Chicago RS Institute: Register to join us in person for a 3-hour educational symposium on relative strength investing. This event is for financial advisors and will offer 3 hours of CFP/CIMA credit.

When: April 23, 2024, 8 AM CT - 11 AM CT

Where: 1 South Wacker Drive, Chicago, IL, 60606

Who: Speakers include...

John Lewis, CMT, Senior Portfolio Manager; Andy Hyer, CFP, CIMA, CMT, Client Portfolio Manager; Ian Saunders, Senior Research Analyst

Cost: Free! Breakfast will also be provided.

Registration is limited to the first 75 advisors, so be sure to act fast!

Click Here to Register!

Today's Weekly Analyst Rundown video has been separated into shorter, individual videos, in addition to the long-form video that is still found at the beginning of this report. Each asset class will be included at the top of the corresponding featured article today, and each sector that saw notable movement will have a video recording included in the US Sector Update or the Were You Aware. The Fund Score update will be included in tomorrow's Fund Score Overview article. The sections of the video that do not have a corresponding article are included below:

Weekly Momentum Update Video (2:36)

Weekly Size & Style Update Video (1:31)

Visa (V) and Mastercard (MA) reached a $30 billion settlement to limit credit and debit card fees for merchants. The settlement still needs court approval but would resolve most claims in litigation that began in 2005. If the court approval goes through, then Visa and Mastercard would reduce their swipe rates by a few basis points and cap rates for five years. The lower swipe rates and pause in any increases will likely lower costs for businesses and potentially consumers (Reuters). The case doesn’t seem to have had much of an impact on MA and V as neither stock had any outsized moves on the news. V has been a perfect 5 for 5’er since October 2022 and MA has had at least four technical attributes since November 2022. The Financial Select Sector SPDR Fund (XLF) has V and MA as its third and fourth-largest holdings, respectively. V and MA make up more than 15% of XLF’s underlying exposure. 

Weekly Cryptocurrency Update (1:34)

It was a positive week for the Nasdaq Crypto Index (NCI), seeing each constituent advance more than 13%. This coincided with many coins bouncing off relevant support (something mentioned last week as an important point to watch in the near-term) as all members now sit in columns of X’s on their default 5% chart. Perhaps more important for the long-term is the test (and subsequent rally) of $60,000 mark for crypto king Bitcoin. Bulls seem keen to defend this mark, establishing a bit of a range (roughly 17%-19%) between this near-term support and all-time highs above around $73,000. Regardless, bulls should consider this week’s action across the index as a sign of further confirmation of the space’s continued viability.

Today’s report will focus on the recent underperformance of Bitcoin Miners against Bitcoin itself. Looking at miners proxy WGMI, one can see a distinct YTD performance lag (1.22% for WGMI vs. 65.54% for Bitcoin) between the 2 names. While there are several possible reasons for the difference, perhaps the most fundamentally sound is the upcoming Bitcoin Halving. Rewards for mining additional Bitcoin will be cut in half, while the efforts, costs, and labor of mining will most likely stay the same. This compression of mining rewards could put continued pressure on the mining industry- despite interest in the sector being drummed up by the recently approved spot ETFs. From a technical standpoint, a simple Relative Strength (RS) relationship between WGMI & $BTC reveals the mining proxy bouncing off of relative lows against Bitcoin. This action coincides with the fund returning to a buy signal against SPXEWI, pushing its fund score higher. While positive, there is still plenty of work to be done before one would say relative strength within the crypto space sits with the miners. Both fundamental and technical question marks in play make simply buying $BTC a better option for now, but this near-term improvement for WGMI is something to watch as we approach the upcoming halving. 

Each week the analysts at NDW 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.

Check out this week's Major Index and DALI Overview (3:30)

With US Equities indices trading near all-time highs in most cases, Domestic Equities maintains its firm lead over International Equities and Commodities. Under the hood of Domestic Equities, there haven’t been any changes to the sector rankings since early February – which is good news for momentum/RS-based strategies as they can capitalize on leadership trends. But while there haven’t necessarily been changes to the rankings, that doesn’t mean there haven’t been tally signals exchange among the underlying sector representatives. With the first quarter of 2024 nearing a close and next week’s report consisting of quarterly performance reviews, we wanted to take time to note where relative improvement and deterioration have occurred within the sector rankings.

While the above image highlights the lack of ranking changes since February, the daily sector tally (or buy signal) counts show what action has transpired during March. Technology continues to maintain its lead among the sectors and has shown relative improvement during March as it picked up another seven signals. Tech is only the second most improved sector in March as Financials has added another eight tally signals during March to be the most improved. Financials now ranks as the second most improved sector within DALI rankings year-to-date and continues to be supported by the Finance and Insurance subsectors. Although Consumer Discretionary currently ranks as the second worst performing SPDR ETF on an absolute basis during March, down 1.12%, subsectors like Homebuilding, Leisure, and Autos and Parts, provided for some relative improvement. Discretionary maintains as the third most improved sector from a relative standpoint during March and on a year-to-date basis.

Beyond the three aforementioned sectors above, pretty much all other sectors – except Industrials – have shed just one tally signal during March. As of Tuesday’s close, Industrials stands as the sector with the most relative deterioration in the sector rankings during March, albeit in a small way, with a loss of three tally signals.

On an absolute basis, laggard sectors like Energy XLE and Basic Materials XLB have been the best-performing ETFs during March, up 7.43% and 4.31%, but have yet to make relative gains. Additionally, each fund has rallied to resistance, but it is worth noting that XLB is testing its all-time chart high. While Materials looks to be the fifth SPDR fund to mark a new all-time high, Financials XLF became the fourth SPDR fund to do so with action over this past week. During last Friday’s trading, XLF rallied above the $42 level to mark a new all-time high for the first time in roughly 26 months. On the default chart, XLF has maintained a buy signal since July of last year and shifted back into a positive trend following a second buy signal in December. XLF’s fund score resides at 3.86, near a two-year high, and is coupled with an intensely positive score direction of 2.98. The fund has been in a column of Xs on its default trend chart since November 2023 and now trades almost 25% above current support levels. On the more sensitive 0.25 point per box chart, support can be found in the lower-$38 range at $37. The fund’s rally has put XLF in overbought territory so those seeking exposure may look to add on a pullback into the $40 to $41 range. 

U.S. Sector Updates

The past week saw no significant technical developments in the Technology, Communication Services, Energy, Basic Materials, Consumer Non-Cyclicals, Healthcare, Real Estate or Utilities Sectors. Those that saw noteworthy movement are included below, in order of their relative strength ranking in the DALI domestic equity sector rankings. Sector designations are based on DALI sector rankings and are as follows: 1 - 3 overweight, 4 - 7 equal-weight, and 8 - 11 underweight.

International Equity Weekly Video (3:03)

Latin American representatives have shown increased dispersion over the past month, with relatively smaller representatives accounting for most of the relative strength improvement. This is not visible for those simply following the iShares S&P Latin America 40 ETF ILF. Even though that fund shows a strong 4.22 fund score sitting in a positive trend and on a buy signal, we have not seen the default chart move since January. Even more, the fund is about flat over the past 30 days, posting a return of just 0.07% (through 3/26). Brazil makes up the largest weighting of this fund by far, accounting for over 50% of the underlying exposure, which has not helped the fund over the past month. The iShares MSCI Brazil ETF EWZ has returned -2.60% over the past 30 days, notably underperforming other Latin American countries like Mexico (FLMX) at a gain of 2.90%, Colombia (GXG) 6.65%, and Peru (EPU) at 9.81%. Today, we will highlight the technical pictures of those other representatives as potential opportunities to look toward in the second quarter given their recent improvement and higher rankings in our NDW Country Index Matrix Rankings.

Mexico has been one of the most consistent relative strength names in international equities over the past two years, as it has remained in the top quartile of our NDW RS Country Matrix Rankings since February 2022. That 25-month stint is longer than any other current country inside the top ten, speaking to its resiliency. Of course, having one country sit so high in the rankings for so long begs the question of when this streak will end, as it cannot go on forever. However, it is important to remember that we are in the business of buying winners, and you will be hard-pressed to find a more consistent winner than Mexico. When that changes, so will our rankings, but the current technical picture for our southern neighbor does not suggest any pending declines on the horizon.

The Franklin FTSE Mexico ETF FLMX pushed higher Wednesday to break a triple top at $34, marking its highest level in over a decade. The fund has maintained an RS buy signal against the S&P Equal Weight Index SPXEWI since May 2022, helping it reach a robust 4.29 recent fund score posting that is paired with a strongly positive score direction. FLMX has not shown the same level of improvement so far in 2024 that we saw in the final few months of 2023, however, this week’s breakout provides further confirmation of an already positive technical backdrop. The fund still sits in an actionable trading range, with a weekly overbought/oversold reading of about 59% at the time of this writing. Weekly momentum also just flipped back to positive, suggesting the potential for further upside from here. Those looking to add exposure to Mexico may consider the fund on this breakout, with initial support seen at $32 and further support seen at $31. Note that FLMX is also a holding in the Franklin International Rotation Model (Franklin Report).

Colombia has shown consistent relative strength improvement since it began ascending from the last ranked position in our NDW Country Index Matrix ranking one year ago. Moving from the 42^nd position in March 2023 all the way to the 4^th position by March 2024 is no small feat. The Global X MSCI Colombia ETF GXG has also been indicative of this strength, with the fund pushing higher Wednesday to give a second consecutive buy signal at $25. GXG carries a strong 4.49 fund score paired with a sharply positive 2.73 score direction. We saw it move back to an RS buy signal against the market in January and saw weekly momentum recently flip positive, suggesting the potential for further upside from here. The fund also carries a 6.94% yield. Note that the recent appreciation has left GXG on a stem, with an intraday weekly overbought/oversold reading north of 93% at the time of this writing Wednesday. Those looking to add exposure may be best served to wait for a pullback or normalization in the trading band. Initial support can be seen at $22.50 with further support offered at $19.75 and $19.25.

The final country we will highlight today is Peru, which is the lowest ranked of today’s three countries in focus at the 12^th position out of the 42 countries in the NDW Country Index Matrix Ranking. Still, 12^th is not bad, and we have seen Peru climb four positions in the past month, a greater rise than Mexico or Colombia have experienced in the past two months. This rapid appreciation has been seen on the default chart of the iShares MSCI Peru and Global Exposure ETF EPU, which climbed to a multi-year high of $39.50 earlier this month after reversing higher from the $33 position in February. EPU carries a near-perfect 5.84 fund score paired with a positive 2.35 score direction. This drastic appreciation has left EPU in an extended position, with a weekly overbought/oversold reading north of 100%. Initial support is also not seen until $33. Those looking to add exposure toward EPU may want to wait for some consolidation given the extended technical position. Remember, securities can pullback through price or pullback in time, as sideways movement around the current level would also lead to a normalization in the trading band. Further overhead resistance may be seen around $40 with additional resistance near $44.50.

Weekly Fixed Income Update Video (2:11)

US Treasury yields were down slightly over the last week following the Fed’s March meeting. As discussed last week, the statement of econ projections released following the meeting showed the FOMC median projection is still for roughly three 25 bps cuts this year. However, members’ median projection for the fed funds rate in 2025, 2026, and the longer term increased, indicating their estimate of the neutral rate has risen. The change in projections could help support relatively higher yields in longer maturities, potentially helping to normalize the yield curve which has been inverted since 2022. Thus far, the two/10-year Treasury yield spread (USYC2Y10) has not moved significantly, remaining in roughly the same range it has been in for the last few weeks.

For those wondering how to position in the current market, your best bet may be to look to short-duration bonds and funds. Short-duration US fixed income currently outscores long-duration US fixed income, with an average score of 2.51 vs. 2.20. The possibility that there could be more support for higher yields at the long end of the curve adds another reason to favor short duration over long; and, at least for the time being, short duration US Treasuries still generally offer higher yields than their long-term counterparts - another point in favor of exposure to short maturities.

The fixed income rankings in the Asset Class Group Scores (ACGS) look largely the same as they have for the last couple of months. Floating rates and high yields sit atop the rankings, while most core groups still sit in the red zone with scores below 2.5.

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 will.gibson@nasdaq.com.

Data represented in the table below is through 3/26/2024:

Broad Market Commodities Report

Portfolio View - Commodity Indices

Weekly Commodities Video (1:43)

Historical data suggests that copper and emerging markets move in parallel. In other words, when copper prices rise, we have typically seen emerging markets appreciate and vice versa. Why?

Like everything else in financial markets, there are many possible variables at play. That said, one of the clearer economic rationales is that many emerging market countries are large exporters of copper and China is reportedly one of the largest consumers (Source: oec.world). So, if the Chinese economic outlook improves then its demand for copper will assumably grow, fueling demand for the emerging market exporting countries. This is probably an oversimplification, but it gets the idea across the line.

Regardless of the underlying fundamental rationale, the price trend is rather convincing. The left-hand chart below overlays the iShares Emerging Markets ETF (EEM) with the United States Copper Index Fund (CPER) since March 2014. Note that 20-year and since inception charts tell the same story. The right-hand chart below overlays the iShares Emerging Markets ex China ETF (EMXC) with CPER since July 2017 (launch of EMXC).

As seen above, copper and emerging markets often move in parallel (at least during prolonged periods of time). This is especially important to remember today because China is currently fighting to stay above 15-year lows (left-hand chart below) and copper recently returned to a Point & Figure buy signal after nearly falling into a negative trend last year (right-hand chart below).

Should copper push past January and April 2023 resistance, the China contrarian trade could have some tangential confirmation.

Daily Option Ideas for March 27, 2024