Good news or bad news on the fundamental and macroeconomic front, US stocks are on a clear up trend. The small-cap and mid-cap stocks are farther above their January highs than the large-cap stocks, but the large-cap stocks are doing well too.
Pretty much no matter how you slice it (market-weighted, equal weighted, sector equal weighted, earnings weighted, revenue weighted, or dividend weighted), the S&P 500 (and large-cap) US stock market is in a clear up trend.
Some indicators of upward strength (such as Point & Figure Bullish Percent, New Hi/Lo Ratio, Percent Above 50-Day Average, and Percent Above 200-Day Average) are very high, which doesn’t leave much room for improvement, and therefore makes the large-caps fairly vulnerable to at least some slowing down, if not some correction. However, up its up until its down. Keep stops on all positions.
The individual sectors vary in price recovery from the post-January low, perhaps creating some catch-up opportunity, although the laggards may be behind for good reason.
All of the charts below are Renko (Brick) charts. That type of chart, like Point & Figure charts, is independent of time. It plots “bricks” (or “boxes”) of equal size whenever the price moves at least as much as a minimum amount, which in this case is the 10-day average daily range of prices for that security (that means the point change required for a new box varies as the range of the daily price varies). Brick charts are reasonably effective at visualizing trends as well as support and resistance.
In each chart, a blue horizontal line marks the January high.
S&P 500 (Proxy SPY) Above January High:
The current price brick is above the January high, having recovered fully from the mid-January decline. The price pattern shows higher lows and higher highs, one of the most basic definitions of an up trend.
Variations on the S&P 500 Up Too:
The S&P 500 Equal Weight index (proxy RSP) is ahead of the standard S&P 500 index, because the smaller constituents have much more representation in the overall price level — consistent with the out-performance by mid-cap and small-cap indexes.
The S&P 500 Equal Sector Weight Index Above January:
The S&P Equal Sector Weight index (proxy EQL) is above its January high, although the 9 separate sectors shown later are not all above the January high.
Fundamentally Weighted Close Relatives to the S&P 500:
The RevenueShares Large Cap ETF (RWL), which contains the S&P 500 list weighted by revenue, is also well above its January high.
The WisdomTree 500 Earnings weighted ETF (symbol EPS) is just above its January high.
The WisdomTree Large-Cap Dividend weighted ETF (symbol DLN) is above its January high.
S&P 500 Sectors Vary In Post-January Recovery:
If we rank the sectors by the number of boxes above or below the January high, they look like this:
Some S&P 500 Internal Indicators:
These indicators are strong. That’s the good news. The cautionary news is that they can’t get much higher, although they could remain elevated for extended periods.
As of March 16, 2010, we hold SPY in some, but not all managed accounts, We do not have current positions in any other securities discussed in this document in any managed account.
Opinions expressed in this material and our disclosed positions are as of March 16, 2010. Our opinions and positions may change as subsequent conditions vary. We are a fee-only investment advisor, and are compensated only by our clients. We do not sell securities, and do not receive any form of revenue or incentive from any source other than directly from clients. We are not affiliated with any securities dealer, any fund, any fund sponsor or any company issuer of any security. All of our published material is for informational purposes only, and is not personal investment advice to any specific person for any particular purpose. We utilize information sources that we believe to be reliable, but do not warrant the accuracy of those sources or our analysis. Past performance is no guarantee of future performance, and there is no guarantee that any forecast will come to pass. Do not rely solely on this material when making an investment decision. Other factors may be important too. Investment involves risks of loss of capital. Consider seeking professional advice before implementing your portfolio ideas.