Market Perspective: Recent Trends and Performance in Charts via /r/wallstreetbets #stocks #wallstreetbets #investing


Market Perspective: Recent Trends and Performance in Charts

Since the volatility in mid-late May I’ve been generally bullish on the market: it seemed that nothing could accelerate meaningful downside move and this I think was further proven with the post-FOMC reaction of a small stumble and then right back up. And while I’ve continued to be bullish more recently, I have been looking at and discussing metrics and commentary around market breadth and the authenticity of this latest move to ATHs.

Let’s look at some charts to build context:

SPY vs RSP 1y

SPY vs MAHP 1y

SPY vs S5FI 1y

In the first chart we compare the performance of the SPY to the RSP, the latter being the equal-weight S&P 500 index. We can see that while the SPY has bounced to new highs from the mid-June low, the RSP has traded largely sideways. At first this may look similar to previous patterns in the chart where the performance has diverged, but this is in fact a divergence of direction – one going up and the other sideways. This is still a nascent pattern in my opinion, but a worrying sign if this continues.

The second chart shows the SPY vs the percentage of S&P 500 stocks making new all-time-highs, the latter of which continues to hover in a range around %10. For example on Friday only ~%9 of S&P 500 stocks closed at ATHs.

Our last chart shows the the SPY vs the S5FI, the percentage of S&P 500 stocks above their 50DMA at close on any given day.

What this might tell us is that this recent rally has been narrow, in other words lacking broad participation and fueled by a few select stocks dragging the index higher. That’s generally not considered a healthy move and can be indicative of a stall-out or perhaps a setup to some downside.

Charts

Sector Compare YTD

So while the indices have moved higher as of late, there doesn’t seem to be a particular sector that’s been leading the way, and in fact it seems like we’ve had more downside than upside moves sector-wise through the last few weeks.

SPY 1y

QQQ 1y

IWM 1y

Let’s also take a look at the RSP and ARKK charts:

RSP 1y

ARKK 1y

Takeaways

  • ARKK, representative of the growth trade, seemed like it had taken a turn for the better but then stalled out around the 130 mark which seems to be overhead resistance. It’s since given back a good bit and with it now below it’s 200DMA I wonder if we’ll continue to see further downside here.
  • I think the RSP here tells us a lot. It’s been in a tight range for awhile now and failed to make new highs in concert with the SPY which again is a real indicator that a handful of stocks are dragging the index higher.
  • IWM continues to be range-bound, but I’m getting the feeling we could test the lower end of that around the 208-210 area soon given recent performance.
  • SPY and QQQ don’t look terrible, especially with last week’s stumbles cooling off RSI, but as I’ve discussed here the credibility of this rally is in doubt.
  • As mentioned above, it's hard to see any clear leader here in terms of a trade, but also hard to see a meaningful pullback happening either. Perhaps this earnings season will be the catalyst for some well-defined action/direction going forward.

I think at a high-level I buy in to this idea that we’re in a “phase two” of this bull market, where phase one has aggressively pulled forward valuations and now companies must prove their stock’s worth. This likely means a more challenging environment where we trade sideways at the index level and investors must find alpha at the individual stock level, and I think this has really been the case since February or March this year.

What I’ve Been Reading

Variant Perception – Phases of a Bull Market

FT – ‘Strange’ bond reaction to US inflation data puzzles investors

Bonus Charts

UBER 1y

I think UBER has been breaking down for awhile, and this setup looks like it could yield further downside as we’ve broken below this lower trendline, the 20/50DMAs have turned down under the 200DMA… it just doesn’t look great.

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Submitted July 18, 2021 at 11:38PM by _foldLeft
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