Edition 0005. 02.12.2022.
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 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.
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.
Three weeks ago we saw 4 of our 9 symbols close with a gain. Two weeks ago we saw 9 of our 9 symbols close positively. Last week we saw 3 of our 9 symbols close with a gain. Last week’s leaders were the Russell 2000, the S&P small-caps, and then the S&P mid-caps. The laggard was QQQ as expected with rising rates and an almost certainty of the Fed raising the Federal Funds Rate in March.
From a quantitative perspective, the continued deterioration is evident. There are 0 symbols in both a quantitative uptrend and with a positive momentum condition. That said, we do not see an increase in the number of symbols in both a downtrend and with a quantitatively negative momentum condition.
The symbol universe has is also now 10 weeks, on average, from its last 52-week closing high. It is also, on average, 11% from that 52-week high.
Performance table sorted by the year-to-date rate-of-change.
Relative Comparison Chart. This shows the year-to-date performance.
QQQ has fallen to the bottom of the pack again. DJT has fallen one rank. Spy has fallen two ranks, while IJH and IJR have both climbed above IWB.
The U.S. Landscape Charts
QQQ: The Nasdaq 100 ETF
QQQ finished last and lost 3.06% in value. Price continues to stay below its 40-week simple moving average and flirt with the $350 level which was established as support in October 2021. Momentum has now changed to a negative and has accelerated as the PPO oscillator line has crossed below 0. Price is rangebound.
Standard & Poor’s ETFs
SPY: The S&P 500 ETF
SPY finished down 1.84%, and closed below its 40-week simple moving average. Momentum continues to accelerate to the downside, thought the PPO oscillator line has not crossed below 0. Price is rangebound.
IJH: The S&P 400 ETF
IJH finished up for the 3rd week in a row, though price is below its 40-week simple moving average. IJH gained 0.94% in value. Momentum has decelerated to the downside, but the PPO oscillator line is below 0. Price is rangebound, but its 40-week simple moving average is now sloping down.
IJR: The S&P 600 ETF.
IJR, the best performing of the S&P ETFs, closed with a gain of 1.35% despite the PPO momentum oscillator being below 0. Price continues to stay below its 40-week simple moving average and is rangebound, but its 40-week simple moving average is now sloping down.
The Russell ETFs
IWB: The Russell 1000 ETF.
IWB finished down 1.6%. Price continues to close below its flat 40-week simple moving average and remain above July 2021’s swing low of $237. Momentum continues to accelerate to the downside, though the PPO oscillator line is still above 0. Price is rangebound.
IWM: The Russell 2000 ETF.
IWM finished up last week gaining 1.51%. IWM continues its down trend. Last week price tested $207 as resistance from below after $207 has held as support since February 2021. Momentum continues to be negative.
Dow Jones Indices
DJT: Dow Jones Transportation Average.
The Dow Jones Transportation Average finished in the middle of the Dow Averages, giving back 1.41% in value. Price remains below its downward sloping 40-week simple moving average. Momentum continues accelerating towards its 0-line from above. A break below the descending triangle generates a measured move down to the 14,000 area which coincides with the September 2021 swing lows. Price remains rangebound.
DJI: Dow Jones Industrial Average.
The Dow Jones Industrial Average was the “best” performing of the Dow Averages. Price closed below its 40-week simple moving average giving back 1.41% in value. Momentum continues to accelerate down towards the 0-line. Rice remains in its 8-month trading range above 33,515 and below 36,953. range.
DJU: Down Jones Utility Average.
While the Dow Jones Utility Average was near the bottom of our universe last week, it remains the only symbol with price above an upward sloping 40-week simple moving average. Last week the DJU lost 1.85% in value. Momentum has now crossed below its average while still above its upward sloping trendline. Utility bulls have been waiting almost 2 years for price to break out of its ascending triangle and reclaim its pre-Covid price levels, hoping that the price action in the last week of 2021 and first week of 2022 was a premature breakout and not a false breakout.
Conclusion
It is a tough environment for US equites. They are all down YTD. While we did see a bounce from several oversold symbols, there is no evidence that we will see continued strength anywhere, expect perhaps utilities. US equites are becoming increasingly vulnerable, but still holding up.
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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