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There is a variety of information available when examining the technical strength of a security through its point & figure chart page on the NDW research platform. One of the readings available under the Stock Data header is the Weekly Overbought/Oversold (OBOS) percentage, which depicts where the last closing price of the security sits relative to the 10-week trading band that is shown on the actual point & figure chart. This trading band, which is shown through the Top, Mid and Bot (Bottom), indications on the right-hand side of a trend chart, takes trading data throughout the past 10 weeks and essentially puts it on a distribution curve with the 10-week moving average being the “Mid” point on the chart. This distribution curve is then flipped vertically to align with the price data, with the “Top” of the trading band corresponding with a weekly OBOS reading of 100% (100% overbought), and the “Bot” corresponding with a reading of -100% (100% oversold). When examining a security to understand its recent price movement, this reading is best used for timing your trade. You may want to wait for a pullback to purchase a position that is in overbought territory (typically viewed at or above 70%), and may want to wait to sell a position that is heavily oversold (typically viewed at or below -70%) as it could have the potential for a near-term rally.

One of the recent additions to the NDW platform is the opportunity to view how the current intraday information may affect this OBOS reading. This can be viewed by clicking on the Weekly OBOS reading on the chart page, which brings up the historical view of the week-to-week change in the reading. At the top of this pop-up, you will now see what the OBOS reading would be if the price remained it the level depicted on the delayed quote found above the normal trend chart.

As an example below, we can see that today’s price movement for Cisco Systems CSCO resulted in a decline of about 11%, which led the stock to reverse down into a column of Os from $48 to $43. Prior to this move, CSCO had a weekly OBOS reading of 29%, and after this move, CSCO sits at an intraday weekly OBOS reading of -69% at the time of this writing, shifting it to near heavily oversold conditions.

In each of the last two trading days, the S&P 500 SPX has come within five points of reaching the all time of 3080 it established on 2/19 before the coronavirus induced sell off. If you had fallen into a Rip Van Winkle-style slumber for the last few months, looking at just the index levels you could think that that market had fallen asleep as well and remained virtually unchanged. The actuality of course is that the last few months have been anything but restful. While the S&P 500 is in the same place it was at the in February, other assets and segments of the market are in very different places than they were when the S&P last peaked back in February. With the S&P making headlines as flirts with hitting a new all-time high, we expect that you may be receiving calls from clients asking about their portfolios and where other parts of the market currently stand. With that in mind, today we wanted to give you some talking points about what has transpired in the between the S&P’s (almost) peaks.

While the S&P 500 is now roughly flat, down just -0.17% from 2/19 through 8/12, the story is very different for other equity indices. Technology stocks, especially large cap names, have been amongst the best performers during the pandemic as a result, the tech-heavy Nasdaq-100 NDX surpassed its previous all-time high in June and has made a series of new highs since then and barely missed making a new high watermark in Thursday’s trading, as a result NDX has gained 14.81% since SPX peaked on 2/19. The Dow DJIA, with its heavier exposure to financials and industrials, has lagged both the S&P and is down -4.67% over the same period (DJIA actually peaked slightly earlier as it hit an all-time on its P&F chart on 2/12). Small cap stocks have lagged large cap stocks as the Russell 2000 RUT is down -6.46% since 2/19, unlike the large cap indices which were trading at or near all-time highs in February, RUT still had not gotten back to the high it reached in August 2018.

Internationally, emerging market equities have led the way as the MSCI Emerging Markets Index MSCIEMERG is down just -0.88%, while the MSCI EAFE Index EAFE is -5.26%; it is worth noting that international markets hit peaks and troughs at various times, influenced heavily by the timeline of the coronavirus  - Chinese equities for example, which make up a significant portion of MSCIEMERG peaked and bottomed before the US and most other markets.

While the major equity indices are, for the most part, within a few percentage points of where they were pre-pandemic, the same is not true for domestic interest rates. The US Treasury 10YR Yield Index TNX was already near historically low levels in mid-to-late February when it sat about 1.6%. TNX fell to a low of 0.4% on its P&F chart and currently sits at 0.675%, far below the lowest level it had ever hit prior to the COVID-19 and the Fed’s market intervention. The fall in rates has been a boon for many bondholders – the iShares Barclays 20+ Year Treasury Bond ETF TLT has gained 13.78% on a price return basis since the S&P peaked, trailing the Nasdaq-100 by only about 1%.

There has been wide dispersion within real assets – gold GC/ and silver SI/ have had historic rallies gaining 19.44% and 40.66% respectively, easily outperforming equities. Crude oil CL/ on the other hand is down -20.13% over the same period. While a 20% intra-year loss is certainly enough to grab your attention, like S&P, looking at just the performance of crude oil in over this period glosses over truly unprecedented volatility as the front month oil contract fell below zero.

As mentioned above regarding the Nasdaq-100, tech stocks, especially large caps, have been among the best performers this year; and each of the “FAANG” stocks, except Alphabet GOOG have posted double digit gains since the S&P’s peak in February. Aside from GOOG, which is down -1.31% over the period, the FAANGs’ gains have ranged from 11.70% (Microsoft MSFT) to 45.71% (Amazon AMZN). They have all been outdone by another big name, however, as Tesla TSLA is up just under 70%.  

As the major domestic equity indices continue to either near or surpass new all-time highs, we have also continued to see a more risk-on approach from the two main percentile ranks found on the Asset Class Group Scores (ACGS) page. The Money Market Percentile Rank (MMPR) has fallen to 6.34%, marking its lowest level since the March decline. This reading climbed as high as 54.93% on March 23^rd, before beginning to move lower as global equities marched higher. In looking at this indicator from a historical perspective, we can see that timeframes of major growth for domestic equities have largely coincided with MMPR readings south of 10%, where we sit today. As you may assume, the lower the better for this reading, and so it is certainly a positive sign for risk-oriented assets that we have seen a further dampening of this percentile rank.

On the flip side, we have also seen the US Equity Core Percentile Rank (CorePR) move higher, notching a recent level of 93.66%. This reading fell as low as 57.04% on March 12^th and moved sharply higher soon thereafter to remain above 75% for the remainder of the market rally. While this recent movement is certainly a positive indication for the broad domestic equity market, this is not quite the highest level we have seen for the CorePR over the past few months, as the reading got to 96.48% at the beginning of June. Nonetheless, the continued recent ascent of the CorePR speaks to the strength of the large-cap space within the domestic equity market, as these assets have been the bellwether groups that have led the market higher through its recent rally. In looking at the historical perspective of this indicator, the reading is not a stranger to high field position, although we do not typically see it remain at levels above 90% for a prolonged period of time. This is not to say that a reading above 90% should be viewed as a bad omen, but rather that we typically see other, more focused areas climb above the core market during extended periods of growth, and so we should not be surprised if other areas begin to creep above the core.

While this has not happened yet, there is a multitude of areas that have that potential simply by nature of the 47 groups that currently possess group scores north of 4.00. This amount of names speaks to the breadth of strength we are seeing from a variety of areas within the markets, and not only those associated with equities, as many fixed income areas continue to score in relatively high field position.

In order to view those areas that have shown more recent improvement, the ACGS page can be sorted by score direction, which now reveals that US micro-cap has the highest score direction of any group on the page at a recent reading of 2.80 leading to a group score of 3.90. We covered this area in a more in-depth fashion in Tuesday’s ETF Spotlight but is still worth mentioning given its continued improvement. We also see international and global equities demonstrating recent strength from a directional perspective, with a focus on emerging market equities in the Asia region. Europe has also shown recent strength on the international side, with its score moving above the 3 score threshold for the first time since February at a recent reading of 3.03.