We are excited to announce phase three of the Nasdaq Dorsey Wright Model Builder with the launch of Matrix and FSM-based Relative Strength (RS) Testing Service. As part of this launch, we are granting you free access to the service for the remainder of 2020. The tool is designed to help you more easily design, test, implement, and monitor custom models powered by the Nasdaq Dorsey Wright methodology. Through the end of December, be sure to join us each Thursday at 1 pm EST for a custom modeler demo presented by the analyst team.

11/19/2020: Static Model Builder Demo Replay - Click Here

12/9/2020: Matrix Model Builder Demo Replay - Click here

11/5/2020: FSM Model Builder Demo Replay - Click here

Click here to register for future Nasdaq Dorsey Wright Model Builder Demos

On December 4th, the Percent Positive Trend for NYSE ^PTNYSE reached 70% for the first time since February of 2013 which is a span of almost 8 years! This means that 70% of the stocks within the NYSE universe are currently trading in a positive trend. The NYSE universe has much more emphasis on small and mid cap names compared to the SPX universe which is strictly large cap names. Going back to 1994, this is the tenth time the ^PTNYSE has reached such a level, not including clusters of occurrences within 30 days. The 3 month, 6 month, and 1 year returns are on average very positive for both the S&P 500 Index and the Russell 2000 Index.  The average returns for each index are fairly similar over the 3 month and 6 month periods, but over the 1 year period, the S&P 500 Index outpaced the Russell 2000 Index by over 500 basis points. While broader participation is a good sign for domestic equities as a whole, it does not necessarily mean that small and mid caps will perform better than large caps, at least when only observing the ^PTNYSE.

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:

• Only one of the major bullish percent (BP) indicators advanced over the past week; BPOTC ticked higher in a column of Xs to 62%. All of the other major BP indicators remain above midfield in a column of Xs.
• None of the major positive trend (PT) indicators experienced change over the previous week, as each also remains above midfield in a column of Xs.
• Similarly, none of the major HiLo indicators saw material movement as each remains in high field position in a column of Xs.
• All of the ten-week (TW) indicators also reside in high field position in a column of Xs, unchanged from last week's reading.
• However, we do note one of the major thirty-week indicators advancing higher in a column of Xs; 30ALL ticked up to 80%.

Equity markets were generally flat over the course of the past week with the S&P 500 SPX down 0.21% and the S&P 500 Equal Weighted Index SPXEWI down just 0.06% (12/8 – 12/15); however, Small Caps remained a bright spot.  The iShares Russell 2000 ETF IWM is up more than 25% over the past 90 days compared to a 9% gain for the S&P 500.  Interestingly enough, all segments of Small Caps have seen gains in excess of 25% over the past three months including Small Growth and Small Value. 

The improvement in the Small Cap space has been seen on a number of different fronts, DALI included, as the 3 Small Cap related style boxes are the 3 most improved style boxes within DALI, with Small Cap Growth continuing to be the strongest.  While Small Cap Growth has been in the top three styles for much of this year, Small Blend and Value are moving up the ranks to the extent that Small Blend is close to overtaking Large Blend, which would be the first time in nearly two years Small Blend would be ahead of Large Blend.  All this is to say, we are continuing to see improvement in the Small Cap space as we head into the end of 2021.

Portfolio View - Major Market ETFs

Additional Comments:

It was a mixed bag in terms of performance over the last week as six major market funds covered in this report finished the week in positive territory while the remaining four funds finished in the red. The best performing ETF for the week was once again the iShares S&P SmallCap 600 Index Fund IJR with a gain of 1.82% while the iShares MSCI Emerging Markets ETF EEM lagged with a loss of -0.77%.

Last week, we discussed the notable action on the Point & Figure chart of IJR, which had just rallied to match its all-time high from August 2018 at $90. As previously mentioned, IJR gained 0.91% over the last seven days, making it the best performing major market fund for the second week in a row. With Tuesday’s (12/15) trading session, IJR’s positive price action caused the fund to print an X at $91, officially marking a new all-time high for the small-cap proxy. Currently, IJR has a solid fund score of 4.23 coupled with a strongly positive score direction of 2.65. While IJR still lags the majority of the major market funds covered in this report on a year-to-date basis, we find that over the last 30, 60, and 90 day periods, IJR has outperformed all 10 major market funds, including the high-flying QQQ and SPY. IJR’s impressive rally has pushed the fund into heavily overbought territory, where the potential for a mean-reversion becomes higher. Currently, IJR’s overbought/oversold (OBOS%) reading is 123% overbought, the highest OBOS% level recorded since December 2016 when it read 129% overbought. From here, initial support sits at $85, with additional support offered at $79.

If you are looking for small-cap stock exposure via single stocks, simply click the “All Holdings” button off IJR’s trend chart. Once the current holdings are loaded in a new window, you can easily save the list to a custom portfolio by clicking the “Send to..” shuttle button. Once you click into this custom portfolio, we suggest sorting the list by technical attributes to identify the high RS names or even using the custom portfolio as the starting universe for a stock screen to generate actionable ideas.  

SECTOR BULLISH PERCENT CHANGES

Average Level

67.39

REAL

RETA

FINA

TEXT

SOFT

COMP

auto

CHEM

prot

LEIS

ELEC

REST

HEAL

HOUS

WALL

SAVI

OIL

INET

buil

INSU

BANK

DRUG

OILS

WAST

META

AERO

FORE

BIOM

euti

FOOD

MEDI

SEMI

MACH

prec

GUTI

TRAN

TELE

BUSI

GAME

STEE

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

SECTOR INDICATOR CHART CHANGES

PT is the percentage of stocks within a sector that are trading above their bullish support lines. 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. The strongest sectors, i.e. market leaders, will have most of these indicators positive and moving higher in a column of Xs.

FAVORED SECTOR STATUS CHANGES
A sector is considered to be Favored if it has 3 or 4 of the sector indicators (Relative Strength, RSX, RSP, & PT) positive, Average if it has 2 of the 4 indicators positive, & Unfavored if it has 0 or 1 of the indicators positive. The table below contains those sectors that have experienced a Favored Sector Status change over the past week. It is best to focus on sectors that are about 50% or lower on their Bullish Percent charts & are in Xs. Note: If a sector moves from Favored to Average, it doesn't necessarily mean that the sector in question has to be sold - it just means you need to evaluate your individual positions with exposure to that sector. 

Favored		Average	Unfavored
4	3	2	1	0
OIL  SAVI	WAST  ELEC  WALL  BANK	INET
4	3	2	1	0

The breadth of strength among international equity markets has continued to expand over the past week, with specific emerging market economies showing the most significant improvement. This can be seen on the non-US view of the Asset Class Group Scores (ACGS) page, which shows Latin America as the group with the highest average score direction among the international groups examined at a recent posting of 3.16. We can see that this improvement has essentially only been over the past six weeks, as the Latin America group began November at an average fund score of only 0.92 and has risen rapidly to its current group score of 3.74 through trading Tuesday. The group has not been able to maintain an average score above 4.00 for a prolonged period of time since the fourth quarter of 2018, making the potential further improvement of Latin America an important place to monitor as we look towards 2021.

The iShares S&P Latin America 40 ETF ILF has been indicative of this recent improvement, as it has ascended from a double bottom formation at $21 in November to march higher in a single column of Xs, reaching $29 earlier this month. Although the fund still sits in negative territory from a year-to-date performance standpoint with a return of -14% through Tuesday, ILF has risen over 17% in the past 30 days, besting the gains of the broad international fund ACWX as well as the broad emerging markets representative EEM, which have each gained just over 4% during the same timeframe. Looking underneath the hood at the country exposure within ILF reveals, perhaps unsurprisingly, that Brazil makes up a vast majority of the fund at an allocation of 62%. However, Mexico also has a substantial allocation at 21%, as the only other country representative with their percentage exposure in double-digits.

Those looking for investment ideas in Latin America outside of Brazil may consider the iShares MSCI Mexico ETF EWW as a potential candidate for further examination. This fund has moved substantially higher off its September low of $31 to break through to a positive trend and ultimately give three consecutive buy signals before reaching its December high of $43.50. The fund has since pulled back from heavily overbought territory and current sits at $42 on its default chart. This improvement can also be seen in its strongly positive score direction of 4.37 that brings its recent score posting to an impressive 4.83, which bests the average non-US equity fund (3.84) as well as the average Latin American fund (3.74). Exposure to EWW may be considered either at current levels or upon further normalization of the fund’s trading band, as it remains in slightly overbought territory with a recent weekly overbought/oversold (OBOS) reading of 77%. Initial support can be found at $40.50 on the default chart, with further support found on the more sensitive ¼ point chart at $38.25.

The US Treasury 10YR Yield Index TNX reversed up into a column of Xs at 0.95% in Wednesday’s trading, but remains below its recent high of 0.975%. The 30-year yield Index TYX also reversed up Wednesday and currently sits at 1.7%; TYX has formed a potential bullish triangle, which would be completed with a breakout at 1.75%.

As mentioned last week, the US dollar DX/Y has continued to weaken and currently sits at a multi-year low on its default chart. The weakening dollar is a tailwind foreign bonds and in yesterday’s trading, the JPMorgan International Bond Opportunities ETF JPIB broke a double top at $52, returning it to a buy signal and a positive trend for the first time since March. JPIB currently has a 2.90 fund score and yields 4.36%. The fund currently sits in heavily-overbought territory, so those considering adding exposure may wish to wait for a pullback or for price to normalize at current levels.

As they have for much of the year, convertible bonds continue to lead the fixed income market from a relative strength perspective. The convertibles group currently has a 4.81 average fund score in the Asset Class Group Scores System, placing it first among fixed income group and fifth amongst all 135 groups in the system. Over the last 30 days (12/15), the inverse-fixed income group is the only fixed income group that has had its average score increase, as it has risen 0.06 points. The score of every other fixed income group has declined over this period, in many cases due to rising interest rates. The largest score deteriorations belong to the retirement & income, corp bond-high yield, strategic income, and inflation protection groups, which have all seen their scores decline by at least -0.25 points.   

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 james.west@dorseywright.com.

Data represented in the table below is through 12/15/2020:

Broad Market Commodities Report

Portfolio View - Commodity Indices

It’s been a hectic year, in many ways. When beginning to construct the graphic below, we quickly realized the sheer number of pivotal events that happened in 2020, implying our list is certainly not exhaustive; however, it does help convey the rollercoaster experience for the markets since the close of 2019. The year opened on mostly stable footing for the groups mentioned, and even after the first U.S. COVID case was reported in Washington state in late January, the S&P 500 (SPX) did not reach its all-time high until roughly a month later (February 19th). However, following the major index’s all-time high a series of events quickly sent the market and respective commodity prices lower, a few being the emergency rate cut from the Federal Reserve and declaration of COVID as a global pandemic. Note that while equites, copper, silver, and oil plummeted, gold remained relatively robust and partially led the charge off the market bottom on March 23rd, perhaps fulfilling its assumed role as a “safe haven” asset. Despite its recent pullback, gold (GLD) still holds an impressive year-to-date return north of 20%.

Keep in mind that after about a month following the market bottom on March 23rd, we still found crude oil falling, eventually rolling negative for the first time ever in April. Oil, represented by the United States Oil Fund (USO) below, remains the worst performer of the grouping on the year despite its recent bounce, posting a loss in excess of -60%.

However, as the global outlook began to improve with promising vaccine data and a continually accommodative fiscal posture, we then saw precious metals pick up steam, particularly silver. In fact, the iShares Silver Trust (SLV) hit $27 in August, its highest level in over seven years. As of late, we’ve seen the precious metals space cool as base metals like copper (represented by (CPER) below) and the broad equity market have continued steadily higher. Although through yesterday (12/15), SLV remains the best performer of the group on the year, followed by CPER, GLD, and the S&P 500 (TR.SPXX).

Relative strength is a measure of how a stock is performing when compared to something else, in this case the S&P 500 Equal Weighted Index (SPXEWI). Each day the stock's closing price is divided by that of the SPXEWI, the resulting numbers decimal is moved two places and then plotted on a Point & Figure chart. Whenever the relative strength chart shows a double top buy signal (e.g. RS Buy or Positive Relative Strength), it suggests the stock is likely to outperform the market for the foreseeable future. Conversely, whenever the relative strength chart gives a double bottom sell signal (e.g. RS Sell or Negative Relative Strength) it suggests the stock will under-perform the market. Relative strength signals tend to last roughly 18 to 24 months on average. Consequently, changes from buy signals to sell signals (and vice versa) are important to be aware of as they are longer-term implications of a stock's likely performance versus the indices. Using the Point & Figure chart along with the relative strength chart will allow you to better ascertain risk-reward and other trade management tools, but we always want to over-weight our portfolios toward those stocks that are on RS buy signals, giving us the best chance of outperforming the broader market.

In the Optionable Universe, this week we saw 38 relative strength buy signals compared to 51 last week. On the sell side, there were 10 relative strength sell signals compared to 12 last week.

Symbol	Company	Sector	Price	RS vs Market Signal	RS vs Market Column	RS vs Peer Signal	RS vs Peer Column	Tech Attrib
ATLC	Atlanticus Holdings Corp	Financial Services	21.370	Buy	X	Buy	X	5
CIB	Bancolombia S.A. (Colombia) ADR	Banks	40.660	Buy	X	Sell	X	3
DENN	Denny's Corporation	Cyclical Goods and Services	14.120	Buy	X	Sell	X	3
EGHT	8*8, Inc.	Technology Services	31.000	Buy	X	Sell	X	4
BIDU	Baidu, Inc. (China) ADR	Technology Services	185.500	Buy	X	Sell	X	4
CATM	Cardtronics PLC	Financial Services	35.770	Buy	X	Sell	X	4
VERU	Veru Inc.	Medical Products	9.330	Buy	X	Buy	X	5
IGT	International Game Technology	Cyclical Goods and Services	15.260	Buy	X	Sell	X	4
IMGN	Immunogen Inc	Biotechnology	7.440	Buy	X	Buy	X	5
JOE	the St Joe Company	Real Estate Investment & Services	38.690	Buy	X	Buy	X	5
LPL	LG Display Co., Ltd. (Korea) ADR	Industrial Goods & Svcs	8.320	Buy	X	Sell	X	2
NBR	Nabors Industries, Inc.	Oil Drilling, Equipment Svcs	70.580	Buy	X	Buy	X	5
PSMT	PriceSmart, Inc.	Retail	91.480	Buy	X	Sell	X	3
LPI	Laredo Petroleum Inc.	Oil Companies Major	19.510	Buy	X	Buy	X	5
MTDR	Matador Resources Company	Oil Companies Secondary	12.440	Buy	X	Buy	X	5
SF	Stifel Financial Corp	Financial Services	77.400	Buy	X	Buy	X	5
SGMO	Sangamo Therapeutics Inc.	Biotechnology	12.980	Buy	O	Buy	O	3
WBS	Webster Financial Corporation	Banks	43.010	Buy	X	Sell	X	4
CBIO	Catalyst Biosciences Inc.	Biotechnology	7.230	Buy	X	Sell	X	3
WD	Walker & Dunlop, Inc.	Real Estate Investment & Services	90.730	Buy	X	Buy	X	5
UAN	CVR L.P.	Chemicals	14.230	Buy	X	Buy	X	4
SCM	Stellus Capital Investment Corp	Financial Services	11.020	Buy	X	Buy	X	5
VUZI	Vuzix Corporation	Communications Technology	5.740	Buy	X	Sell	X	4
BRG	Bluerock Residential Growth REIT, Inc.	Equity REITs	11.060	Buy	X	Buy	X	5
SCYX	Scynexis Inc.	Pharmaceuticals	7.400	Buy	X	Buy	X	5
FLOW	SPX FLOW INC	Industrial Goods & Svcs	59.730	Buy	X	Sell	X	4
EDIT	Editas Medicine Inc	Biotechnology	64.930	Buy	X	Buy	X	5
TRTN	Triton International Ltd/Bermuda	Industrial Goods & Svcs	48.880	Buy	X	Sell	X	4
PUMP	ProPetro Holding Corp	Oil Companies Major	8.100	Buy	X	Buy	X	5
BKR	Baker Hughes Company	Oil Companies Secondary	22.010	Buy	X	Buy	X	5
CEIX	CONSOL Energy Inc.	Coal	7.100	Buy	X	Buy	X	4
SMAR	Smartsheet, Inc. Class A	Software	71.140	Buy	X	Sell	X	4
LEVI	Levi Strauss & Co. Class A	Cyclical Goods and Services	20.820	Buy	X	Sell	X	4
EWBC.TR	East West Bancorp, Inc. TR	Banks	52.285	Buy	X	Sell	X	4
IMGN.TR	Immunogen Inc TR	Biotechnology	7.440	Buy	X	Buy	X	5
COF.TR	Capital One Financial Corporation TR	Financial Services	94.309	Buy	X	Sell	X	4
DXC.TR	DXC Technology Co TR	Technology Hardware Equip	24.185	Buy	X	Sell	X	3
JOE.TR	the St Joe Company TR	Real Estate Investment & Services	38.779	Buy	X	Buy	X	5

Symbol	Company	Sector	Price	RS vs Market Signal	RS vs Market Column	RS vs Peer Signal	RS vs Peer Column	Tech Attrib
CALM	Cal-Maine Foods, Inc.	Food and Beverage	37.450	Sell	O	Sell	O	0
GPRE	Green Plains Inc.	Chemicals	13.810	Sell	O	Buy	O	2
K	Kellogg Company	Food and Beverage	61.240	Sell	O	Sell	O	0
NOC	Northrop Grumman Systems Corporation	Industrial Goods & Svcs	298.510	Sell	O	Buy	O	1
CONE	CyrusOne Inc	Equity REITs	68.110	Sell	O	Sell	O	0
RDHL	REDHILL BIOPHARMA LTD	Pharmaceuticals	8.890	Sell	O	Buy	O	2
BZUN	Baozun Inc	Technology Services	34.560	Sell	O	Sell	O	0
BJ	BJ's Wholesale Club Holdings Inc	Retail	37.110	Sell	O	Sell	O	1
GPRE.TR	Green Plains Inc. TR	Chemicals	13.810	Sell	O	Buy	O	2
WPC.TR	W.P. Carey & Co. LLC TR	Equity REITs	76.330	Sell	O	Buy	O	2

Daily Option Ideas for December 16, 2020