Saturday, February 13, 2010

ETF Rewind - Week 6 (2/12/10)


(Click Image to Enlarge/ ETF Rewind Glossary)

Markets made gradual, albeit volatile progress last week that left the S&P 500 (SPY) higher for the first time in a month by about +1.3%. In fact, due to muted closing ranges overall, by some short-term measures equities are actually beginning to look overbought (see the RSI charts below).

The Small-Cap Style ETFs look particularly extended, including IWM, PWT and PWY. However, as these readings maybe exaggerated by the aforementioned narrow range, perhaps markets can build on Friday's late comeback momentum. I'm somewhat skeptical of that, but we'll see. Meanwhile, with nearly 17 days spent under its 20 and 50-day moving averages (which are both pointing lower), I'd suggest that the S&P 500 needs to show stronger signs of recovery strength -- and soon -- if it isn't to be sold for a third leg lower.

Lastly, note how a handful of the tracking indices have recently broken their respective ten-month moving averages, including the: EAFE Internationals (EFA), Utilities (XLU) and Commodities (DBC). This type of damage has the potential to feed on itself and minimally takes weeks to repair. At this point the action may be easy to write-off with hope of a recovery/bounce ahead -- but as a potential early warning sign -- I'd suggest that it should likewise be given cicumspect consideration. (See "Trading the 200-Day" from the archives.)

Holiday-shortened Week Seven of 2010 featuring very busy reporting calendars, monthly options expiry, and rotation model selections, as follows:
Have a terrific long weekend!

If you are interested in a significantly more thorough version of this weekly summary, consider taking a look at Market Rewind's nightly ETF Rewind Pro service. In addition to coverage of nearly 200 ETFs across twelve major asset classes, you will find three model portfolios, daily market signals and commentary, pairs trading and various powerful portfolio management tools.

Never Investment Advice: Prior Weekly Summaries: ETF Rotation Models

2 comments:

preparedinvestor said...

Jeff,

Since you used 20 points for Hurst estimation (obtained 20 from your old post), and since the trend from the past 20 days in negative in SP500, and since the trend stability 23 (< 50), am I correct in interpreting that:

- trend from the past 20 days is about to change. That is SP500 might be heading up since the past 4 weeks return is -ve.

Thanks,

Nidhi

jgpietsch said...

I saw that indication as more of a mean reversion over trend environmental warning, although certainly discontinuities like this often do occur at reversals, as you suggest. Thanks for your comment, Jeff