $480 with a new high in momentum to confirm. Bears want to see the 40-week moving average violated and the last swing low at $426 broken.
IJH: The S&P 400 ETF
IJH, the S&P 400 mid-cap stocks, like QQQ and SPY, had a large run up from the Covid low. While we saw ascending triangles from the Qs and SPY, in mid-caps we saw more of a coil (symmetrical triangle). The psychology is a little different with the coil. There is more selling pressure towards the apex of the triangle, but they are both considered continuation patterns until proven otherwise after large rallies. While SPY and IJR (covered below) broke out the same week, November 2020, IJH was the earliest to break out during the week ending October 9th, 2020. Price broke above the coil, we saw a throwback to ensure resistance became support, and then rallied for about 7 months into May 2021. While QQQ rallied into November 2021 and SPY into December 2021, small-caps hit their heads on resistance in May 2021. Price went sideways for the better part of 7 months from May into November 2021. Price did attempt a break above $277.81 in November of 2021. It is too early to tell if it was a failed breakout or a pre-mature breakout. Bulls are watching $291.85 and looking for momentum to confirm, while Bears are watching the 40-week and $254.20.
IJR: The S&P 600 ETF.
IHR, the S&P 600 small-cap stocks, like QQQ, like SPY, and like IJH, had a large run up from the Covid low. The initial selling started in late August 2020, 2-3 weeks before the Qs and SPY and at the same time as IJH. IJR broke out of its ascending triangle the same week as SPY, and then rallied for about 5 months into March 2021. Recall that IJH keep rallying into May 2021. QQQ rallied into November 2021, and SPY rallied into December 2021. That is to say, IJR After the really into March 2021, was the first symbol to stop going up. Price went sideways for the better part of 7 months into November 2021. Price did attempt a break above $116.75 in November of 2021, the same time as IJH. Like IJH, it is too early to tell if it was a failed breakout or a pre-mature breakout. Bulls are watching $121.45 and momentum to turn up, while Bears are watching the 40-week simple moving average and rooting for a brea$102.50.
The Russell ETFs
IWB: The Russell 1000 ETF.
IWB, the Russell 1000, marched upwards from the Covid low. In September 2020, the same week as QQQ and SPY, sellers started taking profits and we saw the emergence of a coil (symmetrical triangle). Like SPY and IJR, price broke out of its continuation pattern the week ending November 13th, 2020. From there we saw a 60 week run into November 2021, again, like QQQ and SPY. Price looks to be consolidating a bit, but we did make the last all-time closing high on December 21st, 2021. Bulls are focused on the 40-week moving average and and they want a move above $267 with momentum breaking above its downward sloping trendline, while Bears would prefer the 40-week simple moving average to fail around $250 and support to fail at $237.
IWM: The Russell 2000 ETF.
The IWM, the Russell 2000, ran up from the Covid low and we saw the emergence of a falling wedge from the end of August until the breakout in early October 2020. This timing was similar to the S&P mid-caps - IJH. From there, price had a throwback to confirm resistance would hold as support. Price ran higher until the middle of March 2021, just as the S&P small caps - IFR, did. Price has now been trading in a rectangular fashion, moving sideways for 45 weeks. We did see buyers attempt to start a new trend in early November 2021 when price broke above $234.50 and failed. While the timing matches IJH and IJR, the resolutions do not look similar.
Recall from the tables above, IWM is the only outlier with the 40-week moving average not sloping upwards and with momentum in a negative condition below the 0-line. From a purely quantitative perspective, this is no longer in an uptrend and does not have positive momentum. That said, we absolutely need price confirmation because that it the most important component of the chart. Bulls want to price remount the moving average and break above 244.50, while the Bears are ready for $274 to fail as support.
Dow Jones Indices
DJT: Dow Jones Transportation Average.
From the Covid low in March 2020, of the three Dow Jones Indices, the Transportation Average has been the place to be, gaining 132% from Covid low. Like most of the other symbols in our US Equity Universe, sellers stepped in at the end of August 2020. Price formed a broadening pattern. The psychology here shows the eagerness of both the buyers and sellers. There was a real battle between supply and demand. Notice the long-legged doji candles and tall bodied candles inside of the broadening pattern. All of the candles had a lot of intra-week volatility. Some of the weeks ended in a tie, while other weeks had clear winners. Ultimately, buyers won. Price broke upwards at the end of November 2020 and rallied into the week ending May 14th, 2021. Price formed a falling wedge as sellers began taking profits from the second leg of the index’s massive run up. Price retraced into the 40-week simple moving average over the course of 24 weeks. Buyers stepped in again come mid-October 2021. In the 4th week of the new rally, there was a selling climax. Since then, price has been a consolidation – a descending triangle. Bulls was to see a break above the descending triangle and above 18,246.50, while Bears are looking for price to fail at the 40-week simple moving average and fall below the last swing low from September 2021 at 13,946.50.
DJI: Dow Jones Industrial Average.
Like the transports, the Industrial Average followed similar pattern. A run up from the Covid low, a bullish continuation pattern from the end of August into November of 2021, followed by a second leg higher into May 2021. From there the stories are similar, but change a little. The consolidation pattern in the transports is a falling wedge, whereas the consolidation pattern in the industrials is a rectangle. This implies there is less selling pressure in the industrial space. While they both broke out around the same time, the transports have started to again consolidate while the industrial have continued upwards. The transports had their last closing high the week ending November 5th, while the industrials has theirs on the week ending January 1st, 2022. Bulls want price to continue higher with momentum breaking above its downward sloping trendline, while Bears want to see price fail at the 40-week simple moving average and have price break below support 33,515.
DJU: Down Jones Utility Average.
The Utility Average, out of our US Equity landscape has seen the least love from buyers. It has only risen roughly 42% from its Covid lows. That said, perhaps there is a resolution on the horizon. Perhaps investors are interested in the larger dividends from the utility space. Price is certainly making higher highs and higher lows. The 40-week simple moving average is certainly sloping upwards. Momentum is certainly positive. While there is certainly overhead supply on longer term charts, if price holds above its pre-Covid levels, there might be more upside for utilities.
Conclusion
According to our quantitative analysis using an upward sloping 40-week moving average to confirm identify an uptrend, or lack thereof, and our12/26 PPO (MACD) oscillator to confirm the momentum condition, the only major index that is not in an uptrend and does not have positive momentum is the IWM. These are small caps that may or may not have confirmed positive earnings.
Looking at the charts, we do see increased volatility the last few weeks on every chart, but they are still going up or in bullish continuation patterns until proven otherwise. Despite all of the doom and gloom being discussed on the news, and all of the Bears pointing to breadth deterioration and new lows outweighing new highs, from a high level the technical damage is not yet apparent on any of the weekly charts. IJH is an ETF to investigate since it is showing relative strength by virtue of going down the least. That would make a great article.
While the year-to-date performance is not looking great for any of the symols, we are only between 3 and 11 weeks off of all time-highs on average for the entire landscape of symbols. The average drawdown from that high is only 6%. Things are not that bad from a weekly perspective.
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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