As part of our regular market review in the DP Alert, we have begun to notice a very good indicator to determine market weakness and strength. It may not be new to all of you, but we’ve found as of late this indicator tells a story.

We have been tracking the relative strength of the SPY to equally-weighted RSP. When the relative strength line is rising, it means that mega-cap stocks are leading the market. When the relative strength line is falling, mega-cap stocks are taking a back seat.

The chart below shows you what happens when the mega-caps start to slide against RSP. The market itself usually travels lower (as does equal-weight RSP). It doesn’t happen every time, but it happens enough that we should be checking this chart regularly. If you are an Extra member or above with StockCharts.com, you can click on this chart and save it to your own ChartList for monitoring.

Currently mega-caps are underperforming RSP and that has spelled trouble for the market. It did tip upward Friday, but ultimately the relative strength line is in a declining trend. We’ll want to watch for a move out of that declining trend.

Conclusion: Cap weighting has made it important to monitor how the SPY is performing in relation to equal-weight RSP. A declining relative strength line is bad for the market as a whole and that is what we are currently seeing.

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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

In this exclusive StockCharts video, Julius analyzes seasonality for U.S. sectors and aligns it with current sector rotation. He explores how these trends impact the market (SPY) and shares insights on potential movements using RRG analysis. By combining seasonality with sector rotation, he provides a deeper look at market pressure and what to watch next.

This video was originally published on February 28, 2025. Click on the icon above to view on our dedicated page for Julius.

Past videos from Julius can be found here.

#StayAlert, -Julius

The Russell 2000 ETF triggered a bearish trend signal this week and continues to underperform S&P 500 SPDR, which remains with a bullish trend signal. Today’s report shows the Keltner Channel signals in each. SPY is currently correcting within an uptrend and pullbacks within uptrends are opportunities.

TrendInvestorPro tracks trends and pullback opportunities with our comprehensive reports and videos. Click here to take a trial and gain full access.

A Keltner Channel is a volatility band based on an exponential moving average and Average True Range (ATR). ATR is a volatility indicator developed by Welles Wilder, creator of RSI. I am using a 125-day EMA and setting the outer lines 2 ATR(125) values above and below. These long-term parameters are better suited for trend-following signals. A price move above the upper line signals a volatility breakout or uptrend, while a move below the lower band signals a downtrend.

The chart below shows the Russell 2000 ETF (IWM) with a bullish trend signal in mid December as it broke out of the Keltner Channel. This signal lasted around 14 months and ended with a break below the lower line in late February. IWM gained around 15% for this signal, which is not bad for 14 months. This is in the past because IWM is now in a downtrend and below its pre-election levels.

The bottom window shows the Average True Range (ATR) for reference. ATR is an average of the True Range over a given period of time. Wilder used the High, Low and Close over a 2 day period to calculate True Range. Note that this indicator is based on point changes, not percentage changes. This means we cannot compare values across charts. ETFs with higher price values, such as SPY (~586), have inherently higher ATR values than ETFs with lower price values, such as IWM (~215).

The next chart shows SPY with a Keltner Channel breakout with a big surge in November 2023. SPY seemed overbought when the bullish signal triggered in mid November, but the ETF did not pause until April 2024. SPY remains in an uptrend and is up around 30% in the last 15 months. Most recently, SPY declined into the Keltner Channel to test the 125-day EMA. This is considered a correction within an uptrend and a potential opportunity.

SPY is clearly preferred over IWM. First, SPY’s gain since the Kelter breakout was twice as large (relative strength). Second, SPY remains in an uptrend and IWM reversed its uptrend. Large-caps are still the place to be in this market. Small-caps show relative and absolute weakness, and should be avoided.

TrendInvestorPro tracks trends and pullback opportunities with our comprehensive reports and videos. Click here to take a trial and gain full access.

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Bristol Myers Squibb (BMY) reported strong Q4 earnings earlier in February, and prospects remain strong for 2025, although it may face some headwinds. The recent earnings announcement for the company led to a pullback in the stock price; however, BMY is now showing signs of recovery and gaining some momentum.

The stock caught my interest when I ran my StockCharts Technical Rank (SCTR) scan on Thursday evening. An attractive price point and the recent strength of the Health Care sector enticed me to do a deeper dive into the stock’s charts.

The Health Care sector was in a steady downfall from September to December 2024. Bristol Myers Squibb (BMY) deviated from the downfall and trended higher during this time. The daily chart of BMY below shows the stock’s performance relative to the Health Care Select Sector SPDR Fund (XLV). Since September 30, 2024, BMY’s performance has outperformed XLV’s. Even during the February pullback, the stock was performing better than the Health Care sector.

FIGURE 1. DAILY CHART OF BRISTOL MYERS SQUIBB. The SCTR score has crossed 76, the MACD is crossing over into positive territory, and BMY is outperforming XLV.Chart source: StockCharts.com. For educational purposes.

The SCTR score in the upper panel didn’t display strength until November and, even though it crossed above 76, it didn’t go higher than 92. In late January, the SCTR score fell below the 76 level.

The following points are worth noting:

• The stock price bounced off its 21-day exponential moving average (EMA) and 50-day SMA on Thursday.
• The SCTR score has crossed above the 76 level.
• Bristol Myers Squibb’s relative performance against XLV is at 21.31% and trending higher.
• The moving average convergence/divergence (MACD) has crossed above its signal line and is very close to the zero line.

If BMY’s stock price continues to rise higher there could be an opportunity to add some positions of this stock. How high could the stock price go? The probability of BMY hitting its 52-week high is high, but, for a favorable risk-to-reward ratio, there needs to be strong upside momentum. The weekly chart below shows the stock has the potential to rise to around the $72 level.

FIGURE 2. WEEKLY CHART OF BRISTOL MYERS SQUIBB. A break above the upper Bollinger Band, rising RSI, and crossover of the stochastic oscillator point to further upside move in the stock price.Chart source: StockCharts.com. For educational purposes.

• A break above the upper Bollinger Band^® would be positive for the stock.
• The relative strength index (RSI) is just shy of 60. A cross above 70 would confirm upside momentum.
• Look for the %K line to cross over the %D line in the full stochastic oscillator (lower panel).

The bottom line: I’ll be monitoring Bristol Myers Squibb’s stock price closely. I’ve set an alert to notify me when the stock price crosses above $61. If the indicators in the daily chart still indicate buying pressure is strong and the trend is bullish, I’ll consider adding BMY to my portfolio.

The SCTR Scan

[country is US] and [sma(20,volume) > 100000] and [[SCTR.us.etf x 76] or [SCTR.large x 76] or [SCTR.us.etf x 78] or [SCTR.large x 78] or [SCTR.us.etf x 80] or [SCTR.large x 80]]

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.

As “economic softening” increasingly emerges as the prevailing narrative driving the markets, the retail sector occupies a peculiar space amid these shifts in investor confidence, inflation fears, and looming tariff woes. This is because retail straddles both cyclical and defensive sectors, accounting for a huge chunk of Consumer Discretionary and Consumer Staples spending. January retail spending saw its sharpest decline in two years, though post-holiday spending may have distorted the data. The coming report in mid-March might provide a clearer picture.

In a nutshell, here’s what’s weighing on investors’ minds:

• Tariffs could drive up costs which may be passed on to consumers.
• Immigration policies might trigger labor shortages, further increasing expenses.
• Both factors could disrupt the broader supply chain, impacting everything from sourcing to sales.

Despite these challenges, analysts are expecting moderate growth for retail in 2025. With that in mind, let’s take a look at where retail stands relative to Consumer Discretionary (XLY), Consumer Staples (XLP), and the S&P 500 ($SPX).

Below is a PerfCharts view.

FIGURE 1. PERFCHARTS COMPARING XRT WITH XLY, XLP, AND THE S&P 500. Retail underperformed all of its peer components.Chart source: StockCharts.com. For educational purposes.

I’m using the SPDR S&P Retail ETF (XRT) as the retail sector proxy. Its holdings are primarily concentrated in discretionary retail (broadline, apparel, automotive, and specialty), with secondary holdings in staples (food and drug retail).

Over the last year, XRT has lagged the broader market and the Consumer Discretionary and Consumer Staples sectors, in which it has some participation. Yet Wall Street expects moderate and stable growth in discretionary and staple retail spending, respectively. With XRT beaten down among its peers, could it be approaching a bottom and presenting a potential buying opportunity?

Below is a weekly chart of XRT.

FIGURE 2. WEEKLY CHART OF XRT. It doesn’t seem like there was much going on over the last three years.Chart source: StockCharts.com. For educational purposes.

XRT had a significant rise, a sizable decline where its valuation was cut in half, a volatile period of sideways movement, and a higher and less volatile period of even more sideways movement leading to where it is now.

The Bollinger Bands^® will help you visualize the strength of the trends (when XRT was trending) and the upper and lower threshold of its varying sideways movement over the last three years or so.  If XRT is poised for moderate growth, its position near the lower Bollinger Band suggests a potential long entry. But is this just another rangebound trade to be sold near the upper Bollinger Band?

Let’s take a closer look at a daily chart.

FIGURE 3. DAILY CHART OF XRT. A swing trader’s paradise?Chart source: StockCharts.com. For educational purposes.

The cycles aren’t perfect, but that’s what you’re immediately presented with here. XRT seems to be trading in sync with the Stochastic Oscillator, which is particularly effective in forecasting turning points in a non-trending market such as this one. The Keltner Channel, which is slightly less sensitive to volatility than Bollinger Bands because it is based on the Average True Range (ATR) rather than standard deviation, pairs effectively with the stochastic oscillator for anticipating market reversals and “fading” tops and bottoms.

So is this a “trading” stock or a stock you can invest in for the longer term? Here’s how I’d approach it.

• Swing traders are likely to buy at these levels, with the goal of selling as soon as price either reaches the top Keltner Channel or the stochastic reading reaches 80 (or both). This is risky, of course, and swing traders’ stop-loss would vary depending on their strategies.
• Investors hoping that XRT will rally beyond the channel, breaking its trading range, would want to set a stop loss a few points below the current low. Investors will hope to see XRT break above the last swing low of $77 and eventually $82 (the most recent swing high) while forming a consecutive low that’s above the most recent swing low of $73.50. If it fails to do this, then it’s likely to remain rangebound. If XRT closes below $73.50, then the likelihood of further downside is greater.

At the Close

Retail’s dual role in discretionary and staple spending makes it difficult to forecast, and XRT’s sideways movement reflects that uncertainty. Swing traders may find short-term opportunities, but long-term investors should wait for a clear breakout. Without momentum, staying on the sidelines might be the safer choice.

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.

In this exclusive StockCharts video, Joe breaks down reverse divergences (hidden divergence), key upside & downside signals, and how to use ADX and Moving Averages for better trades! Plus, he examines market trends and viewer symbol requests!

This video was originally published on February 26, 2025. Click this link to watch on Joe’s dedicated page.

Archived videos from Joe are available at this link. Send symbol requests to stocktalk@stockcharts.com; you can also submit a request in the comments section below the video on YouTube. Symbol Requests can be sent in throughout the week prior to the next show.

Sector rotation is difficult to spot in real time because it unfolds over weeks or months and isn’t always obvious until after the fact. Since there’s no single or definitive way to monitor a rotation, you’d have to observe it from different angles. In this article, we’ll examine one combined approach you can use.

Tuesday’s Consumer Confidence report saw its worst decline in four years. This followed last week’s Consumer Sentiment report, which also caused a huge upset. If anything, these confidence reports indicate that investors are forecasting the likelihood of a recession.

Might these expectations also be evident in the way investors are allocating their capital? In other words, are we seeing an early sector rotation from cyclical to defensive stocks?

Julius de Kempenaer’s article on the top five leading sectors touches on this. If you’re not familiar with his articles, sector rotation is sort of his thing, so I recommend you follow his posts if this interests you.

FIGURE 1. RRG SECTOR CHART. Is a rotation underway?Chart source: “The Best Five Sectors #8.”Consumer Discretionary (XLY) and Financials (XLF)—both cyclical components—have begun to retreat from their leadership positions. Meanwhile, Utilities (XLU), a purely defensive sector, started showing signs of strength despite lagging behind its cyclical peers.

To get another bird’s eye view of sector activity, pull up a sector chart on MarketCarpets. Here’s a screenshot of a five-day view taken on Tuesday. It doesn’t show the type of movement the RRG chart shows, but you can view the strength of performance (and other available metrics) in percentage terms.

FIGURE 2. MARKETCARPETS SECTORS CHART. Among the cyclical stocks only, Consumer Discretionary is the weakest performer, while Consumer Staples leads the pack.Image source: StockCharts.com. For educational purposes.

Granted, five days of performance doesn’t define a trend, but this chart suggests an interesting pattern: Consumer Staples, Health Care, and Real Estate are outperforming their sector peers. Although Real Estate is generally cyclical, REITs, known for their steady income, often exhibit defensive characteristics.

What do these movements look like in terms of market breadth? The Bullish Percent Index (BPI) is a powerful tool for assessing the internal strength of an index or sector. So let’s examine the top three cyclical and defensive sectors to see what the BPI reveals.

FIGURE 3. THE TOP THREE CYCLICAL AND DEFENSIVE SECTORS BASED ON BPI.Chart source: StockChartsACP. For educational purposes.

While the BPI gives you the percentage of stocks exhibiting P&F buy signals (see the highlighted number on the vertical axis to the right), there are a lot of nuances involved in analyzing these numbers in detail. For example:

• BPI favors the bulls when above 50% (meaning more than 50% of stocks in the index are signaling P&F buys).
• BPI favors the bears when below 50%.

There’s more nuance to this, all of which is covered in the ChartSchool article (see link above Figure 3). That said, here are a few key points:

• The cyclical sectors—Consumer Discretionary, Financials, and Materials—are either declining or lagging behind their defensive counterparts.
• Consumer Staples, Health Care, and Utilities—all defensive sectors—have a greater percentage of stocks signaling P&F buy signals, a bullish indication.

It would help to compare the performance of both sector groups, which is why it’s a good idea to look at ratios.

Here’s the issue: Finding a definitive index for these stocks is challenging, since sectors like Tech, Industrials, Energy, and Communications fall somewhere between cyclical and defensive. However, ETFs such as the iShares MSCI USA Momentum Factor ETF (MTUM) and the Invesco S&P 500 Low Volatility ETF (SPLV) can serve as useful proxies for cyclical and defensive stocks, respectively.

• MTUM is heavily weighted in Technology, Consumer Discretionary, Industrials, and Financials stocks.
• SPLV is concentrated in Utilities, Consumer Staples, and Health Care.

Here’s a ratio chart (SPLV:MTUM) comparing the two.

FIGURE 4. RATIO OF SPLV TO MTUM. This attempts to show the spread between defensive vs cyclical sectors.Chart source: StockCharts.com. For educational purposes.

By plotting a Zig Zag line, you can see the swing points that define the ratio’s trend. Note the following:

• Defensive sectors appear to be basing, if not bottoming, against cyclicals, following a longer-term downtrend.
• Defensives have also broken above a recent swing high but appear to be pulling back; if a rotation were to occur, you’d expect the ratio to continue trading above both the current swing high and low, following the basic principle that an uptrend consists of consecutive swing highs and lows.

Your Next Action Steps

Keep tracking the activity of defensive and cyclical sectors using the RRG, MarketCarpets, BPIs, and ratio chart. It’s too early to tell right now whether a sustainable rotation is at play, and much of the dynamics affecting these sectors are subject to the political and geopolitical policies at play. If the likelihood of a rotation appears more evident, then drill down on sector ETFs or individual stocks within the sector.

At the Close

Sector analysis is a complex topic that requires a multi-angled approach. If you’re attempting to time a rotation, you don’t want to move too early into a rotation that doesn’t pan out, but neither do you want to move too late. By using StockCharts tools like RRG charts, MarketCarpets, BPIs, and ratio analysis, you can gain clearer insights into whether investors are shifting from one sector to another. Keep a close eye on economic and policy shifts as well, as they’re likely to change the conditions of the market.

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.

In this video, Dave breaks down bearish macro signals and risk management using the “line in the sand” technique! Learn how to spot key support levels, set alerts on StockCharts, and protect your portfolio!

This video originally premiered on February 26, 2025. Watch on StockCharts’ dedicated David Keller page!

Previously recorded videos from Dave are available at this link.

The US Consumer Confidence Index^® came in much lower than expectations, and the Expectations Index fell to 72.9. A fall below 80 signals a recession ahead, enough to elevate the fear of economic weakness. As a result, the stock market sold off. But after 11:30 AM ET, the buyers came in, and the market rebounded from its lows. However, the rebound wasn’t enough to make much of a dent, except for the Dow which closed in the green. 

If you regularly monitor breadth indicators, you may have noticed that the New Highs – New Lows Index ($NYHL) was up over 150%. This caught my attention. The broader equity indexes were falling significantly, yet the new highs were way higher than the new lows. That was unusual, but since the stock market is known for pulling surprises when you least expect it to, it’s helpful to look under the hood to determine if the stock market is strong or weak. 

The Market’s Heart Beat

Looking through the rest of my charts in my Market Analysis ChartList — a part of my daily routine — one that I found interesting is the SPDR S&P 500 ETF (SPY) with the Percent Above Moving Average oscillators in the lower panels (see chart below).

FIGURE 1. DAILY CHART OF SPY. The percentage of S&P 500 stocks trading above their 50-, 100-, and 200-day simple moving averages are above 50 but watch these oscillators closely as they indicate the health of the overall market. Chart source: StockCharts.com. For educational purposes.

It’s interesting to note that the percentage of S&P 500 stocks trading above their 50-, 100-, and 200-day simple moving averages (SMAs) started to decline at the end of September 2024. The SPY was still trending higher and it wasn’t till December when it started to pull back.

The September pullback coincided with a relatively low percentage of stocks trading below their moving averages and declined further during the January 2025 pullback. But the oscillators recovered from these levels and as of now, even though SPY bounced off its 100-day moving average, they are not close to the previous lows. The good thing is they are all above their 50 threshold level. You can’t say the same for the Nasdaq stocks.

The chart below replaces SPY with Invesco QQQ Trust (QQQ) and analyzes the percentage of Nasdaq stocks trading above the 50-, 100-, and 200-day SMAs. They are trading at levels seen in August 2024, which is when QQQ went through a -15.56% pullback.

FIGURE 2. DAILY CHART OF QQQ. Although the QQQ is holding on to the support of its 100-day SMA, the percent of stocks trading below their moving averages are below 50, which is a bearish indication. Chart source: StockCharts.com. For educational purposes.

The Technology sector witnessed a four-day losing streak and was the worst-performing sector in the last week. Tech stocks are facing many headwinds — tariffs, AI unwinding, and chip availability, to name a few. Investors are rotating out of Tech stocks and moving into the offensive sectors — Consumer Staples, Real Estate, and Health Care. 

The Bottom Line

The broader stock market is at an interesting juncture and could go either way. SPY and QQQ are holding on to the support of their 100-day SMA but two important news events could shake things either way — NVIDIA earnings and Personal Consumption Expenditures Price Index (PCE). The rest of the week could be a bumpy ride.

If you haven’t done so, apply the percentage of stocks trading above significant moving averages oscillator. Percentage Above Moving Average indicator is available for several indexes. Try them out and see which ones give you a good “under the hood” look at the broader market.

StockChart Tip. Click the charts of SPY and QQQ in the article to see a live chart.

Then, save the charts to one of your ChartLists. Not sure how to create ChartLists? Check out this tutorial.

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.