As a result of trading on 5/8/18, there was a change to the DWA Sector Stock Model STOCKMODEL. Note, in order to be able to view this model on the platform, you will need the matrix subscription. The change was within the Internet Sector Portfolio where Mercadolibre, Inc. MELI was removed because it's relative strength deteriorated enough in the matrix to warrant its removal. In it's place, the model added Autohome Inc. ATHM; ATHM. The stock broke a triple top in Tuesday's trading and bullish price objective of $116 suggests that there is potential for additional upside from here. Through the close on 5/8, the STOCKMODEL has gained 12.98% on the year, while the S&P 500 Index SPX is flat, down -0.06%.

Each week the analysts at DWA review and comment on all major asset classes in the global markets. Shown below is the summary or snapshot of the primary technical indicators we follow for multiple areas. Should there be changes mid-week we will certainly bring these to your attention via the report.

Observations:

• There were no changes to any of the Bullish Percent Indicators this week. 
• The Positive Trend for All PTALL remains in O's and fell one box to 52%.
• The High Low for All ALLHILO and OTC OTCHILO both reversed up into X's at 48% and 52% respectively. Conversely, the High Low for NYSE NYSEHILO remains in O's and fell two boxes to 40%.
• The Ten Week for All TWALL, NYSE TWNYSE, and OTC TWOTC all reversed back up into X's at 52%, 54%, and 50% respectively. 
• The 30-Week for All 30ALL and NYSE 30NYSE reversed down into O's at 44% and 42% respectively. 
• The short term picture showed signs of improvement as the indicators continue to jockey back and forth. There are no major changes and we continue to advise that you stick to your disciplines and remain patient while this market figures out whether supply or demand will take the baton. 

Volatility has certainly picked up in the market over the past few months; however, US Equities remains the number one ranked asset class in DALI.  Specifically, Growth, from an investment style perspective, and Technology, from a sector perspective continue to lead their respective groups.  So, we would continue to view these areas as the current leaders in the market.  However, the Energy sector has recently been the biggest mover to the upside and is an area that warrants your attention today.

Most of the headlines you will read are about Crude Oil (CL/) hitting $70 a barrel for the first time since 2014.  What you will not hear is that the Point & Figure chart of Crude Oil moved back into a positive trend in July 2017 at $50 and has remained positive ever since.  The improvement in Energy has not been confined to this commodity, it has spilled over to the equity markets, driving improvement in oil-related stocks as well.

For the first time in over a year, the broad Energy sector has moved into the top half of the DALI Sector Rankings and is by far the most improved sector this year. 

Over the course of this year, the Energy sector has added 68 tally buy signals.  This is, by far, the most improvement out of all the broad sectors.  The second most improved sector has been Consumer Cyclicals (+17 buy signals).  On the other hand, the Utilities, Real Estate, and Consumer Staples sectors all have been the biggest movers to the downside and are currently the three lowest ranked sectors in the DALI Sector Rankings.

Portfolio View - Major Market ETFs

Additional Comments:

It was a mostly positive week (5/1 – 5/8) for the 10 major market ETFs covered in this report, as eight were able to finish up while just two finished in the red. The biggest mover to the downside this week was once again the PowerShares Frontier Markets ETF FRN while the biggest gainer was the iShares S&P SmallCap 600 Index Fund IJR. On a year-to-date basis, the PowerShares QQQ Trust QQQ continues to lead the pack in terms of performance with a gain of 6.62% (through 5/8). In fact, just this past week, we witnessed the more sensitive 1 point per box chart for the QQQ return to a Point & Figure buy signal as it successfully completed a bullish triangle with a move to $165. With today's (5/9) market action, demand continues to have the upper hand as QQQ was able to push higher and returned to a Point & Figure buy signal on its default chart with a move to $168.  The fund continues to trade well above its bullish support line and offers an impressive fund score of 5.63 with a positive score direction of 0.51. At this juncture, QQQ remains near the middle of the 10 week trading band with an OBOS% reading of 10% and recently experienced a flip back to positive weekly momentum, suggesting the potential for higher prices. All in all, the weight of technical evidence remains positive for QQQ and new positions are welcome on this breakout. Looking to the default chart, the first sell signal from here would come with a move to $156, while further support is offered in the mid- $150s.

(The DWA Technical Indicator link, found under the Indicators menu, provides valuable insight into where positive relative strength readings and positive trend charts are concentrated. RSX is the percentage of stocks within a sector whose relative strength charts are in a column of Xs. RSP is the percentage of stocks within a sector whose relative strength charts are on a buy signal. PT is the percentage of stocks within a sector that are trading above their bullish support lines and the overall trend is positive. The strongest sectors, i.e. market leaders, will have most of these indicators positive and moving higher in a column of Xs.)

Over the past week of trading, 11 sector BP charts moved higher while 10 moved lower. BPBUIL, BPINET, and BPSEMI all reversed up into Xs while BPAUTO, BPINSU, and BPPROT reversed down into Os. At this juncture, the BP for the Machinery and Tools sector is 1% away from a reversal up into Xs while the BP for the Textiles/Apparel sector is 1% away from a reversal down into Os. The average sector BP level this week is 46.85%, up 0.37% from last week. There were five shifts on the Favored Sector Spectrum that are listed below:

• Internet is now Favored as the RSXINET gave a buy signal
• Textiles/Apparel remains Favored but lost an attribute as a result of the reversal into Os on the PTTEXT
• Protection Safety Equipment is now Average due to the reversal into Os on the PTPROT
• Oil Services has improved to Average as the RSXOILS gave a buy signal
• Autos & Parts is now Unfavored due to the sell signal on the RSXAUTO

Average Level: 46.85

The average Bullish Percent reading this week is 46.85% up 0.37% from the previous week

FOOD

aero

REAL

tele

INET

auto

RETA

TRAN

savi

comp

EUTI

stee

GUTI

insu

elec

busi

BUIL

PREC

biom

wall

fina

leis

HEAL

drug

medi

fore

OILS

CHEM

OIL

REST

hous

meta

mach

prot

SEMI

WAST

SOFT

bank

GAME

TEXT

0-14

16-20

22-26

28-32

34-36

38-42

44-46

48-52

54-56

58-62

64-66

68-72

74-78

80-86

88-100

PERCENT RELATIVE STRENGTH & POSITIVE TREND UPDATE

(The DWA Technical Indicator link, found under the Database tab, provides valuable insight into where positive relative strength readings and positive trend charts are concentrated. RSX is the percentage of stocks within a sector whose relative strength charts are in a column of Xs. RSP is the percentage of stocks within a sector whose relative strength charts are on a buy signal. PT is the percentage of stocks within a sector that are trading above their bullish support lines and the overall trend is positive. The strongest sectors, i.e. market leaders, will have most of these indicators positive and moving higher in a column of Xs.)

FAVORED SECTORS LIST
Favored Sectors are those that have three of the four charts (Relative Strength, RSX, RSP, and PT) positive. The table below contains those sectors which changed their favored status over the past week. It is best to focus on those sectors that are about 50% or lower on their Bullish Percent Readings and in a column of Xs on the bullish percent chart. Should a sector move from Favored to Average, that doesn't mean the sector has to be sold.

Favored		Average	Unfavored
4	3	2	1	0
	INET  TEXT	prot  OILS	auto
4	3	2	1	0

Those of you seeking exposure to more confined areas of the market, rather than just broad exposure may find tools like the Asset Class Group Scores page (found under the Indicators tab) useful. At the top of the page, we are able to check the box for Non-US and click the Set View button beneath the menu to be presented with a list of groups sorted from highest to lowest average score. Remember, this page aggregates data from every mutual fund and ETF in our database and calculates the arithmetic mean in order to produce the average score column. We tend to focus on our attention on the groups that are colored blue, as they offer an average score above 4 (recall our fund score rankings range from 0-6, with 6 being the best). What could arguably be one of the more overlooked functions on this page is its ability to assist you with idea generation. Notice the column to the left of the group name titled "Ideas". The number in this column, next to the group name, corresponds to the number of ideas available for each group. For example, if we were to click 180 next to Super Pacific, we are presented with a list of ETFs and Mutual Funds that fall into this category sorted by fund score from highest to lowest. One of the names that caught our attention from this list was the PowerShares China Real Estate ETF TAO.

The ETF offers an impressive fund score of 5.55, which tops the average Real Estate (2.55), All China (4.26), and All Global & International (3.60) scores. In addition, TAO comes with a score direction of 1.23 indicating its improvement over the past six months. So far this year, it has gained 4.78% (through 5/8) which puts it within the 100th percentile of Real Estate funds and within the top decile of all funds in our database. What is even more noticeable, is the fact that it also provides a yield of 5.48%, which is not incorporated into the performance figures referenced. TAO also comes with a bullish price objective of $45.50 suggesting it has potential to move higher from here. Those seeking exposure to International Equities with a sector twist may consider TAO at current levels as it is currently on a buy signal and trades near the middle of its 10-week trading band. Those with exposure to this fund already have support visible in the upper $20’s too.

Another potentially attractive aspect of TAO is that it is not necessarily highly correlated to other International and Chinese ETFs. Recall that correlation is a statistical measurement describing the relationship between two variables. Correlations can range from +1.0 (perfect positive correlation) to -1.0 (perfect inverse correlation), with most outcomes residing in the middle. A correlation of 0.0 would indicate that there is no relationship between the two variables over the time frame studied. A correlation of -1.0, or perfect negative correlation, suggests one variable consistently goes up when the other goes down. A correlation of +1.0, or perfect positive correlation, indicates that the variables move in unison. In order to perform this task on the Dorsey Wright platform, users may hover over the Tools tab at the top of the page and then click Calculators. From there, select Correlation Coefficient on the left hand side. Upon doing so, you will be presented with the image below. Simply enter the tickers you wish to compare separated by comma. Then choose the amount of days you would like to look back. We choose 1250 because that is the equivalent of five years worth of data. After clicking calculate, the table will appear. Here we can see how TAO behaves relative to other funds. Here is a legend of the other funds included in the table:

• iShares MSCI Emerging Markets ETF EEM
• SPDRs S&P 500 ETF Trust SPY
• SPDR S&P China ETF GXC
• Guggenheim China Technology ETF CQQQ
• KraneShares MSCI All China Health Care Index ETF KURE

This may be helpful to see that TAO will not necessarily mirror the returns or behavior of other Chinese related funds like GXC, CQQQ, or KURE. This provides portfolios with more diversification with a chance to also produce income for the portfolio.

On Monday (5/7/18), we saw US Preferreds & Convertibles moved ahead of International Debt to take the number one spot in the DALI Fixed Income rankings. This change is directly related to another recent development – strengthening in of the U.S. dollar.

After hitting a multi-year low in February, the NYCE U.S. Dollar Spot Index DX/Y, reversed up late last month, broke a triple top, and currently sits at a 2018 high on its default chart. If this trend of a strengthening dollar continues, it may present something of a conundrum for fixed income investors – as we’ve been in a rising interest rate environment over the last several months, foreign bonds have been an area of relative safety as they are fairly insensitive to changes in domestic rates. However, the performance of foreign bonds is significantly impacted by changes in the U.S. dollar – in fact, currency return is often the largest component of the total return on foreign fixed income investments. Therefore, if we continue the U.S. dollar strengthen, investors may have fewer attractive rate-insensitive fixed income options.

We have already begun to see the rising dollar’s effects in the Asset Class Group Scores. Over the last 30 days, the six groups with the largest score deterioration are Emerging Market Income, Global Currency, and four global income groups.

Remember, these are technical comments only. Just as you must be aware of fundamental data for the stocks we recommend based on technical criteria in the report, so too must you be aware of important data regarding delivery, market moving government releases, and other factors that may influence commodity pricing. We try to limit our technical comments to the most actively traded contracts in advance of delivery, but some contracts trade actively right up to delivery while others taper off well in advance. Be sure you check your dates before trading these contracts. For questions regarding this section or additional coverage of commodities email ben.jones@dorseywright.com.

Data represented in the table below is through 05/07/18:

Broad Market Commodities Report

Portfolio View - Commodity Indices

When looking at the market from a macro level this year, using the DALI Asset Class Ranking, we find that the Commodities asset class is the most improved asset class by a wide a margin. In the graphic below, we display the current DALI Tally Signal Ranking, along with monthly snapshots going back to beginning of the year. You can create a similar view using the 'History" function in the DALI Tool. When we calculate which areas have strengthened or weakened this year, we find that Commodities is the only asset class that has gained signals. In addition, it appears that all of the other asset classes have lost signals because of Commodities. Year-to-date, Commodities has gained +48 new signals, and in effect, has seen its tally signal count rise from 131 to 179. Domestic Equities, which remains in first place, lost -13 signals, dropping from 316 to 303. International Equities is flat, but it has lost 6 signals since its reached 296 at the end of February. Fixed Income has lost the most number of signals, down -19, while Cash and Currencies are down -8 and -5, respectively. That said, while Commodities has gained +48 signals, it still has a lot of ground to make up. Domestic Equities and International Equities lead Commodities by over 100 signals,  so while Commodities has strengthened, it has not strengthened enough in the ranking to affect many of our asset allocation models based on DALI.

Commodities has benefited from a weaker US Dollar DX/Y, rising Crude Oil prices, and even an uptick in inflation expectations. It's also important to note that we may be entering a period that favors Commodities due to our position on the business cycle. According to PIMCO, Commodities displays positive returns in both expansion and slowdown periods. While the debate is still ongoing over which part of the cycle we're in, they both favor Commodities.  From a performance standpoint, over the past five years (5/8/2013-5/9/2013), Commodities has struggled relative to equities and even bonds. The WisdomTree Continuous Commodity Index Fund GCC, which often serves as a proxy benchmark for the Commodity asset class, is down -29.07% over the past five years. Meanwhile, the S&P 500 Index ETF SPY is up 63.65%. This type of performance is fairly typical in recovery periods, however, if the recovery has shifted to expansion or maybe skipped to slowdown, Commodities may be an asset class that can continue participating in the upside. In all, given the improvement in Commodities, we'll continue to monitor this asset class for opportunities going forward. 

The Distribution Report below places Major Market ETFs and Indices into a bell curve style table based upon their current location on their 10-week trading band. The middle of the bell curve represents areas of the market that are "normally" distributed, with the far right being 100% overbought on a weekly distribution and the far left being 100% oversold on a weekly distribution. The weekly distribution ranges are calculated at the end of each week, while the placement within that range will fluctuate during the week. In addition to information regarding the statistical distribution of these market indexes, a symbol that is in UPPER CASE indicates that the RS chart is on a Buy Signal. If the symbol is dark Green then the stock is on a Point & Figure buy signal, and if the symbol is bright Red then it is on a Point & Figure sell signal. Box Color indicates the Sector Status Rating. Green = Favored, Yellow = Average, and Red = Unfavored.

Average Level: -2.59

The average Bullish Percent reading this week is 46.85% up 0.37% from the previous week

					tlt
					hyg
					VOOV
					RSP	VOOG
					dvy	nasd
					djia	NDX	rut
		lqd	agg	vwo	spx	MID	icf	uv/y
FXE		shy	ief	GC/	XLG	efa	SML	CL/	gsg	DX/Y
<--100	-100--80	-80--60	-60--40	-40--20	-20-0	0-20	20-40	40-60	60-80	80-100	100->

Daily Option Ideas for May 9, 2018