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 remain unchanged from last week, each residing in a column of Os at midfield.
• Similarly, all major positive trend (PT) indicators remain unchanged from last week. Each remains in a column of Xs at midfield.
• All major HiLo indicators also remain unchanged, each residing at or above the 90% level.
• Two of the major ten-week (TW) indicators reversed down into a column of Os last week. TWALL and TWNYSE both reversed down and now reside in a column of Os at 76% and 78%, respectively. TWOTC remains in Xs at 80% while TWWORLD remains in Os at 70%.
• Three of the four major thirty-week indicators remain unchanged from last week, each residing at lower-midfield. The lone change came from 30OTC as it continued higher in a column of Xs to 46%. 

Portfolio View - Major Market ETFs

Additional Comments:

It was a mixed bag in terms of price performance over the last week of trading as half of the major market funds covered in this report finished up for the week while the remaining half found themselves in the red. The best performing fund over the last seven days was the iShares MSCI Emerging Markets ETF EEM, up 3.21%, while the worst-performing fund was the iShares S&P SmallCap 600 Index Fund IJR, down -2.69% (through 6/23). Relatively speaking, US large caps continue to dominate all other areas of the equity markets, a leadership theme that is reflected in the year-to-date performance numbers for our lineup of major market funds with the Invesco QQQ Trust QQQ leading with an impressive gain of 17.04%, followed by the XLG and the SPY with respective returns of 2.98% and -3.05%.

In recent reports, we have continued to discuss the factors driving the wide performance dispersion between the top-performing fund, the QQQ, and the second-best performing fund, the XLG, including the superior strength of large-cap growth stocks relative to their large-cap value counterparts. Today, we want to bring your attention to another year-to-date performance dispersion that caught our eye – the +8% spread between that of the cap-weighted SPDR S&P 500 ETF Trust SPY and the equal-weighted Invesco S&P 500 Equal Weight ETF RSP.

While the SPY and RSP provide exposure to the same basket of 500 stocks, the way in which each provides exposure is what makes them stand apart. The SPY is a cap-weighted fund, meaning the larger the stock's market cap, the higher the weighting in the fund. Conversely, the RSP gives all stocks the exact same weighting with no regard for market cap. When we drill down into the sector weightings for each of these two S&P 500-based funds, we find that there are significant differences in sector weightings between the SPY and the RSP, which we've broken down in the table below. Notice how the SPY is most heavily allocated to the technology sector at 27.24%, which is nearly 2x greater than the RSP’s 14.38% weighting. This spread of +12.86% is the largest sector weighting difference between the two funds and is one that has greatly benefitted the SPY as technology (XLK) is the top-performing SPDR sector fund so far this year, up 14.14%. On the other hand, the RSP is most heavily allocated to industrials at 14.51%, a weighting that nearly doubles that of the SPY’s, making it the second-largest single sector weighting difference between the two funds. RSP’s aforementioned overweight to the industrials sector has caused a significant drag on the fund as industrials (XLI) is one of the worst-performing sectors so far into 2020, down -15.24%. That said, SPY’s relatively low weighting of 7.94% has shielded the cap-weighted fund from taking a bigger hit in performance. The second-best performing sector fund on a year-to-date basis is communication services, a high-RS sector that the SPY has a 10.95% allocation towards versus the RSP’s 4.44% weighting. Once again, this single sector overweight is the third-largest and has helped the SPY outperform so far this year. as comm services is up 4.25% year-to-date. As we often mention throughout our research, it is important to not only know what you own (S&P 500 stocks) but how you own it (cap versus equal weight). Additionally, in case of the SPY, we often find that outperformance is not just about what is owned or overweighted, such as technology and communication services, but is also about what is not owned or underweighted, like industrials and financials. 

SECTOR BULLISH PERCENT CHANGES

Average Level

59.45

TELE

META

euti

tran

savi

leis

BIOM

INET

guti

comp

bank

FINA

game

oils

stee

elec

busi

SOFT

HEAL

FORE

insu

MEDI

wall

oil

DRUG

prot

aero

real

wast

food

text

chem

auto

hous

prec

rest

reta

mach

BUIL

semi

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
wast	oils  oil
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 06/23/2020:

Broad Market Commodities Report

Portfolio View - Commodity Indices

While analogies continue to surface about the potential disconnect between the stock market and the economy, key reminders of the market being a leading indicator are also increasing in circulation. Although generally true, the stock market is not the sole leading indicator of economic expectations. In fact, probably to little surprise, there are a number of such indicators that take shape outside of equities, and in the commodity space. Today we will highlight copper, or “Doctor Copper” in market lingo, focusing largely on the recent technical improvements for this alternative leading indicator. As a refresher, copper is often referenced as a leading economic indicator due to its fundamental and wide-ranging application in industrial production and electrical equipment (source: investopedia.com). Rising demand for copper will typically manifest in higher market prices, consequently suggesting the potential for economic growth. According to the Eurasia Group, in the current environment, two large catalysts for copper demand stem from green and digital stimulus programs. This demand is centered predominantly in Asia and Europe as electric vehicles, 5G networks, and renewable power generation remain in focus (source: cnbc.com). As countries begin to work through the lingering effects of the COVID-19 epidemic, we note an increased demand for copper that has translated into an improved picture in the near-term.

From a technical perspective, the shorter-term chart ($0.02 scale) for Copper Continuous HG/ shows resounding strength on the back of six consecutive buy signals following its multi-year low of $2.12 that was established in March. Additionally, copper’s recent ascent back into a positive trend on this near-term chart set the stage for a further advance past resistance established in February of this year. HG/ has formed a double top at $2.66 and a further advance to $2.68 would offer additional bullish confirmation to the upside with a seventh consecutive buy signal. Support is offered at $2.56 on the $0.02 chart.

A similar picture of strength is displayed on the iPath Series B Bloomberg Copper Subindex Total Return ETN JJC. The note seeks to provide exposure to the Bloomberg Copper Subindex Total ReturnSM Index, which tracks unlevered futures contracts on copper. JCC displays similar chart action to HG/ and is on a fourth consecutive buy signal in a newly-established positive trend. Monthly momentum has recently flipped positive as well, suggesting the potential for further gains. JCC is actionable here with a solid fund score of 3.50 on the back of a positive score direction of 2.10. Note that support is offered at $39.50.