No changes in the top-5

At the end of this week, there were no changes in the ranking of the top-5 sectors.

1. (1) XLY – Consumer Discretionary
2. (2) XLF – Financials
3. (3) XLC – Communication Services
4. (4) XLI – Industrials
5. (5) XLE – Energy
6. (6) XLK – Technology
7. (7) XLU – Utilities
8. (11) XLB – Materials
9. (8) XLRE – Real Estate
10. (9) XLP – Consumer Staples
11. (10) XLV – Health Care

In the bottom of the ranking, a few changes are showing up.

Materials rose from #11 to #8. XLRE dropped from #8 to #9. And XLP and XLV both dropped one position to #10 and #11.

As a refresher, this ranking is done based on a combination of RRG metrics on both the daily and the weekly RRGs.

Based on the positions of XLE and XLK on the weekly RRG, it may seem strange that XLE is above XLK. However, looking at the daily RRG, it can be seen that XLE made a huge move into and through leading with a very high RS-ratio and RS-momentum reading, which dragged the sector above XLK.

Consumer Discretionary

XLY has put a new higher low into place which underscores the current strength of this sector. The newly formed low at 218 is now the first support level to watch for XLY.

The first target to the upside is the level of the previous peak around 240. The uptrends in both price and relative strength are still intact.

Financials

The Financials sector now also has a new higher low in place at 47, which should also be seen as the first support level for XLF.

51.6 is the first target and resistance level on the upside. An upward break will unlock more upside for financial stocks.

Communication Services

Out of the top-5 sector charts, XLC is probably the strongest.

This week’s upward break out of the flag-like consolidation pattern must be seen as very strong and the signal for a further rally. Taking out the previous high at 102.40 will be the confirmation.

Industrials

XLI continues its bounce of support and is underway to the upper boundary of its rising channel. Intermediate resistance is expected around 144.

Relative strength remains under pressure but is still stronger than the other sectors and therefore keeping XLI inside the top 5.

Energy

Energy dropped back a bit after its rally in the last few weeks but remains solidly in the middle of its range. Here also relative strength remains under pressure.

Performance

As of the close on 1/24 the top-5 portfolio gained 3.89%, keeping up with SPY which gained 3.99% over the same period.

#StayAlert, and have a great weekend. — Julius

Despite the strength in some key growth stocks in January, semiconductors have been decidedly rangebound for most of the last six months.  While this week’s breakout of the range appears to be a significant bullish signal, the bearish candle pattern on Friday indicates investors may be best served by being patient for upside confirmation.

Big Base Breakouts Are Bullish

After reaching a swing low around $200 in early August, the VanEck Vectors Semiconductor ETF (SMH) made a series of higher highs to reach a new peak in mid-October around $260.  The SMH ended up retesting this resistance area two more times through early January, with a number of pullbacks finding support at the 200-day moving average

The failed breakout in the first week of 2025 was noteworthy in that it was punctuated by a bearish engulfing pattern, representing short-term distribution according to candlestick chart aficionados.  Tuesday of this week, we saw another breakout above the $260 level, and an upside follow-through day suggested that this breakout may finally have staying power.

What is the first market-related thing you look at every morning?  If the answer is “financial television” or “my brokerage account” then we have some work to do!  In his upcoming FREE webcast on Wednesday, January 29th, Dave will share the actual morning coffee routine that he uses every morning to clearly define market trends, identify shifts in investor sentiment, and check in on market action.  

You’ll leave this session with plenty of ideas on how to upgrade your own daily market analysis routine to improve your market awareness.  Sign up for this free event HERE and learn how better routines lead to better decisions!

Semis Have Finally Closed the Gap

While this week’s breakout did confirm a breakout above the recent consolidation pattern, a closer look reveals that SMH may have just simply closed the price gap from July 2025.

I often get asked about how I use price gaps in my analysis, and my general answer is that I treat them as support and resistance zones.  I’ve found that the market has memory, and investors tend to gravitate toward price gaps as meaningful levels of interest, considered a “pivot point” for future potential reversals.

So while the move above $260 appears to be a good breakout, the fact that we’re still in the price gap from last summer suggests that perhaps there is still more to prove before we can sound an “all clear” for semiconductors.

Bearish Engulfing Pattern Suggests Another Peak

Candle charts can be so helpful in understanding the short-term sentiment shifts within the context of the longer-term market trends.  And Thursday and Friday brought us the dreaded bearish engulfing pattern, a two-candle reversal pattern that suggests a bearish shift in short-term sentiment.

What’s so fascinating about SMH is that we had another bearish engulfing pattern on the previous test of $260 from earlier in January, resulting in a pullback to the 200-day moving average.  If you look closely at the first chart we shared in this article, you may notice bearish engulfing patterns at a number of price peaks over the last 12 months!

While the bearish engulfing pattern doesn’t necessarily negate the recent “big base breakout”, it does suggest that semis have lost some upside momentum.  I look for breakouts with improving momentum, improving volume, and improving price action.  Unfortunately for semiconductors, it looks like investors may have to watch for more confirmation before believing in this latest attempt to find a new high!

RR#6,

Dave

PS- Ready to upgrade your investment process?  Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice.  The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.  

The author does not have a position in mentioned securities at the time of publication.    Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

Gold mining stocks have been climbing since the end of December, a trend that usually goes unnoticed unless gold — often dismissed as an “old relic” — undergoes one of its periodic shifts into a timely and relevant asset.

Recently, gold has been in the public spotlight, shedding its “relic” skin to reveal itself, once again, as a safe haven asset. If you haven’t been following the yellow metal, here’s what you might have missed:

• Gold prices have been rising, making mining a profitable venture.
• Central banks worldwide have ramped up gold purchases, driving prices higher.
• Several mining mergers have taken place, improving efficiency.
• Safe-haven demand, driven by geopolitical and economic uncertainties, has fueled gold investment.
• Gold mining can also mean silver extraction (along with other metals), which is in short supply.

A glance at the5-day MarketCarpets’ Bullish Percent Index (BPI) view on Thursday shows that next to healthcare, gold miners have the second largest lead over other indices and sectors.

FIGURE 1. MARKETCARPERTS BPI CHART. Gold miners have the second-highest BPI reading among other sectors and indices.Image source: StockCharts.com. For educational purposes.

This 5-day BPI reading tells you that over 41% of gold mining stocks exhibit Point & Figure buy signals. This suggests a surge in buying activity relative to the other sectors on the list.

As StockCharts’ PerfCharts below show, rising gold and silver prices have been fueling gold mining activity and investment (note that this isn’t always the case, as various operational factors can impact mining companies independently of the metal prices they produce). We’ll use the VanEck Vectors Gold Miners ETF (GDX) as our industry proxy.

FIGURE 2. PERFCHARTS OF GDX,GLD, AND SLV. The metals are leading miners and driving mining activity and investment.Image source: StockCharts.com. For educational purposes.

Taking a look at GDX’s weekly chart, you can see the relative performance between gold mining stocks and the yellow metal.

FIGURE 3. WEEKLY 5-YEAR CHART OF GOLD MINERS. Note how gold prices are now leading the collective performance of the gold mining industry.Image source: StockCharts.com. For educational purposes.

For years, gold mining stocks led the price of gold (represented by the blue line), but, over the past year, gold has begun outperforming miners. This suggests a few possibilities:

• Investors might have been concerned about rising operational costs and weaker profit margins in the mining sector, favoring gold over the companies that produce it.
• Now, the renewed interest in mining stocks suggests that investors might be anticipating improved profitability in miners as gold prices continue to rise.

But is investing in miners a wise move or a trap? As the daily chart below shows, it can be either. It all depends on how the index reacts at critical technical levels.

FIGURE 4. DAILY CHART OF GDX. Keep a close eye on resistance at $38 and support at $33.Image source: StockCharts.com. For educational purposes.

GDX has pulled back from its high of $43.71. Is this a pullback or the beginning of a more significant trend reversal Whether the rally continues or reverses into a downtrend depends on whether the price breaks above resistance at $38 or falls below support at $33.

This notion rests on the simple principle that an uptrend consists of consecutive higher highs and lows and that a downtrend consists of consecutive lower lows and highs. The ZigZag line effectively highlights this trend movement, especially the current swing high ($38) and low ($30).

In terms of technical strength, volume, and momentum:

• The StockCharts Technical Rank (SCTR) line is rising but still below the initial bullish threshold of 76. This is a promising indication, but not yet confirmed bullish.
• Buying pressure, according to the Chaikin Money Flow (CMF), is above the zero line, indicating buyers are starting to take control of the market.
• The Relative Strength Index (RSI) is rising yet below the 70 threshold, indicating there’s still room for GDX to run before entering overbought territory.

The main point is to add GDX to your ChartLists, watch how it responds to the key support and resistance levels, and monitor volume and momentum readings for confirmation.

At the Close

Gold mining stocks have gained momentum alongside rising gold prices. While this signals renewed interest in the industry, the technicals, in this case, can give you a much clearer picture of the underlying dynamics of price and market sentiment. Keep an eye on those levels to help you make a sound decision and pinpoint optimal timing.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The Mag7 ETF (MAGS) formed another short-term bullish continuation pattern as it worked its way higher since the triangle breakout in mid September. This report will also analyze the long-term trends, highlight the short-term setups and compare performance for the stocks in this ETF.

First and foremost, MAGS is in a long-term uptrend with a new high in mid December and price well above the 200-day SMA. This ETF has been in a long-term uptrend since the big surge and breakout in November 2023. MAGS started trading in April 2023 so the 200-day SMA did not start until late January 2024. MAGS fell sharply in July 2024, but held above the 200-day SMA and resumed its uptrend with a new high in November.

The indicator window shows the MAGS/RSP Ratio, which measures relative performance. This line rises when MAGS outperforms the S&P 500 EW ETF (RSP) and falls when MAGS underperforms. MAGS is outperforming the broader market as the price-relative rises and hits new highs.

With MAGS in a long-term uptrend and leading the market, we want to be focused on bullish setups within this trend, such as bullish continuation patterns. MAGS and several other tech-AI related ETFs were featured in our report on Thursday. Medium-term, MAGS formed a triangle in July-August. This triangle formed within a long-term uptrend and was a bullish continuation pattern. MAGS broke out in mid September and worked its way higher the last five months.

More recently, the ETF formed a flag in October, a pennant in November and another flag here in January. These are short-term bullish continuation patterns. MAGS is breaking out of the flag this week and this signals an end to the pullback and a resumption of the uptrend. Re-evaluation support is set at 53.

Nvidia (+146%), Tesla (+97%), Amazon (+35%) and Meta (+66%) are powering MAGS with the biggest gains over the past year. Microsoft (+13%) and Apple (+15%) are the laggards in the group, but one is setting up and the other resumed its uptrend. This report continues at TrendInvestorPro where we analyze the trading setups for each of the Mag7 stocks. Click here to take a trial and gain immediate access.

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The Biotech industry group is making a comeback and the ‘under the hood’ chart displays new strength coming into the group. We have a constructive bottom that price is breaking from and while it does need to overcome resistance at the 200-day EMA, it looks encouraging. What impressed was the increase in participation of stocks above key moving averages which is trending higher. A positive close today would likely see these numbers expand.

The Silver Cross Index measures how many stocks have a 20-day EMA greater than the 50-day EMA, or those stocks holding a “Silver Cross”. The Silver Cross Index is moving swiftly higher right now and should see a Bullish Shift across the signal line soon.

We will say that this is a rather aggressive group so it could turn on us should the market weaken. Stay nimble.

I did a quick scan and found two stocks in this area that you might find interesting.

First we have a stock that I picked yesterday for DP Diamonds subscribers. In DP Diamonds I go through my scan results and find the best candidates to present to subscribers. I give out ten stock and ETF picks per week. PTCT has broken from a declining trend. The RSI is positive and the PMO is rising toward a Crossover BUY Signal. Stochastics are also on the rise. Notice relative strength studies. The group is attempting to outperform again. PTCT is outperforming both the group and the SPY. I’ve opted to set the stop as close to support as possible without making it too deep. There is plenty of upside potential here.

VERV is breaking out from an intermediate-term trading channel. I like this breakout move. It is trying very hard to close above resistance. Given the positive RSI and rising PMO above the zero line on a Crossover BUY Signal, it looks like this breakout will materialize. The OBV broke out with price so the rally is being confirmed. Stochastics are above 80. Relative strength is excellent for VERV against both the group and the SPY. We could see a little profit taking at this resistance level, but that would likely offer a good entry.

Conclusion: Biotechs are rallying and under the hood indicators are confirming the rise. We should see more upside out of this group, but as noted earlier, this is an aggressive group and will likely require the market to continue making its way higher. Should the market turn on us, there won’t be too many areas that will be unscathed, but for now the rally is holding up.

The DP Alert: Your First Stop to a Great Trade!

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Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin

(c) Copyright 2025 DecisionPoint.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

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Bear Market Rules

Despite periodic rallies that have buoyed the home improvement retail sector, Lowe’s (LOW) is showing signs of potential weakness. Recent price action in Lowe’s stock and lagging growth metrics suggest that its latest attempt to sustain a breakout may run out of steam.

Below, we’ll explore the technical and fundamental factors behind this bearish thesis and outline a limited-risk options strategy to take advantage — discovered automatically through the OptionsPlay Strategy Center within StockCharts.com.

Technical Analysis of Lowe’s Stock Price

 After initially breaking above $260 resistance, LOW has spent the past two months attempting to build on its bullish momentum. However, it has since:

1. Confirmed a false breakout. LOW has since fallen back below the $260 support, negating the breakout and signaling a bearish trend change.
2. Underperformed the S&P 500. During its failed breakout, the stock has lagged the broader market, suggesting weakness ahead.
3. Retest of Resistance. Recently, LOW rallied back to the $260 level, which now acts as resistance, providing a strong risk/reward for adding bearish exposure.

FIGURE 1. DAILY CHART OF LOWE’S STOCK. The stock is showing signs of weakness after a false breakout and a retest of its resistance level.Chart source: StockCharts.com. For educational purposes.

Fundamental Analysis of Lowe’s

 From a fundamental standpoint, LOW also appears vulnerable:

• Premium Valuation, Tepid Growth. While Lowe’s trades at around 21x forward earnings, its projected EPS and Revenue growth metrics remain in the low single digits — well below market averages.
• Weak Profitability. Net margins of only 8% compare unfavorably to the S&P 500’s average of 12%. This relatively thin profitability questions the justification for LOW’s high valuation multiple.

 In essence, the stock’s elevated valuation doesn’t align with its modest growth prospects and subpar margin profile.

Options Strategy for Trading Lowe’s Stock

 The OptionsPlay Strategy Center highlights selling a bear call spread to capitalize on this potentially neutral to bearish view on LOW by selling the March 7 $265/$275 Call Vertical @ $4.20 Credit. This entails:

• Selling the March 7, 2025, $265 Call at $7.38
• Buying March 7, 2025, $275 Call at $3.21
• Net Credit: $4.20 per share (or $420 total per contract)

FIGURE 2. RISK CURVE FOR A BEAR CALL VERTICAL. The strategy has a max reward of $420 and max risk of $580.Image source: OptionsPlay Strategy Center at StockCharts.com. For educational purposes.

Trade Details

• Maximum Potential Reward: $420
• Maximum Potential Risk: $580
• Breakeven Point: $269.20
• Probability of Profit: 64.70% (if LOW closes below $269.20 by March 7, 2025)

 If LOW remains below the $269.20 breakeven level at expiration, this strategy will be profitable. It’s a high probability of success strategy to express a bearish view with defined risk.

Unlock Real-Time Trade Ideas with OptionsPlay Strategy Center

 This bearish opportunity in Lowe’s was uncovered in seconds using the OptionsPlay Strategy Center on StockCharts.com. The platform’s Bearish Trend Following scan highlighted LOW as a prime candidate, then automatically structured the optimal options trade, helping you skip hours of research.

FIGURE 3. BEARISH TREND FOLLOWING SCAN FILTERED LOW AS A CANDIDATE FOR A BEAR CALL SPREAD.Image source: OptionsPlay Strategy Center at StockCharts.com. For educational purposes.

By subscribing to the OptionsPlay Strategy Center, you can:

• Automate Your Scans. Find high-probability opportunities based on real-time market data and technical signals.
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Don’t let profitable setups pass you by. Subscribe to the OptionsPlay Strategy Center today and harness powerful scanning and strategy-building tools that put you a step ahead in the market every day.

Remember that old commercial, “It’s not nice to fool Mother Nature?” Well, there should be another one pertaining to the stock market, “Don’t bet against a secular bull market advance!” We’re all trained, or brainwashed, if you will, to believe that the next major stock market top is at hand or just around the corner. It completely immobilizes us when it comes to having belief in the major advance at hand. Give us a bit of selling and we’ll quickly point out the likely recession and swift stock market drop ahead. Two weeks ago, reigniting inflation was a major concern and the S&P 500 was 5% off its high. Today, we’re in all-time high territory after the ACTUAL inflation data said that inflation is NOT a problem. Or we can just be blindfolded and keep tuning into the circus that is CNBC.

Drown out the noise and all the bearish rhetoric, and instead focus on one of my favorite charts. This is a 100-year monthly chart of the S&P 500:

I show this chart to our EarningsBeats.com members at least once per week. It’s that important to recognize and understand long-term perspective. The next time you think, “is this the start of the next secular bear market?”, I want you to remember one thing. There have been TWO starts to secular bear markets in my entire lifetime – the early 1970s and the turn of the century as the dot com bubble popped. That’s it. Just stop trying to call the 3rd one. There have only been 14 cyclical bear markets since 1950, which means that, on average, we see only one of these lesser bear markets every 5-6 years. Since 2018, we’ve had 3 of them (2018, 2020, 2022). That’s waaaaay more than our fair share. Let the bulls do their thing.

The following chart is the HERE AND NOW, not the bears’ wishful thinking and hoping. Yep, it’s another all-time high on the S&P 500:

If you look back above to the 100-year chart, you’ll see that the S&P 500’s monthly PPO is accelerating to the upside, telling us that long-term bullish momentum just keeps building. Bear markets don’t begin until that monthly PPO moves into negative territory. That sure seems like a long time from now based on the 100-year chart. Get on the right side of the trade, which is the long side. Not only is the S&P 500 monthly PPO nowhere near negative territory, none of our 11 sectors are anywhere close either. Every sector currently has a monthly PPO above 4. Our aggressive sectors have monthly PPOs residing near 10 or 11.

At EarningsBeats.com, we stress the importance of owning leading stocks in leading industry groups, which is the exact strategy we use to beat the S&P 500 in our portfolios. Our flagship Model Portfolio has now gained more than 300% since its inception on November 19, 2018. It’s crushing the benchmark S&P 500 as you can see below:

The current quarter is showing tremendous outperformance again. Growth stocks tend to power secular bull market advances, so taking advantageous of that helps in terms of relative performance. Stocks like PLTR, CLS, and TPR are providing us excellent leadership and direction.

Time to Relax

At 4:15pm ET today, our EarningsBeats.com team is hosting a virtual Friday Happy Hour. Everyone is invited! Grab your favorite beverage and join us as we celebrate another all-time S&P 500 high 2025-style! Simply CLICK HERE to join the event, but remember, it won’t start until 4:15pm. Be sure to stop by and meet our entire team!

Happy trading!

Tom

In the last quarter of 2024, semiconductors have been walking a tightrope between tariff fears and supply chain uncertainties. Geopolitical tensions between the US and China cast a long shadow over the industry, holding our proxy, VanEck Vectors Semiconductor ETF (SMH), in a consolidated range from October 2024 through January.

However, with new policies and developments in Washington, the narrative has shifted, as evidenced by SMH’s upside breakout in this weekly chart.

FIGURE 1. WEEKLY CHART OF SMH. The new narratives in DC have injected a fresh dose of optimism into the semiconductor industry, causing SMH to break out of its 3-month range.

SMH broke above resistance at the $261 level and is on its way toward testing its all-time high of $281.82.

What changed the narrative?

Four factors have likely contributed to this renewed optimism in semiconductors:

1. Tariffs on China may not be as severe as initially expected.
2. The $500 billion “Stargate” AI initiative has sent AI-related chipmakers higher.
3. The new administration’s economic policies, including tax cuts, deregulation, and increased government spending, have sparked a broad market rally, benefiting tech.
4. A renewed push for reshoring and domestic semiconductor manufacturing is seen to reduce risks, positioning US chipmakers for long-term growth.

With these factors in play, let’s examine three semiconductor stocks — Nvidia (NVDA), Taiwan Semiconductor Company (TSM), and Broadcom (AVGO) — all of which are positioned to benefit from these changes.

FIGURE 2. SIX-MONTH PERFCHARTS VIEW OF SMH, NVDA, TSM, AND AVGO.  Note AVGO’s jump in December.Chart source: StockChars.com. For educational purposes.

Using StockCharts’ PerfCharts charting tool, you can view a comparative performance of these stocks against our industry proxy SMH. All three stocks began outperforming their chip industry peers, but only AVGO made a notable jump in December.

So, let’s look at a daily chart of AVGO’s price action.

FIGURE 3. DAILY CHART OF AVGO. It’s a technically strong stock that may be due for a pullback.Chart source: StockChars.com. For educational purposes.

• Strong financial performance and significant advancements in proprietary AI tech drove the company’s 40% jump in December.
• AVGO’s StockCharts Technical Rank (SCTR) score rose above the 90-line threshold, signaling bullishness across multiple indicators and timeframes.

Yet there are signs indicating near-term weakness.

• The Money Flow Index (MFI) is declining as AVGO attempts to rally above its all-time high of $251; a bearish divergence suggesting the likelihood of a pullback.
• The Accumulation/Distribution Line (ADL) on the chart (pink line) has dropped below the price action, indicating a drop in money flow which can precede a price decline.

Nevertheless, AVGO remains a technically strong stock with a promising outlook in light of the current AI developments. If you’re considering a long position, use the Quadrant Lines to help decide your entry point. A pullback that holds within the top two quadrants signals strength and may present a solid buying opportunity. However, if AVGO falls below the middle line into the third quadrant, it could indicate weakness, warranting a reassessment of the stock’s momentum and overall bullish thesis.

Next, let’s shift over to a daily chart of TSM.

FIGURE 4. DAILY CHART OF TSM. It’s been smooth sailing, and if the advance continues, it’s crucial to find a near-term entry point.Chart source: StockChars.com. For educational purposes.

TSM is well-positioned to benefit from the developments and policy changes discussed earlier in this article. As the world’s largest semiconductor foundry, TSM plays a crucial role in AI chip manufacturing. Additionally, its expansion into the US includes new facilities in Arizona, which can help mitigate some supply-chain risks, though Taiwan remains its primary hub.

• TSM has notched an all-time high.
• Its SCTR reading is just below the ultra-bullish 90 threshold.
• Its Relative Strength Index (RSI) reading suggests steady upward momentum with plenty more room to run (before entering overbought territory).

If you’re considering entering a long position in TSM, you might wait for a retracement to the middle Bollinger Band, as it recently closed above the upper band. According to John Bollinger, the indicator’s developer, the bands should contain 88–89% of price action, which makes a move outside the bands significant.

Last but not least, here’s a daily chart of Nvidia (NVDA), the world’s leading AI chipmaker.

FIGURE 5. DAILY CHART OF NVDA. Momentum and volume are dwindling as price looks to be trading rangebound.Chart source: StockChars.com. For educational purposes.

NVDA is arguably the most favored AI chip stock on Wall Street. Nevertheless, the Chaikin Money Flow (CMF) and RSI indicate that the stock’s volume and momentum appear subdued, suggesting the market may be waiting for a catalyst to drive the next move.

While NVDA’s attempt to break above its all-time high of $153 appears to be waning, keep a close eye on support at the $130 range. A close below this, should that happen, can lead to further downside. The next level of support below that line would be near $115.

At the Close

Add SMH, AVGO, TSM, and NVDA to your ChartLists and monitor the key levels closely. Stay updated on news and policy developments from the new administration, as these could impact the semiconductor industry. While market sentiment remains bullish, watch for key technical levels and potential catalysts that could drive further upside—or signal a shift in momentum.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

I have been traveling in the US since 1/15 and attended the CMTA Mid-Winter retreat in Tampa, FL 1/16-1/17 and then moved to Redmond, WA to work from the Stockcharts.com office this week. Unfortunately, the 40-degree (F) temp drop between Tampa and Seattle left me with a cold and a soar throat so I am skipping this week’s video.

On this daily RRG, I have highlighted the tails for XLE and XLY.

In my “best five sectors” series, XLE entered the top-5 this week, replacing XLK which was pushed down to position 6/ Consumer Discretionary still remains the no 1 sector.

The daily tail for XLE really stands out in terms of length and having both the highest RS-Ratio and highest RS-Momentum readings in the universe.

XLY rotated through lagging and has recently started to pick up again.

The reason why XLY still remains the strongest sector can be seen on the weekly RRG below.

On this time frame, XLY is deep inside the leading quadrant and rolling over as it is losing RS-Momentum, so far the loss of relative strength (RS-ratio) remains limited.

The XLE tail is another story, the rotation here suggests weakness as it is rotating back into the lagging quadrant.

The strength on the daily for XLE and the weakness for XLK have caused them to switch positions. So far that has not been very beneficial yet but time will tell.

But while the sector is now one of the best five we may as well take a look at the individual stocks and see if there are any interesting charts to be found.

Energy – XLE

The RRG (weekly) for Energy stocks shows an evenly spread universe with a bit more tails at higher RS-Ratio levels.

While checking the price charts of symbols showing strong RRG characteristics a few came out as potentially interesting.

EQT Corp – EQT

EQT is well inside the leading quadrant and recently started rolling over. However, the upward break in the price chart opened up a lot of upside potential.

A drop back towards or into the support zone between 48-50 would be an ideal time to look for buying opportunities, if we get there. Any newly formed higher low will confirm the strength of the current move.

Coterra Energy – CTRA

CTRA is somewhat similar. Here also a nice upward break out of a long sideways range which is holding up well. Any setback into the former resistance area, now support, should be seen as a renewed entry opportunity.

CTRA still has some resistance waiting around 32, the level of the 2022 peak.

Baker Hughes – BKR

From the cluster of symbols on leading or weakening around 100 on the RS-Momentum scale, BKR shows a promising chart.

The recent break above its previous high is holding up well while relative strength remains strong. The current, mild, loss of relative momentum seems temporary.

EOG Resources – EOG

EOG is located close to the benchmark with a very short tail and it has just crossed back into the leading quadrant. The upward break in the raw-RS line suggests that there is more relative upside underway.

On the price chart, there is serious overhead resistance just below 140 where several highs have lined up over the past three years. But the in-between-lows during that same period are all higher. This builds a very large ascending triangle which is generally a bullish pattern. The trigger will be the upward break above that horizontal barrier.

The long-term implications show up even better on the monthly chart for EOG

Once that upper boundary is taken out EOG will have some serious upside potential.

#StayAlert, –Julius

As the S&P 500 and Nasdaq 100 once again test new all-time highs this week, I’m struck by how leadership trends have shifted around quite a bit since mid-December.  Part of my daily chart process involves a series of ratios to better evaluate and understand which stocks are leading, which stocks are lagging, and from where the next big leadership theme may emerge.

Here are three key ratio charts that I’ve found incredibly valuable in recent years, all derived from my Market Misbehavior LIVE ChartList.  I should also note that the Relative Rotation Graphs remain one of my primary tools to track leadership rotation among the 11 S&P 500 sectors.  I feel that the charts below complement the RRG to provide a more comprehensive picture of rotation among themes and styles.

This first chart hits on perhaps the most important equity market theme in 2024, the dominance of growth over value.  The top panel compares the Russell 1000 Growth vs. Russell 1000 Value ETFs, which pulled back into mid-January before rallying again this week.  

Next we have the S&P 500 Pure Growth and Value ETFs, which ignore stocks like Microsoft Corp. (MSFT) that are “double counted” as they display both growth and value characteristics.  This chart has once again broken to new highs as growth stocks have spiked higher this week.

Finally, we’re charting a ratio of the S&P 500 High Beta and Low Volatility ETFs, which has been steadily trending higher since early September.  This provides another way to demonstrate how higher beta companies, or those that tend to experience stronger movements than the benchmark, have done better than more conservative names that tend to demonstrate less volatility than the benchmark.

Even though strategists, including yours truly, have been speaking of the “return of small caps” for quite some time, this next chart shows that investors are still waiting for that fateful day to arrive.  The Russell 2000 ETF has been underperforming its large cap counterpart fairly consistently over the last two years, and the equal-weighted S&P 500 ETF is close to a new 52-week low relative to the regular cap-weighted S&P 500 ETF.

While conditions appear to be ripe for small caps to outperform, these ratios show how the strength in large caps continues to be a key market theme.  Indeed, for the last 12 months, owning anything but large cap growth stocks most likely did not help your portfolio, with the notable exception of a rare few outperformers.  When in doubt, follow the trend.  And the trend remains favoring large cap stocks.

These next three data series represent what I call “offense vs. defense”, in that they track traditionally offensive sectors like consumer discretionary vs. traditionally defensive sectors like real estate.  With the exception of the bottom data series, showing how hotels have underperformed utilities, this chart shows that investors are still favoring “things you want” over “things you need”.

To put it another way, offense is still winning over defense.

Overall, despite a clearly corrective move at year-end 2024 into early 2025, these equity markets appear to have rotated right back to a growth-led bull market phase.  By consistently reviewing the charts we’ve discussed above, you should be able to better identify shifts in leadership and hopefully take action to better position yourself for what may come next.

For two more bonus ratio charts covering key asset allocation themes, be sure to check out my latest video on the StockCharts TV YouTube channel!

RR#6,

Dave

PS- Ready to upgrade your investment process?  Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice.  The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.  

The author does not have a position in mentioned securities at the time of publication.    Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.