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The U.S. Equity Landscape. Week 10.

Edition 0009. 03.12.2022.


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 decelerating. 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 = 4-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.


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 1-week rate-of-change.

Another week of losses for US equities. The majority of our symbols have closed at new 4, 13, and 52-week lows. The only symbol that remains in a quantitative uptrend with a positive momentum condition is the Dow Jones Utility Average. The biggest losers were QQQ and then the large caps. Deterioration from 2 weeks ago is evident as the 40-week simple moving average has now turned down in !!!, IWM, SPY, and DJT. DJT’s momentum condition has turned negative as well.


Performance table sorted by the year-to-date rate-of-change.


Relative Comparison Chart. This shows the year-to-date performance.

Aside from the DJU falling back into negative territory in terms of year-to-date gains, the picture remains the same with large caps indices at the bottom beating out only the tech dominated Nasdaq 100.

 

The U.S. Landscape Charts


QQQ: The Nasdaq 100 ETF

QQQ gave back 3.82% in value. While the intermediate term trend is negative and down over 20% from its high, the long-term trend is still intact as price heads down to test its 38.2% Fibonacci retracement level from the March 2020 Covid low to the November 2021 high 15 weeks ago. While momentum is not giving us much hope, bulls are rooting for price to remain above $316 which marks the May 2021 swing low and the 38.2% Fibonacci retracement level of the March 2020 low to the November 2021 high. If price closed below $316 we can look to $258 as the next level of possible support. Price is in a down trend.


Standard & Poor’s ETFs


SPY: The S&P 500 ETF

SPY gave back 2.8% in value last week. While the 4-period simple moving average is now sloping down, I hesitate to call this a downtrend as price is above the wick of February’s low and above the $400.50 area. Momentum is certainly negative an accelerating, so it is likely that our next stop will be roughly $400 which marks a potential gap support level from April 2021. Price is still rangebound.


IJH: The S&P 400 ETF

IJH gave back 1.68% in value, though buyers did step in at the $254 level again. The lower boundary of the roughly 12-month trading range remains intact. Momentum us accelerating to the downside, so we will watch closely to see if price remains above $254. Price is still rangebound


IJR: The S&P 600 ETF.

IJR, the least weak of the S&P indices, gave back 1.1% in value last week. While price remains under its downward sloping 40-week simple moving average, it remains above the $102.50 level which marks its 12-month long trading range. Momentum remains negative but weak. Price remains rangebound.


The Russell ETFs


IWB: The Russell 1000 ETF.

IWB gave back 2.86% in value. Like SPY, its 40-day simple moving average has turned down, though it remains above the wick of February’s low candles. Momentum is accelerating to the downside on elevated volume, so it is likely that price is headed lower to $210 which marks the early 2021 lows and the 38.2% retracement from the March 2020 Covid low to the December 2021 highs. Price remains rangebound.


IWM: The Russell 2000 ETF.

IWM was the least weak of the entire symbol list. It gave back 0.97% in value. Price remains in a downtrend unless buyers can push price above $207. Momentum is decelerating, so there is hope that the $191 level will hold as support.


Dow Jones Indices


DJT: Dow Jones Transportation Average.

DJT gave back 1.04% in value. While the 40-week simple moving average has turned down, momentum continues to decelerate just below its 0-line. Elevated volume shows buyers are there to absorb the overhead supply, at least for now. Price remains rangebound.


DJI: Dow Jones Industrial Average.

DJI was the weakest of the Dow Jones Averages giving back 1.99% in value. Like SPY, price remains above the low wick from February. Momentum continues to accelerate to the downside. As long a price remains above 32,000 price is rangebound. A break below and price is likely to head down to test the 30,000 area which marks the early 2021 lows.


DJU: Down Jones Utility Average.

DJU gave back 0.99% in value last week. DJU also remains the only symbol in our US equity universe to remain in a quantitative uptrend with a positive momentum condition. While down last week, price did hold above its breakout level. The momentum oscillator line has remounted its average, though remains coiling. Utility bulls are looking for price to remain above 964 and for momentum to break above its coil. Price remains in an uptrend.


Conclusion

Of our 9 symbols: 1 is in an uptrend, 1 is in a downtrend, and 7 are in ranges. This market continues deteriorate and remains extraordinarily vulnerable. It remains beaten down under the surface, but at the index level there is still hope that we have paused to digest gains as we get ready for our next leg higher to continue the secular bull market. Obviously, chopping around and moving sideways or breaking down remain as options.

 

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.


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:


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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