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:

• All major bullish percent (BP) indicators moved significantly higher over the past week. BPOTC and BPWORLD reside in a column of Xs at 60% while BPALL and BPNYSE] read 66% and 80%, respectively.
• All major positive trend (PT) indicators also moved higher in a column of Xs last week. PTOTC and PTWORLD read 44% while PTALL and PTNYSE reside at 46% and 56%, respectively.
• All major HiLo indicators pushed higher, as NYSEHILO and OTCHILO each resides at the 90% level now. ALLHILO reads 88%.
• All major ten-week indicators also moved higher over the past week, with two breaching the 90% threshold. TWALL and TWNYSE read 90% and 96%, respectively, while TWOTC and TWWORLD read 88% and 82%, respectively.
• Finally, the upward movement carried over to all major thirty-week indicators as each advanced in a column of Xs. 30ALL and 30OTC both sit at the 52% level while 30NYSE and 30WORLD read 50% and 42%, respectively.  

Portfolio View - Major Market ETFs

Additional Comments:

It was another exceptionally strong week for the 10 major market funds covered in this report as each managed to finish in positive territory. The top-performing fund over the last seven days was the iShares S&P SmallCap 600 Index Fund IJR, up a notable 8.99%. Conversely, the iShares MSCI Frontier 100 ETF FM lagged the pack despite finishing in positive territory with a gain of 2.80%. Two of the 10 major market funds currently sit in positive territory on the year, the Invesco QQQ Trust QQQ and the Invesco S&P Top 50 ETF XLG, with respective gains of 14.43% and 3.66% (through 6/9). In fact, with today’s (6/10) market action, the tech-heavy QQQ has rallied to new all-time highs, which we’ll discuss below. We have also updated initial support levels for all 10 major market funds covered in this report using today’s intraday action (note: all technical data is through 6/9).

As previously mentioned, the QQQ has reached a new all-time high at $245 with today’s market action as large-cap growth stocks continue to drive major US indexes higher. Recall that QQQ was the first major market fund to move back into positive territory for the year following the COVID-19 selloff and continues to lead the #2 performer, XLG, by a whopping 10.67%. To read more on the divergence between the QQQ and XLG, click here for the Major Market ETF Update published on May 20th. In early April, the QQQ returned to a buy signal with a spread triple top at $192 and has continued to rally in a single column of Xs without a pullback ever since. As a result, QQQ is nearing the very top of its 10-week trading band with an OBOS% reading of 93% overbought. Additionally, monthly momentum has been positive for two months, suggesting the potential for higher prices for the QQQ. From a fund score perspective, the QQQ has a solid score of 5.04, outscoring the average growth-domestic fund by 1.26 score points, the average all US fund by 1.82 score points, as well as the average US large-cap growth fund by 0.84 score points. The weight of the technical evidence is overwhelmingly positive, and demand is in control. As previously mentioned, QQQ is trading in technically overbought territory so those looking to initiate new long positions may wish to scale in or enter on a pullback and/or normalization of the trading band. An initial support level on the default chart sits at $182, with additional support offered with a test of the bullish support line at $178. For those looking for tighter support levels, we find viable support at $234 and $229 on the QQQ’s more sensitive 1 point per box chart.

SECTOR BULLISH PERCENT CHANGES

Average Level

68.81

LEIS

CHEM

GUTI

INSU

TRAN

PROT

FORE

BUSI

META

STEE

WALL

AUTO

DRUG

OIL

SAVI

SOFT

TEXT

BUIL

prec

HEAL

FOOD

MEDI

EUTI

SEMI

AERO

biom

TELE

COMP

INET

ELEC

HOUS

MACH

WAST

OILS

FINA

RETA

BANK

REST

REAL

GAME

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
TEXT  AERO	HEAL  COMP  MEDI  STEE  SOFT  MACH	prec  WAST  FOOD
4	3	2	1	0

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 06/09/2020:

Broad Market Commodities Report

Portfolio View - Commodity Indices

Since March, both the Federal Reserve Bank and Congress have taken “unprecedented” policy measures to provide liquidity, inflate asset prices, and ultimately stimulate the economy. While it is still very much up for debate whether or not quantitative easing leads to inflation in the long-term, having a game plan for potential inflation is important in guiding long-term investment decisions.The first step is finding evidence of inflation, which is defined as “a general increase in prices and fall in the purchasing value of money.” Given this definition, evidence of inflation would be a rise in prices and or a decrease in the value of the dollar. The first piece of the equation can be measured using the Consumer Price Index (CPI). The index provides a measure of the average change over time in prices paid by urban consumers for a market basket of consumer goods and services. According to the Bureau of Labor Statistics, the CPI has fallen for the last three consecutive months of March, April, and most recently, May (source: BLS). For now, the CPI has painted a picture of deflation rather than inflation.

For the second part of the equation, we turn to the dollar. If there is evidence of inflation, then the value of the dollar should be decreasing. When we look at the NYCE U.S. Dollar Index Spot DX/Y there are signs of weakness. After two months of consolidation near the $100 level on its Point & Figure Chart, DX/Y broke through a triple bottom at $98.50 to return to a sell signal and has since fallen into a negative trend at the end of May.

What do we make of these conflicting pieces of evidence? Although there hasn’t been a general increase in prices, we have also seen signs of a decrease in the purchasing power of the dollar. One fact worth remembering is that the Consumer Price Index is reported monthly and posthumously, whereas DX/Y is constantly changing and potentially can be seen as more of a leading view of potential inflation. Although the evidence is not overwhelming at this point, if you’re concerned about inflation and are looking for an alternative to using Treasury inflation-protected securities (TIPS), there is another option. The Index IQ Real Return ETF CPI tracks an index that seeks to provide a “real return” or a return above the rate of inflation thus providing a hedge to a rise in the Consumer Price Index. The fund holds a variety of fixed income, equities, and real asset funds in an “ETF of ETFs” wrapper. This provides a unique alternative to traditional inflation-protected fixed income investments and is dynamic to reflect inflation expectations. Despite a suboptimal fund score of 1.62, CPI has rallied off its March low of $25.10 to complete three consecutive buy signals on its way to $27.30 on the more-sensitive 0.10 pt chart. From here, support is offered at $27. Note that CPI carries a yield of 2.17% and an expense ratio of 0.44%.

For more information on liquid alternative strategies including CPI, please register for next Tuesday's (6/16) webinar at 2 pm ET.