Edition 0001. 01.30.2022.
This weekly commentary examines the 10 largest companies, by market capitalization, affectionately called The Generals, in the S&P 500. We analyze performance, price, trend, and momentum, and breadth. By having an in-depth understanding of that The Generals are doing, it should help us to understand what is next for the S&P 500 as a whole.
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 down ma.
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 line 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 = 21 day closing high or low.
2 = 63 day closing high or low.
3 = 252 day 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 link for the most up-to-date weights: https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-sp-500-etf-trust-spy?
Overview.
Performance table sorted by the 5-day rate-of-change.
This first table is sorted by the 5-day rate-of-change. On average, The Generals, gained ground last week closing with an average gain of 3.35% while the S&P 500 itself gained 0.77%. Year-to-date, the only general that has gained in value is Berkshire Hathaway. It is also worth noting, that from a quantitative perspective it is the only general with a positive trend and momentum condition.
Relative performance chart. This shows the year-to-date performance in a more visual way.
Here is a chart showing the Year-to-Date performance. We can see that Apple has taken over 2nd place ahead of United Health last week on its earnings.
The Generals geometric average and relative strength.
The top panel is a geometric average of the 10 generals. The geometric average is a form of weighting that minimizes the impact of the highest priced stocks on the average itself. The bottom panel is The General’s Geometric Average divided by SPY. We can see that the relative strength line made a new closing high with price.
The Generals geometric average and advance-decline data.
The top panel is a geometric average of the 10 generals. The middle panel is the cumulative advance decline line which, in this case, is measuring weekly advancers minus decliners to get the net advancers. The net advancers are then summed to form the cumulative advance-decline line. We can see, as did the relative strength line, the AD line confirmed the last all-time closing high of The General’s Geometric Average.
The bottom panel, called the advance-decline percentage, shows the percent of net advancers as histogram bard. The line is a 10-week simple moving average of the net advancers histogram. We can use this to show breadth thrusts, and we can also judge the strength of the underlying 10 stocks. This week we can see that 30% of the generals advanced, so 3 of the 10 symbols, while the 10-week average reads 49%. The average line below 60% and above 40% shows indecision and lack of conviction.
The Generals geometric average with percentage above moving average data.
This next chart shows The Generals Geometric average with its 10-week simple moving average in blue and its 40-week simple moving average in red. The middle panel shows the percentage of stocks above a 10-week moving average. The bottom panel shows the percentage of stocks above a 40-week simple moving average. The shading turns red when the percentage drops to 40% or less. We can see from the middle panel that only 20%, so 2 out of 10, generals are above their 10-week simple moving averages. The bottom panel shows that 60%, so 6 of 10, generals are above their 40-week simple moving averages.
The Charts
Note that Goog and Googl are very similar, and until there is a change the analysis of Goog represents both charts.
Apple
Apple rebounded after monster earnings week and closed with a gain of 4.88%. We are just 8 weeks from the last all-time closing high the trend looks strong. Momentum and relative strength did confirm that last all-time closing high. The relative strength line did find support and bulls are looking for more upside in the weeks to come. As Apple goes, so too goes the market.
MSFT
Microsoft also had a great week on earnings and closed with a gain of 4.13%. Microsoft found support around its October 2021 swing low and bounced higher to form a bullish engulfing candle. Momentum has hopefully put in a bottom here with relative strength as it bounced off of its 40-week simple moving average.
Alphabet
Alphabet has earnings this upcoming week, Tuesday 02/01 after the market closes. Last week Alphabet gained 2.46% in value. Price closed to form a bullish piercing line candle. With a positive earnings report, hopefully Alphabet will have a strong week, as Apple and Microsoft did last week, and we can see momentum turning upwards around the 0-line and relative strength can break above its downward sloping relative strength line.
Amazon
Amazon has earnings next week as well. The report should be release on Thursday, 02/03, after the market closes. Last week amazon gained 0.94% in value. Price broke down from its 17-month trading range, but managed to close in a bullish counterattack pattern, which is bullish, just less so than a piercing line. That said, things do not look good for Amazon here. If price rallies back into the trading range on great earnings we can regain some sense of optimism. That will be a challenge for buyers because right now Amazon has a downward sloping relative strength line, a negative momentum condition, and a downward sloping 40-week simple moving average.
Tesla
With positive earnings last week, Tesla still managed to close down -10.33%. It was the weakest general last week. Price closed below its January/February 2021 highs, but above its 40-week simple moving average. Next week will tell us if relative strength is going to drop below its upward sloping trendline and lose its 40-week simple moving average. Momentum is positive though falling. Bulls want to see Tesla close above the $900 level next week.
Meta Platforms
Meta Platforms has earnings next week on Wednesday, 02/02, after the market closes. Last week Meta Platforms gave back 0.48% in value. 21 weeks removed from its last closing high, FB has managed to form 2 lower lows and 2 lower highs. Last week price formed an indecisive spinning top, but price did hold $294 which is a former support level from August and November 2020. Bulls are looking for the polarity principle to emerge and for $294 to now become support. Bulls want to see price rebound upwards, momentum to turn positive, and the relative strength line to break above its falling channel towards its 40-week simple moving average.
Nvidia
NVDA is still 3 weeks ahead of its earnings on Wednesday 02/26 after the market closes. Last week NVDA gave back -2.28% of its value and closed 9th out of 10. Price formed a spinning top right on its 40-week simple moving average after breaking down from its upwards sloping 10-month trendline. Relative strength continues to trend straight down and is now looking to test its 40-week simple moving average. Momentum is falling towards its 0-line with a serious downwards slope.
Berkshire Hathaway
The famed Berkshire Hathaway is still weeks away from earnings. Last week it gained a very respectable 2.52% in value. It is also the only general that has a positive return this year-to-date with a gain of 4.68%. 3 weeks from its last all-time closing high, price found support at $295. $295 was resistance that was tested 3 times throughout 2021, and now it has been confirmed as support. The candle is a bullish piercing line candle, so bulls are looking for more upside here and continued leadership from this general. Momentum looks strong and the relative strength line closed at a 7-month high last week. Anybody who owns this company is in a great position right now.
Unitedhealth
Unitedhealth Group has been showing serious relative strength since October 2021. Price made an all-time closing high the week ending December 31st, 2021 and has since pulled back a little. UNH finished last week by gaining 1.06% in value. Bulls are hoping that the trend break in momentum will not lead to a further loss in UNH’s value.
Conclusion
Like most messages coming from the markets these days, the messages are mixed with a bearish tilt. Only 4 generals, Apple, Berkshire Hathaway, and Unitedhealth are showing relative strength against SPY. TSLA’s relative strength line is testing its upward sloping trend line. Only Berkshire Hathaway is positive for the year. We must monitor the situation as it unfolds. If the generals start down trending, the S&P 500 will do the same.
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