Edition 0003. 01.30.2022.
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 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 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. Last week we had 0 of our 9 symbols close positively, but this week we had 4. The theme was certainly large caps over small. The big winner was the Dow Jones Industrial Average gaining 1.34%. Also positive was SPY, IWB, and QQQ.
From a quantitative perspective, the only symbol with positive trend and momentum is the Dow Jones Utility Index. The thing is, it finished down 0.29%! Generally, utilities are seen as defensive, but also sensitive to interest rates rising, which rose across the curve last week, because they generally carry a lot of debt on their balance sheets. Like most things going on right now in the marketplace, things feel somewhat confused. IJR and IWM are the only symbols that have negative trend and momentum from a purely quantitative perspective. This is change. IJR joined IWM as its momentum condition turned negative this week.
Last week, on average, the universe was below its 52-week high by 11.59%, but this week it has moved down to 11.64% below its 52-week high. This is slight deterioration. Last week, on average, the universe was above its 52-week low by 14.56%, while this week is up to 15.16%. Again, this shows confusion with the average getting lower from its 52-week highs and at the same time getting higher than its 52-week lows. The new highs and lows are quiet, while the average number of weeks from the last 52-week closing high has increased from 8.2 to 9.2 weeks.
Performance table sorted by the year-to-date rate-of-change.
Here is the table sorted by the year-to-date performance. Just like last week, all red. Very little change in the average YTD loss and the order is the same as last week.
Relative Comparison Chart. This shows the year-to-date performance.
No changes in leadership this week with the DJU losing the least. We do see a jump at the bottom of the pack as QQQ overtakes IWM and leaves it behind.
The U.S. Landscape Charts
QQQ: The Nasdaq 100 ETF
QQQ gained 0.03%. Price slightly undercut its October 2021 swing low but the candle is semi-bullish but also semi-neutral. We had massive volume last week showing a lot of shares traded hands, meaning more indecision, so the candle now looks more like a spinning top than a hammer. Momentum did not improve, and the oscillator line is rapidly approaching the 0 line. We are looking above to the 40-week simple moving average and below to $316 marking the May 2021 swing lows.
Standard & Poor’s ETFs
SPY: The S&P 500 ETF
SPY finished up 0.91%. Take a look at that candle! What a wick. The reading is over 907 million shares trading. It certainly looks hammer like, and when hammers form in a down trend at support we should watch for a bounce. Momentum is greater than QQQ, but it too has not bottomed. This is another mixed message from the marketplace. We are looking at the 40-week simple moving average above and at every support level below. We do have gap support around $400.
IJH: The S&P 400 ETF
IJH finished the week down -0.54%. The week’s action resulted in a spinning top/doji candle showing indecision on massive volume. The low of the rectangle did hold as support, though the momentum oscillator moved closer to its 0 line. Bulls are looking for buyers to step in here and push price back above its 40-week simple moving average. The bears are looking for the momentum condition to shift to negative like IWM and now IJR.
IJR: The S&P 600 ETF.
IJR closed down -0.74%. The candle is leaning away from indecision towards bears wearing bulls down here. Momentum has now crossed its 0-line showing the momentum condition is negative. Couple the candle closing in the lower half of its range with the massive volume and the newly negative momentum condition, and it looks like we might head down to $93 which would mark the 38.2% Fibonacci retracement from the March 2020 low to the November 2021 high. For now, the bottom of its 10-month price rectangle did hold as support.
The Russell ETFs
IWB: The Russell 1000 ETF.
IWB finished with a gain of .70%. The candle is bullish and held support, but its not a hammer. The wick is not 2/3 times its real body. Momentum doesn’t look to have bottomed, though buyers might step in next week.
IWM: The Russell 2000 ETF.
IWM finished down 0.88%. The candle is a spinning top in the bottom half of its range. Massive volume. The January 2021 support held as momentum continued to press below its 0-line. Bulls want to see price jump up above $207 and back into its 10-month trading range.
Dow Jones Indices
DJT: Dow Jones Transportation Average.
The Dow Jones Transportation Average finished down -1.30%. It was this week’s big loser. It is the only 1 of the 3 Dow Jones Averages to have a quantitatively negative trend with questionable momentum. The doji did close below the descending triangle. A measured move generates a price target down the 13,946 area which coincides with the September 2021 swing low. Bull want to remount the 40-week simple moving average while bears are looking down to 13,946.50.
DJI: Dow Jones Industrial Average.
The Dow Jones Industrial Average, while the weakest of the three last week, this week it is the big winner for the entire landscape. DJI gained 1.34%. The 8 month support line of 33,515 held and bulls are now hoping for price to remount its 40-week simple moving average. The volume was massive and the candle closed very close to the top of its range. Momentum does not look as if it has bottomed yet, so we will need another week of net buying.
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 did however give back -0.29% of its value last week. Bulls are looking for price to break above the descending channel and close above the pre-Covid levels above $945.
Conclusion
The US equity landscape in a nutshell: the selling to start the week ended on Friday with rebounds. More symbols lost value and gained, and we saw deterioration as IJR joined IWM with a quantitatively negative trend a momentum condition. Large caps from QQQ, SPY, IWB and DJI finished with some gains after weeks of selling. Small and mid-caps continued to give back. I see a bifurcation of small and large caps with mixed messages everywhere.
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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