Edition 0002. 02.05.2022.
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 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.
Overview.
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 had 7 of 10 generals close with a gain. This last week we had 8 close with a gain. On average, The Generals, gained ground last week. They closed with an average gain of 2.31% while the SPY gained 1.53%. Year-to-date, the only general that has gained in value is Berkshire Hathaway which is up 5.34%. It is also worth noting, from a quantitative perspective, it is the only general with a positive trend and momentum condition. Last week FB joined AMZN in its quantitatively negative trend and momentum condition. We can also see that FB made a 52-week closing low
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 GOOGL and GOOG have overtaken AAPL for 2nd place. UNH has fallen from 3rd to 4th place. AMZN has overtaken MSFT for 6th place. FB has fallen significantly and now the weakest general.
The Generals geometric average and relative strength.
The middle 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. The top panel is its momentum using a 12,26,09 Percentage Price Oscillator.
We can see that the Generals average has made a lower-high on its 40-week simple moving average, so the average is still in an uptrend. Momentum is weaking. The Generals outperformed SPY last week as the relative strength line bounced from the lower line of its descending channel.
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. Last week we had 8 of 10 generals advance, so it moved higher.
The bottom panel, called the advance-decline percentage, shows the percent of net advancers as histogram bars. 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 80% of the generals advanced, so 8 of the 10 symbols, while the 10-week average reads 52%. This is up from 49% two weeks ago. 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 their 10-week moving averages. The bottom panel shows the percentage of stocks above their 40-week simple moving averages. The shading turns red when the percentage drops to 40% or less. We can see from the middle panel that 50%, so 5 out of 10, generals are above their 10-week simple moving averages. This is up from 20% two weeks ago. The bottom panel shows that 80%, so 8 of 10, generals are above their 40-week simple moving averages. This is up from 60% two weeks ago.
The Generals Market Capitalizations
The 5 of the 10 generals changed their positions this week. GOOG fell from 3rd to 5th. AMZN jumped from 5th to 3rd. FB fell from 7th to 9th. NVDA moved from 8th to 7th. BRK.B moved from 9th to 8th.
The Charts
Note: Goog and Googl are very similar, and until there is a change, the analysis of Goog represents both charts.
Apple
Apple closed last week with a gain of 1.21%. 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, but now momentum is crossing below its average. There is still support below from its rising trending. The relative strength Looks strong as it holds its breakout level. As Apple goes, so too goes the market.
MSFT
Despite the bullish engulfing formed at support two weeks ago, Microsoft finished down
-0.75%. Price formed a doji candle above its 40-week simple moving average. Hopefully momentum is bottoming so MSFT can head higher. Relative strength is headed down to test its 40-week simple moving average.
Alphabet
Alphabet released its earnings last Tuesday 02/01 after the market closed. The report and guidance were positive, and Alphabet gained 7.30% in value. Price closed above the previous cande and confirmed the bullish piercing line. Momentum has turned upward above the 0-line and the bgulls are looking for it to break above its downward sloping trend line. Relative strength broke above its downward sloping trendline. Bulls are trying to take control in GOOG.
Amazon
Amazon reported on Thursday, 02/03, after the market closed. Market participants were happy about it, and AMZN gained 9.49% last week. Price has confirmed the previous bullish counterattack candle and is broke inside its 17-month trading range. Price is still below its downward sloping 40-week simple moving average. The good news is that momentum looks to have bottomed. Relative strength is poking above its downward sloping trendline, but below its 40-week simple moving average. As of late, buyer’s have been clear they don’t want to buy AMZN but they also don’t want to sell. Will earnings reinvigorate buyers or sellers next week?
Tesla
With earnings two weeks ago, Tesla managed to close with a gain of 9.09% in value. Price looks to have found buyers at its 40-week simple moving average and around the $900 psychological level. Momentum is sending a mixed message as it is declining long term but strengthening short term. Bulls are looking to hold $900. Relative strength has found support at its upward sloping trendline above its rising 40-week simple moving average.
Meta Platforms
Ouch! FB gave back -21.42% of value after market participants didn’t like the earnings report and guidance Meta Platforms released last Wednesday, 02/02, after the market closed. The first chart is a shorter-term view, and the second chart is a view of FB’s entire price history. Price found its way to a seriously key level. We will see what market participants do with their FB holding this coming week.
Nvidia
NVDA is still 3 weeks ahead of its earnings on Wednesday 02/16 after the market closes. Last week NVDA gained 6.48% last week. Again with mixed messages, this general has broken below a rising trendline yet closed back above its 40-week simple moving average. A measured move below the triangle results in a move down to roughly $150. Momentum has been sharply declining, though might have put in a bottom here as judged by the histogram bars holding steady. Relative strength was up last week, though it is below a downward sloping trendline and a rising 40-week simple moving average. Another mixed message.
Berkshire Hathaway
The famed Berkshire Hathaway is now larger than FB by market cap. Still weeks away from earnings, BRK.B gained 0.67% last week. Notably, it is also the only general that has a positive return this year-to-date with a gain of 5.34%. 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 previous bullish piercing line candle was confirmed with a close higher last week. 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 two weeks ago and is now testing to see if resistance can turn into support for a continued relative strength breakout.
Unitedhealth Group
Unitedhealth Group has been showing serious relative strength since October 2021, and last week was no different. UNH gained 3.67% over SPY’s 1.53%. Price made an all-time closing high the week ending December 31st, 2021 and has since pulled back a little. Momentum looks to be bottoming here, and bulls are looking to retest the all-time closing high of $502.14.
Conclusion
Like most messages coming from the markets these days, the messages are mixed. Things are vulnerable, but that just means be cautious and vigilant. With earnings now behind us for 7 of the 10 generals, we will see how market participants position their portfolios.
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