This column assumes that ETFs are the primary investment tool for the reader.
Please see my weekly market summation for a review of the macro-economic environment and general macro-level market trends.
Investment thesis: the macro-averages are now in a bullish posture; it’s a good time to take a new position. But be careful; defensive sectors are starting to rise, indicating traders are a bit more cautious.
Let’s start by looking at last week’s market activity, beginning with the treasury market:
The treasury market moved lower on Monday and then traded sideways for the rest of the week. Volatility was higher on late Tuesday and Wednesday as the market digested the whipsaw activity regarding additional fiscal measures. Also note the sharp sell-off and subsequent rally on Friday, likely due to additional fiscal talk.
SPY trended higher for the entire week as shown by the central tendency line in blue. t took the index an entire day to recover from Tuesday’s sell-off, but it did recover.
I noted in my weekly round-up that smaller-caps led the market higher this week. Notice that IWM had a very strong move higher earlier in the week. This explains why small caps did so well last week.
Let’s pull the lens back to the 2-week time frame:
During the last two weeks, the treasury market has clearly trended lower, as shown by the 200-minute EMA (in magenta). The ETF has gapped lower twice and then consolidated sideways.
While larger caps are higher, their respective charts are messier. QQQ – which has led the markets higher for most of the post-lockdown rally – is struggling. It’s also been prone to sharper, higher-volume sell-offs.
In contrast, smaller caps have stronger charts. Mid-caps have a solid uptrend