- Smaller-caps have regained the performance lead in the short term.
- The 4th quarter could be tough.
- The markets started the week poorly.
The following is from the author's personal notes:
Data from FinViz.com
Above is my shorthand way of tracking the key sector ETFs (top "panel") and major index-tracking ETFs (bottom "panel"). The sectors represent the entire "XL" series from State Street Global Investors with the exception of real estate, which is represented by "Q" for VNQ. Combined, they comprise the entire US economy. I only use the last letter of each ETF (for example, "B" is the XLB, "C" is XLC, etc.). The bottom panel uses the last letter of the following ETFs: IWC, IWM, IJH, SPY, QQQ, DIA, and OEF. Together, these represent the entire spectrum of US indexes from small to mega-cap). A horizontal line in a column indicates that all ETFs below that level are negative.
The following trends are apparent in the top panel:
- Several reflation trade sectors (energy, financial, and basic materials) performed well last week
- Health care and tech weakened
- Communication services rose a touch
- Notice that most sectors have now declined in the week, month, and 3-month time frames
The following trends are apparent in the bottom panel:
- Small-caps are retaking the lead
The following trends are apparent in the data:
- Russia is still a top performer
- The US and EU fell last week
- China -- which has mostly underperformed -- bounded higher last week
- The UK, All Asia ex-Japan and Emerging Markets are rising a bit
This week, there are two key releases:
- The ISM non-manufacturing index, which comes out on Tuesday
- The employment report, which the BLS releases on Friday
For the jobs report, the main issue will be the top-line growth number:
Last month's headline number was obviously disappointing.
The fourth quarter could be tougher than originally thought:
The global economy is entering the final quarter of 2021 with a mounting number of headwinds threatening to slow the recovery from the pandemic recession and prove policy makers’ benign views on inflation wrong.
The spreading delta variant continues to disrupt schools and workplaces. U.S. lawmakers are wrangling over the debt ceiling and spending plans. China is suffering an energy crunch and pursuing a regulatory crackdown, while markets remain on edge as China Evergrande Group struggles to survive.
Fuel and food costs are soaring worldwide, combining with congested ports and strained supply chains to elevate price pressures. Labor shortages continue to plague some employers.
Let's take a look at today's performance tables.
All the indexes were lower. Oddly, large-caps were the worst performers: the QQQ was off slightly more than 2%. Smaller-caps, however, also took a decent, start-of-the-week hit.
The key to this table lies at the top: three of the top four slots are defensive. That's all you need to know about the tone of today's trading.
Here are today's 1-minute charts:
Anytime the trading day starts with a sharp selloff, the real question is what happens at the close. Today, the QQQ wanted to sell-off, but the index held its ground.
Since the markets are once again in a bearish mood, let's look at the charts to get some key levels.
I've market 452.6 as the 10% correction from the recent high.
The IWM is still consolidating sideways.
10% for the DIA is below the current chart.
Only the QQQ is near a 10% correction.
Now the question becomes, "Will the QQQ lead everyone lower, or is it an outlier?" Let's see how the markets shake out during the rest of the trading week.
This article was written by
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