Overview
Omicron seems to be peaking, and it should decline measurably over the next few weeks.
The earnings seasons got underway this week, and earnings should drive prices for the next few weeks as omicron headlines lose their impact.
Inflation is still running hot, and with omicron declining, the Federal Reserve can maintain its current policy path towards higher rates and lower liquidity.
The Energy markets continued their rally.
The value versus growth debate remains tilted towards value.
Performance Review
The markets are still adjusting to rising rates because they rose rapidly over the previous two weeks (versus their December close). The weakness in tech stocks continued, though there was some bottom-fishing. Value stocks continued to be strong at the expense of growth stocks, and energy stocks maintained their rally.
Our sensitive net bull/bear balance, which measures index performance using leveraged and inverse ETFs, remained negative all week, favoring bearish price action, which is consistent with the triangular consolidation discussed next.
The S&P-500 index (and the corresponding SPY ETF) continued to meet resistance near the early-November highs. The yellow bars in the SPY chart below suggest that the consolidation in the SPY continues. I expect the rally to resume as omicron crests and earnings continue to exceed expectations.
The Vanguard capitalization-weighted indexes of small, mid, large, and mega-cap stocks showed the relative action of value versus growth stocks. As shown in the chart below, Vanguard capitalization-based value ETFs are clustered in the upper-right-hand quadrant in the figure below, confirming their strength versus their growth counterparts.
The key to the Vanguard Capitalization-based ETFs is in the table below.
ETFs Hotlist
This week we turn our attention to the strongest ETFs in our database, which you can explore further using our ETF Finder table. The search for dividends, the trends in energy, and strength in European markets are the themes underlying this week’s list.
The name at the top of the table is GCOW, and its daily chart (shown below) shows the strong trend that emerged in early December. Observe how the COLT2 trend-strength oscillator was near -50 (or lower) for most of the period and rose above 50 in mid-December as the breakout gained strength.
I will use the FILL (iShares MSCI Global Energy Producers ETF) to show the emerging trend in energy stocks (that we also highlighted last week using a chart of the XLE ETF). Notice that the COLT2 oscillator is above 90, signifying a solid trend and suggesting that the trend could continue for a bit longer.
Wrap-up
My posts should give you a good starting point, with context and suggestions if you like to do research. Then, you can visit my website, chandeindicators.com, for more information and ideas. I hope you stay tuned and help by subscribing and recommending it to your friends and colleagues.
Thank you for spending some time with me.
Disclaimer
And now for some housekeeping. This publication is for “edutainment,” education, information, and entertainment purposes only. It is not to be construed as investment advice. Past performance is not necessarily indicative of future results. Our disclaimer at chandeindicators.com is included herein by reference.